HLG - Hallenstein Glassons Holdings

[LoungeLizard]

The forward PE projections are by their nature, extrapolative. They assume what has gone before will go on  into the future. I can understand why many put a lot of faith in HLG's management - I am a fan myself - but I have cashed up for a number of reasons.

 The clothing industry is notoriously fickle. HLG NZ is a busted flush (along with the NZ economy) and I don't see much growth, if any coming here. And there is such a thing as brand fatigue - one just cannot assume that HLG AUS will continue to remain in favour. There have been bigger clothing brands than HLG that have fallen by the wayside. I just wouldn't pay $10 per share on a clothing retailer no matter how good the back of an envelope calculations are. As for $15 per share...really?

It's a separate topic, but the global macroeconomic environment is not looking good. THE US economy is in dire straits - Govt shutdown, inflationary pressure, rising unemployment, crippling debt servicing costs. In addition there is whispers of another banking failure. The US domino is ready to fall, and everyone knows what that means. I have cashed up HLG and a few others and kept the remaining in defensive stocks like GNE, IFT, SPK and FSF. And a couple of long shots like PEB and TRU. IMO this is not a time to hold a lot in retailing, particularly fashion. A 5% holding at best.

Best of luck to holders, but remember that the low volume trading that has produced the current bubble can be disastrous if shareholders need to exit quickly. Stocks like HLG will take a big hit if there is a scramble for the exits.

[Pierre]

The SP has hit $10.

[Basil]

I bought more today including some at $10. They're only just getting started with Glassons Au. There's room for 200 stores over there in the decades ahead, presently only 40. Glassons is a young cool brand there and has a proven growth history of growing sales and eps there at circa 20% CAGR

$15 a real chance 3 years hence. 3 years compound eps growth at low double digits gets you there by itself let alone the shares being prsently underpriced for the proven growth rate.

The metrics are compelling. My #1 investment position. Turners a very close second.

[LoungeLizard]

I seem to remember a similar enthusiasm for HGH's foray into Australia.
 HLg are of course a different beast but compelling metrics don't account for much if the wider macroeconomic environment, or indeed consumer sentiment, turns. Not saying this will happen, but there's an unacceptable risk of substantial capital loss if it does. This very much looks to me like the first half of a buy high / sell low story.

[Basil]

A VERY different company.  HLG is N.Z's oldest listed company.  Haldenstein's traces its roots back over 150 years and Glassons over 100 years.  Its not that hard to see the opportunity but there will always be naysayers and there always has been no shortage of them since I first bought at $2.70 in 2016.  Its nearly quadrupled since then.

Just to briefly recap, HLG has CARG in EPS for the last 5 brutal years in retail of 9.2%.  Is it really that hard to imagine that retail spending will pick up as the economy on both sides of the Tasman recovers ?    Surely even "Blind Freddy" can foresee that.

Glassons Au sales have grown from circa $40m in 2017 more than 6 times to over $250m in FY25 and it still has very very low store penetration in Australia 40 there and 35 here and they have a population of 27m and we have 5.3m.  The same level of store penetration in Aust with Glassons as here would allow them 178 stores so there's plenty of room to grow.

If you back out the pending dividend of 30.5 cps people buying at $10 are paying just 11.4 times next years (FY27) average analyst earnings.      If that's too expensive for some people good luck finding genuine growth companies that are better managed on cheaper metrics.

[winner (n)]

The secret is in a couple of charts a broker puts

One clearly shows a growing number of stores (esp Glassons AU) but more importantly  the average sales per store is increasing as well

That's cool

[Basil]

Interesting presentation from Barramundi.  One image leapt off the page at me.  The average ASX200 stock is trading at a PEG (price earnings to growth ratio) of 3.2 times.  https://api.nzx.com/public/announcement/461765/attachment/455528/461765-455528.pdf
Put that same pricing on HLG and it would be trading at a PE of 3.2 x 9.2% proven growth rate = PE of 29.
The real secret with HLG is its a dirt cheap Australian growth story and at present growth rates Australian sales will be approx. double N.Z. sales within 5 years.  That's right, the no / slow growth N.Z. side of operations both Glassons and Haldenstein's will only be approx. one third of group turnover.  Already in FY25 Glassons Au sales are ~54% of group turnover.

[LoungeLizard]

A VERY different company.  HLG is N.Z's oldest listed company.  Haldenstein's traces its roots back over 150 years and Glassons over 100 years.  Its not that hard to see the opportunity but there will always be naysayers and there always has been no shortage of them since I first bought at $2.70 in 2016.  Its nearly quadrupled since then.

Just to briefly recap, HLG has CARG in EPS for the last 5 brutal years in retail of 9.2%.  Is it really that hard to imagine that retail spending will pick up as the economy on both sides of the Tasman recovers ?    Surely even "Blind Freddy" can foresee that.

Glassons Au sales have grown from circa $40m in 2017 more than 6 times to over $250m in FY25 and it still has very very low store penetration in Australia 40 there and 35 here and they have a population of 27m and we have 5.3m.  The same level of store penetration in Aust with Glassons as here would allow them 178 stores so there's plenty of room to grow.

If you back out the pending dividend of 30.5 cps people buying at $10 are paying just 11.4 times next years (FY27) average analyst earnings.      If that's too expensive for some people good luck finding genuine growth companies that are better managed on cheaper metrics.

Blind Freddy indeed. The real economy in the US is in a technical recession, as is NZ. And contrary to what people may think, Australia is in a period of low growth and the real economy - how the average person is coping - isn't actually that flash. In these periods, retail just isn't the place to store your capital. If people think the growth that HLG has enjoyed can be confidently projected 2-3 years from now, then they've got better eyes than Superman. And remember - those 2-3 years are Trump years. His policies will face a day of reckoning very soon, whether he fires the Government statistician or not!

[winner (n)]

Glassons have 722,000 followers on Instagram

An


Has a pretty high engagement score as well

Lots of customers amongst that lot

[Basil]

Blind Freddy indeed. The real economy in the US is in a technical recession, as is NZ. And contrary to what people may think, Australia is in a period of low growth and the real economy - how the average person is coping - isn't actually that flash. In these periods, retail just isn't the place to store your capital. If people think the growth that HLG has enjoyed can be confidently projected 2-3 years from now, then they've got better eyes than Superman. And remember - those 2-3 years are Trump years. His policies will face a day of reckoning very soon, whether he fires the Government statistician or not!

Glassons Au sales CAGR since FY17 is 25.81%.  Glassons Au 5 year EPS CAGR is 21%.  Most of those years were SUPER tough for retail.  Yes N.Z operations are basically no growth over the last 10 years but I'm not sure how much more evidence you need that Glassons Au is the growth engine for this company ? 

I doubt all the young 13-30 young women in Australia who buy Glassons gear are paying much attention to what the Chump says or does and probably care even less.  A heads-up.  What they care about is looking cool while peacocking or if already paired up, looking cool with their partner and friends while having fun and making good social connections.  Glassons Au is growing strongly and has been growing strongly for the last 8 years.  Year to date sales are up 12.9% too.  I'm looking forward to the trading update at the 10 December annual meeting.

Can you please list all the companies that you can think of that have a similar track record of EPS growth, (last 5 years 9.2% EPS CAGR) that trade on a current year forward PE of 12.6 ?  Are there any ?

[winner (n)]

Plenty of big race meetings in Oz at the moment ....they say more and more young people are attending and giving it bit of a party atmosphere

No doubt new dresses from Glassons are popular

[LoungeLizard]

Glassons Au sales CAGR since FY17 is 25.81%.  Glassons Au 5 year EPS CAGR is 21%.  Most of those years were SUPER tough for retail.  Yes N.Z operations are basically no growth over the last 10 years but I'm not sure how much more evidence you need that Glassons Au is the growth engine for this company ? 

I doubt all the young 13-30 young women in Australia who buy Glassons gear are paying much attention to what the Chump says or does and probably care even less.  A heads-up.  What they care about is looking cool while peacocking or if already paired up, looking cool with their partner and friends while having fun and making good social connections.  Glassons Au is growing strongly and has been growing strongly for the last 8 years.  Year to date sales are up 12.9% too.  I'm looking forward to the trading update at the 10 December annual meeting.

Can you please list all the companies that you can think of that have a similar track record of EPS growth, (last 5 years 9.2% EPS CAGR) that trade on a current year forward PE of 12.6 ?  Are there any ?

You're rather missing my point. I'm not disputing HLG's track record, however good that might be. There's an element of not seeing the wood for the trees here, or rather seeing only one tree. We've been down this road before when PE analysis of HGH seemed to prove that its future was assured. It wasn't. Macroeconomics trumps the fundamentals of any business. My conviction is that this is not a good time to be investing in retail, certainly not at the price that HLG are demanding. Neither of us can prove to any degree of certainty what the future holds, but my bet, is that we are on the verge of a global downturn precipitated by a US crash. If one is to buy NZ stocks right now - and I am not - defensive stocks in essential services are the way to go. Let's re-convene in 6-12 months and see whose right.

[Basil]

With respect, I think its you that's missing the point.  Retail in N.Z. has already been in a multi year recession since Covid and things have been far from rosy in Australia too.  This company has grown well despite a deep recession for years. The latest economic data is showing green shoots here.  Its pure speculation, (I'm not speculating on that) if / when the US might go into a recession and you're drawing an even longer bow suggesting this would impact the retail spending of 13-30 year old's in Australia / New Zealand who have already been hamstrung for years.  As for defensive's, I already have quite a few GNE.  One thing I agree with you on, some parts of the US market are trading on very stretched metrics.  I have no interest whatsoever in taking any position in a NASDAQ ETF or fund at the current level.

[LoungeLizard]

With respect, I think its you that's missing the point.  Retail in N.Z. has already been in a multi year recession since Covid and things have been far from rosy in Australia too.  This company has grown well despite a deep recession for years. The latest economic data is showing green shoots here.  Its pure speculation, (I'm not speculating on that) if / when the US might go into a recession and you're drawing an even longer bow suggesting this would impact the retail spending of 13-30 year old's in Australia / New Zealand who have already been hamstrung for years.  As for defensive's, I already have quite a few GNE.  One thing I agree with you on, some parts of the US market are trading on very stretched metrics.  I have no interest whatsoever in taking any position in a NASDAQ ETF or fund at the current level.

You may well be right. Or not. Time will tell.

[winner (n)]

Interesting presentation from Barramundi.  One image leapt off the page at me.  The average ASX200 stock is trading at a PEG (price earnings to growth ratio) of 3.2 times. 

...

Apparently the 12 month forward weighted PE for the New Zealand market is currently 27.1x, +44% above the long run average.

Jeez HLG is totally underpriced eh