This has turned into an absolutely toxic situation. I'm going to say Yes. DJ's impairments portend serious trouble come Myers own slash and burn on 21/3 which is now just over a month away.
From the AFR;
"However, analysts say the company is at risk of breaching debt covenants if earnings fall another 10 per cent to 20 per cent or if shareholder equity falls below $500 million.
Equity at last balance date was $1.07 billion, underpinned by $986 million of intangible assets, which are now being reviewed and will likely be written down at Myer's half-year result in March."
Is this a joke? Equity is 92% underpinned by intangible assets that are almost certainly going to be impaired.
Current total market cap on Commsec is only $456million. This is a punctured hole compared to shareholder equity at last balance date.
David Jones took a $712.5m or approximately a 1/3 cut in goodwill. I am going to assume Myer will take a similar impairment or worse.
Given the outlined covenants I am having serious doubts about Myer as a going concern for lenders.
Looks cheap but potentially very toxic. I'm staying on the sidelines for their March update.
Keen to hear fellow traders thoughts/.
Cheers
- Cali
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