HLG - Hallenstein Glassons Holdings

[Pierre]

Reviewing the budget, the increase in Kiwisaver contributions is going to hit all NZ retailers with a 1% pay increase. At least with overseas business that softens the blow. However it will make it even harder for Hallensteins to grow at home.

The Australian superannuation contribution rate increases by 0.5% to a total of 12% on 1 July. All of that is paid by employers.

[KW]

The Australian superannuation contribution rate increases by 0.5% to a total of 12% on 1 July. All of that is paid by employers.

Not quite how it works in Australia.  There are two types of employment contracts - those that are "salary + super", and those that are a "remuneration package".  For those on the latter type of contract, their remuneration is a set amount, that is then divvied up between salary, super, and benefits like a car lease, extra holiday leave, meal expenses etc.  In this case, the additional super will come out of their cash salary amount. 

[KW]

Reviewing the budget, the increase in Kiwisaver contributions is going to hit all NZ retailers with a 1% pay increase. At least with overseas business that softens the blow. However it will make it even harder for Hallensteins to grow at home.

It will probably come at the expense of a pay rise.  Most retailers probably budget for 2% increases (or more) in their wages bill each year due to inflation, and the continual increase in the minimum wage (which went up 45% under Labour).  Employees may get 1% increase in super and 1% increase in salary, instead of a 2% inflation adjustment. 

[Ferg]

Not too many shares left for the Hickman Trust to sell....65,000 to go.

https://www.nzx.com/announcements/452290

[Basil]

Good stuff and $Kiwi back around 60 cents US.   Gradual recovery in the Au and N.Z. economies should start to flow through to increased consumer spending.  Metrics look sound at this price level.

[winner (n)]

I love you mate because you're so transparent.  5 minutes ago, it was $9 here we come and now its $5 here we come.  It's as clear as day you have sold lol.  For sure, I am well aware of the significant market pressure that sell down has created.

No worries ....$9 soon and then heading to $10

Won't hear how things are going until late August or early September but if share price keeps going up and up the wait is worthwhile eh

[winner (n)]

Aussie consumer confidence nudging higher says Westpac

They said today " Promising lift in buying intentions as cost-of-living squeeze eases."

That's a good sign

[Basil]

That's good.  Interestingly, last year we all thought they got quite a sales boost from Taylor's Swift's concerts in Australia in late February 2024 but that theory doesn't appear to hold water with group sales this half up 5.4%, (7 weeks from 2 February).  I reckon Glassons Au sales up ~ 10-11% so far this half and N.Z. sales are flat. 

By my reckoning HLG is on track for approx 62-63 cps in eps this year.  I worked this out before looking at market screener and I am encouraged to see the two analysts covering this, their average forecast eps this year is 62.3 cps.  https://www.marketscreener.com/quote/stock/HALLENSTEIN-GLASSON-HOLDI-6495564/finances/ 

Been doing a bit of modelling of first half - second half profit split.  For the last 6 years that has averaged 56.9% 43.1% split, and eps growth from 2019, (unaffected by Covid) to 2024 has been a CAGR of 4.4% per annum.  I think growth has been slowed a bit by Covid and the almost endless recession that followed and they can grow eps a bit faster going forward.  How much faster, maybe CAGR of 6% ? but the actual rate will ebb and flow with economic cycles.  (6% growth is consistent in my valuation methodology as being good value at a forward PE of 14.5 which gives me fair / good value of $9.00 on this year's earnings).

Possibly worth noting that the average analyst forecast is for much stronger growth in FY26 and FY27 with eps growing to 73 (17% growth) and 81 cps (11%).  Average analyst price target is $9.25.  We're in the last quarter of HLG's FY25 year and it's always best to look ahead because that's what the market does, so looking at FY26's numbers, the average analyst has eps of 73 cps and the shares closed at $7.63 so a forward FY26 PE of only 10.5.  Well shy of where I see the fair PE of 14.5.  (Briscoes with its very limited growth prospects trades on a mid 15's PE)  Hmmm

Probably worth remembering how long this company has been trading, managements capabilities, their fortress balance sheet with no debt and ~ $50m cash on hand, (worth ~ 84 cps).  The sustained selling pressure from Hickman's estate share sales seems to have abated, at least temporarily.  Wonder how many there are still to go ?

At $8.20 its trading on 11.2 times forecast FY26 EPS.  Excellent long term hold.  Compares to Briscoes trading on 20 times FY25 earnings with EPS declining in recent years.  Even cheap compared to TRA trading on 13.4 times FY26 EPS but then again, Turners have a stellar 10% CAGR track record.  Two superbly managed growth stocks that are probably both as cheap as each other.

[Basil]

Got a few more on the index rebalancing dip yesterday at $7.81 

[Dolcile]

Good buying Basil.  I couldn't get the $$ into my brokerage account quick enough.

[Pierre]

Nice uplift in the HLG SP today - closed at $8.50. Hopefully, heading back to, or past, its ATH of $8.80.

[Basil]

Nice uplift in the HLG SP today - closed at $8.50. Hopefully, heading back to, or past, its ATH of $8.80.

Happy to hold a good sized position long term.  No question in my mind we're at the bottom of the retail cycle.  Glassons Au will keep growing across all future retail cycles.   Massive long runway for growth in Australia in the decades ahead.  Metrics are very attractive for a company with a CAGR of 6.5% in EPS in the last 5 years.  James Glasson doing exceptionally well with Glassons Au, highly engaged and motivated to stay on long term and will likely inherit some of Tim Glassons ~ 20% stake.  Fortress balance sheet with no debt and over 80 cps in cash, excellent management, best in class stock turn, highly capital efficient business model e.t.c. e.t.c.   A LOT to like about HLG and its prospects for growth over the long term

[winner (n)]

Oz headlines

Consumer sentiment surges to 3½ year high

Thats a good sign for Glassons ...esp as spring is on way as well

Spread the news ... we've got to stop the recent fall in the share price .... down 10% last week or so

[winner (n)]

HLG financial year over ...wonder if we are going to get an update soon

Hope margins recovered after what they said at half year

Maybe some punters already know!

[Basil]

They updated their forecast in early Sept last year so not long to wait.  I added a few more on weakness the other day as I' really believe in the long term Glassons Australian growth story and the metrics are very attractive given the proven GAGR in earnings.