HLG - Hallenstein Glassons Holdings

[Greekwatchdog]

The only point I see in a share split would be to increase liquidity which would help with indicie inclusion.

With more shares issues would it make a difference to trading and increase more volatile intra day trading?

What won't change the running of the business and its performance which gets reflected in the share price and dividends paid out twice yearly.

So for me its a no change.

[Basil]

Many thanks to all who have outlined their thoughts on this so far.
Stock Splits enhancing market liquidity - another perspective and look at the pro's and con's.
https://www.easystreetinvesting.com/stock-splits-enhancing-market-liquidity/

[ValueNZ]

"Stock splits can seem like a financial enigma, but they're a powerful tool for companies aiming to boost their stock's liquidity. In essence, a split takes existing shares and divides them into more pieces—making each share more affordable for investors. This maneuver can fuel trading activity and open the door for new investors who may have been priced out before"

Who is priced out at $9?

There is a (weak) argument when it's a significant price... I say weak because fractional shares are available in most markets.

[Fiordland Moose]

Sometimes I wish HLG could make just a little bit more effort to be shareholder friendly. They are pretty scant with the information and sometimes do the minimum that's required of them. I certainly don't want them going and building up an investor relations team but just a little bit more information, more releases, etc.

I don't think there is much doubt that there is a pretty substantial illiquidity discount built into the share price, and that's always been the case. That's great when you are buying, great for the yield generated along the way, and inconsequential while you are happily holding it. But it would be nice to have the option value of realising those shares without that discount if you ever needed to for whatever reason.

The liquidity remains poor on a day to day basis, despite being in the NZX50 and now having two analysts covering it. I suppose too many long term holders hoarding shares for the yield and uninterested in selling. I built up a large holding in the company in early 2024 @ around 5.50-5.60 a share and it took months to accumulate.

[Dolcile]

The liquidity is similar to Turners.   I was of the mind a few months ago to build into a big position and it was hard without pushing the price up too much. 

[Fiordland Moose]

that's the worrying thing about the NZX. There is capital flight from our home exchange among domestic investors (not necessarily a bad thing - home bias isn't good) and we make it too bloody hard and expensive for offshore platforms to access our shares. Its a real issue for the NZX.

[Dolcile]

Yeah and tbf the overall performance of NZX listed businesses in the last 5 years has been woeful.   Partially due to the economic conditions and partially pi$$ poor management. 

[seaweed]

Sometimes I wish HLG could make just a little bit more effort to be shareholder friendly. They are pretty scant with the information and sometimes do the minimum that's required of them. I certainly don't want them going and building up an investor relations team but just a little bit more information, more releases, etc.

I don't think there is much doubt that there is a pretty substantial illiquidity discount built into the share price, and that's always been the case. That's great when you are buying, great for the yield generated along the way, and inconsequential while you are happily holding it. But it would be nice to have the option value of realising those shares without that discount if you ever needed to for whatever reason.

The liquidity remains poor on a day to day basis, despite being in the NZX50 and now having two analysts covering it. I suppose too many long term holders hoarding shares for the yield and uninterested in selling. I built up a large holding in the company in early 2024 @ around 5.50-5.60 a share and it took months to accumulate.
                                                                                                                                                 I'm glad Basil bought up the subject. We were talking about it a year or two back. Like you Fiordland Moose I had too hard a time when buying or selling HLG. It was pushing sp up too high when buying and when selling pushing down too low. Another thing that pis-ed me off was I would buy $15,000 or $20,000 worth of shares and sp would go up to say $8 as an example, then at end of day someone comes along and sells $1,000 worth and pushes sp down to maybe $7.70c. I was also buying in the $5 and $6 days but was too hard to get in and out. Another thing I would like to point out, if they had a five to one share split  the company would go from about 60,000,000 to 300,000,000 shares. Lets say the shares were $10 each and after split they become $2 each which is a 5 to 1 split. Your every day Joe Blog traders who are used to seeing HLG shares at $10 now trading at $2 and the mind will be telling you it is too cheap for a $10 share to be trading at $2 and will make you want to buy more at $2. The $2 shares are more likely to go from $2 to $3 than before the split of the shares equivalent going from $10 to $15. At $2 it is still paying over a 10c div. I was lucky to have a fairly large size investment mature 5 months ago and have bought into 18 different companies since then. Most of them are in $1 to $3 range and the only ones above that are in the $7 range which is FSF and TRA. I would love to buy more HLG, but seeing sp at $9 plus puts me off and I end up buying more FSF. So come on HLG management lets have a 5 to 1 share split and get some action. We want action! I promise to buy in at $2 and help push sp up again to wherever. That is all I have to say.     

[seaweed]

Something went wrong. My posting joined onto the end of Fiordland Moose posting. So the start of my post is from....I'm glad Basil bought up the subject. Don't know how that happened. 

[Left Field]

Something went wrong. My posting joined onto the end of Fiordland Moose posting. So the start of my post is from....I'm glad Basil bought up the subject. Don't know how that happened. 

Fixed for you Seaweed.

I'm glad Basil bought up the subject. We were talking about it a year or two back. Like you Fiordland Moose I had too hard a time when buying or selling HLG. It was pushing sp up too high when buying and when selling pushing down too low. Another thing that pis-ed me off was I would buy $15,000 or $20,000 worth of shares and sp would go up to say $8 as an example, then at end of day someone comes along and sells $1,000 worth and pushes sp down to maybe $7.70c. I was also buying in the $5 and $6 days but was too hard to get in and out.

Another thing I would like to point out, if they had a five to one share split  the company would go from about 60,000,000 to 300,000,000 shares. Lets say the shares were $10 each and after split they become $2 each which is a 5 to 1 split. Your every day Joe Blog traders who are used to seeing HLG shares at $10 now trading at $2 and the mind will be telling you it is too cheap for a $10 share to be trading at $2 and will make you want to buy more at $2. The $2 shares are more likely to go from $2 to $3 than before the split of the shares equivalent going from $10 to $15. At $2 it is still paying over a 10c div.

I was lucky to have a fairly large size investment mature 5 months ago and have bought into 18 different companies since then. Most of them are in $1 to $3 range and the only ones above that are in the $7 range which is FSF and TRA. I would love to buy more HLG, but seeing sp at $9 plus puts me off and I end up buying more FSF. So come on HLG management lets have a 5 to 1 share split and get some action. We want action! I promise to buy in at $2 and help push sp up again to wherever. That is all I have to say.     

[seaweed]

Thank you LF. And go for it Basil. I am for a share split.

[winner (n)]

Ryman did a 5 foe 1 in 2007 when share price was about $10

Seemed to increase liquidity and Ryman share price didn't seem to suffer too much through the GFC turmoil

Maybe we can call that a successful split

[Basil]

I don't think there is much doubt that there is a pretty substantial illiquidity discount built into the share price, and that's always been the case.

Thanks for your thoughts. I'm not so sure its just a liquidity issue.  For example, I'm aware that Briscoes was held back from NZX50 inclusion for a while as it didn't meet liquidity requirements and yet with no EPS growth in the last 5 years and at best very modest prospects for growth in future years, after inclusion the price has settled such that it trades on a consensus FY26 PE of 19.3

Perhaps with the majority of HLG sales now being with Glassons Au, at some point as this trend towards Australian sales becoming ever more dominant, a listing in Australia is something that might be in shareholders best interests ?  But I'm not so sure with the not inconsiderable extra listing costs and annual fees that's the answer either.  Maybe the market is only really just starting to wake up to the fact that HLG is not the cyclical Kiwi domestic apparel retailer it once was ?  Maybe a few more years of double digit earnings growth is all that's really needed to build the companies reputation for growth ?  Perhaps none of this matters and the present situation is a golden opportunity for value investors buying a very well run and well proven Australasian growth story that still trades on compelling metrics ?

I remember first buying into HLG in 2016 at $2.70 before Glassons Au growth was even a thing to be considered.  I only ever bought for the gross yield which was 15% back then and never expected anything else because back then the company was a cyclical N.Z. apparel company with only very minor Australian sales.  The growth story since then with Glassons Au has been quite remarkable.  The company itself alluded to this at last years AGM.  In my opinion, It wouldn't hurt HLG to continue highlighting the growth opportunities in Australia including the size of the total addressable market to analysts and to consider concentrating capital towards expansion there.  If more rapid expansion in Australia comes at the expense of some N.Z. stores, I seriously doubt that's going to be to any shareholders detriment.  Lets be honest, the Kiwi market is pretty saturated already with Hallenstein and Glassons stores for 5.3 million people, but for Australia with nearly 27 million people, there's an enormous opportunity for expansion with a VERY long runway for growth.

Thanks Winner.  Santana just did a 3:1 split very recently and it hasn't done their liquidity or overall shareholder value any harm.

P.S.  Thanks to all who have shared their thoughts to date, please keep them coming.  In about one weeks time I'll share links to the threads on both forums with the boards of both companies so they can get an idea of what shareholders are thinking.

[Shareguy]

Thought this was well written and sums up a share split well.

https://www.goodreturns.co.nz/article/976518219/how-share-splits-and-consolidation-affect-the-value-of-a-business.html

[Fiordland Moose]

Few other bits and bobs for your list Basil.

Extending the use of franking credits to Australian domiciled investors. Given Australians propensity to better reward growth would be great to get more aussies on the register, and clearly Glassons generates a lot of australian tax paid income, so attaching franking credits to future dividends would be a good place to start.

Not a big fan of dual listings but at some point it makes sense to question what exchange is the most logical to have a primary listing on. Note I'm not advocating it - just raising its possibility.

There are likely more optimal transfer pricing mechanisms available to retain more profit in NZ - ie NZ entities legally owning the inventory physically located in Australian warehouses (and arranging their import from Asia), with a back to back intercompany sale (with margin) occurring once dispatched to stores (or a flash sale once sold to a customer). Obviously complex and need to satisfy two tax authorities at the same time but point there are fairly standard ways of structuring the affairs over and above the current status quo (but noting the current regime looks to be pretty fair and conservatively structured)

As Percy wisely said elsewhere, "it all depends on what matters to Tim Glasson." But a good thought exercise none the less.