HLG - Hallenstein Glassons Holdings

[winner (n)]

Heard there was no very little Te Reo in the speeches

[Waltzing]

"all the Ossies will soon move to NZ"

only after NZ applies to become a state of Australia....

as Aus heats up they will develop more solar power than NZ and reach NET Zero sooner...

They will live underground and make water from sea water .....

HLG will be the leading retailer in smart cooler clothing for the NetZero generation...

[Waltzing]

Retail UP in NZ!!!

https://www.nzherald.co.nz/business/kiwis-boost-retail-spending-in-lead-up-to-christmas/67UTVEPPHNFVBBRXXTHSE23LPQ/

lets hope the Aussi's Shop till they Drop.... probably from heat exhaustion but ...

[Greekwatchdog]

For Bar Review

We upgrade Hallenstein Glasson (HLG) to NEUTRAL from UNDERPERFORM as HLG is trading in-line with our valuation after a recent derating in the share price, reflecting market acceptance of a more subdued near-term earnings outlook. At its annual shareholder meeting, HLG's 19-week FY24 trading update (to early December) indicated group revenue declined versus the prior period, noting a slight improvement since the last update in October. This is in-line with our thesis that HLG is affected by challenging macroeconomic conditions for consumers, and market expectations have softened. HLG now trades near the middle of its retailer peer group, and in-line with its long-run median PE multiple. While we still expect further mid-single-digit year on year revenue declines through to mid-2025, and acknowledge a very challenging near-term operating environment, risk-reward appears more balanced as: (1) self-help actions are available, and (2) the Glassons Australia expansion opportunity remains intact.

What's changed?
Earnings: FY24–FY26 underlying NPAT slightly reduces by -2% to -4%, primarily driven by foreign currency movements
Target price: Reduces to NZ$5.40 from NZ$5.45 (~-1%), reflecting near-term earnings reductions
Rating: Upgrade to NEUTRAL from UNDERPERFORM.
Revenue decline in-line with our expectations
Group revenue for the first 19 weeks of FY24 dropped -4.7% (FB 1H24E: ~-4%) versus the prior period as consumer discretionary spending was affected by cost of living challenges. This theme is consistent with ANZ retailer peers' performance. Trading has improved from the start of the year when a warm winter affected seasonal product sales. HLG noted a more positive reaction to the new season range but uncertainty remains high, with �������three of the four largest trading weeks of the year yet to go.


Gross margin resilience primarily supported by supplier renegotiations
HLG noted an improvement in the year-to-date group gross margin despite a higher USD exchange rate. This was driven primarily by: (1) supplier negotiations, and (2) normalising freight costs. The gross margin recovery appeared to be relatively stronger in the NZ businesses (Glassons NZ, Hallenstein Brothers). We anticipate gross margin pressure reduces marginally as forward exchange rates have improved slightly since our last earnings revisions, but a lower NZDUSD forward rate is a net negative for margin growth.


More imputation credits going forward
A reallocation of intercompany charges should increase imputation credits available for NZ tax resident shareholders (we estimate an average ~75% imputation rate over FY24–FY26).

HLG now trades in-line with our valuation
We upgrade HLG to NEUTRAL from UNDERPERFORM. Following recent share price weakness, HLG now trades in-line with our valuation and the market appears to be more realistic in its expectations for near-term earnings. Further downside risk to revenue in the near term may be partly offset by: (1) a faster than expected roll-out of Glassons Australia, noting a management target of ~50 stores within three to four years versus our forecast for 44 stores by FY27; (2) Hallenstein Brothers showing signs of a turnaround after adjusting its product range; and (3) improved gross margins due to Glassons supplier renegotiations (which is offsetting NZD weakness), and normalising freight costs.


Our target price reduces marginally to NZ$5.40 (~-1% from NZ$5.45), reflecting a -1% reduction in both our relative multiple and DCF valuations, both driven by slight earnings downgrades.

[Basil]

Thanks for sharing GWD.  Fair call from Forbar and as I noted yesterday, I also see fair value at $5.40
Interesting to note their targetted store expansion with Glassons Au which underpins my thesis of ongoing growth there.  70-80% of the value of the group lies in Glassons Au in my opinion.

Where do they see the dividend level for the next 3 years given the faster than expected store expansion?

[seaweed]

Thanks for sharing GWD.  Fair call from Forbar and as I noted yesterday, I also see fair value at $5.40
Interesting to note their targetted store expansion with Glassons Au which underpins my thesis of ongoing growth there.  70-80% of the value of the group lies in Glassons Au in my opinion.

Where do they see the dividend level for the next 3 years given the faster than expected store expansion?

I don't know about div level in next three years but if they keep paying me 20c to 24c divs every 6 months then I am happy with that, which is somewhere between 8-9% yld. Even at 5.80 still around about 8% yld and toped up more this morning at 5.39. Just a waiting game now to a trading update for the Christmas, boxing day and new year, in about 9 weeks time then another nice div about 7 weeks later. 

[Greekwatchdog]

Where do they see the dividend level for the next 3 years given the faster than expected store expansion?
Financials:Aug   23A     24E     25E     26E
Rev (NZ$m)   409.7   397.1   420.3   448.4
NPAT* (NZ$m)   32.0   22.9   25.7   28.8
EPS* (NZc)   53.6   38.3   43.1   48.3
DPS (NZc)   48.0   34.5   39.0   43.5
Imputation (%)   75   75   75   75

[winner (n)]

Suppose chart represents what they meant by sustainable profits

You cannot view this attachment.

[BlackPeter]

Suppose chart represents what they meant by sustainable profits

You cannot view this attachment.

Oh dear - is this a downward channel you charted?

[Waltzing]

brilliant chart by winner() ..  and yes looks to be retracing..

If you look back at the SP versus DIV over the past 15 years or more you can see some pretty high Gross percentages as the stock becomes a value trap and then bounces...

its always been a trade and cyclical stock.

[Basil]

I see it as a growth stock in a rising uptrend but with strong cyclical aspects to it along the way.
It'll break up to new all-time high's in the $8+ range one day but that day won't be any year soon.

[seaweed]

WOW HLG powered away today up 25c, had a funny feeling it was a bit oversold the other day. When I get over this covid thing will go and visit a couple of there shops to see how they going, might even buy some gift vouches for my nieces and nephews from the big oversized div I got today. They make good Christmas presents so say one of the big wigs at the AGM last Tuesday

[seaweed]

I see it as a growth stock in a rising uptrend but with strong cyclical aspects to it along the way.
It'll break up to new all-time high's in the $8+ range one day but that day won't be any year soon.

Not too worried about $8. I like little steps maybe back to $5.80 to $6 first.

[Basil]

WOW HLG powered away today up 25c, had a funny feeling it was a bit oversold the other day. When I get over this covid thing will go and visit a couple of there shops to see how they going, might even buy some gift vouches for my nieces and nephews from the big oversized div I got today. They make good Christmas presents so say one of the big wigs at the AGM last Tuesday

Jeepers you've got it again.  I've warned you before about kissing too many girls at those dances you go too 

[winner (n)]

Good finish to day recovering to $5.20

Thought going to 5 bucks at one stage ....maybe early in New Year .....withdrew my buy in case it did a seeweed and got hit while out ......and went down further