HLG - Hallenstein Glassons Holdings

[Pierre]

An immediate surge in the SP. $10+ should hold after this morning's news!

[Dolcile]

dammit,  i was going to buy a few more yesterday around the $9.72 mark but couldn't get the funds across to my brokerage account quick enough.

Outstanding result

[alkebab]

We got the top line very close mate but the bottom line has far exceeded my expectations.  Currency wasn't especially helpful in that half, more favorable now, so there must have been a very strong recovery in N.Z. profitability which on the face of it is very encouraging for the future level of imputation credits.

NZD has really tanked against the AUD in the last month. Let's see if this is going to be the new way forward... Hasn't been this low since the early 2010s after a decade > 90c.

[Mos]

Very impressive guidance upgrade - added to holding at market opening this morning. 

[Basil]

NZD has really tanked against the AUD in the last month. Let's see if this is going to be the new way forward... Hasn't been this low since the early 2010s after a decade > 90c.

Quite right mate. If the Kiwi Aussie cross rate stays around these level's of $1.19 that's going to be very helpful with translating across Australian profits which at my best guess are currently running around 60% of group profit but could be as much as 70-75% 5 years from now.  I added a few more at the open this morning.

An immediate surge in the SP. $10+ should hold after this morning's news!

If it doesn't I'm wide open to the prospect of buying more.

[alkebab]

The chart has looked like an ascending triangle since late November so I bought a bit over the last 2 weeks, hopefully on the dip.

[Basil]

Not sure how many people realise this but EPS was 22.93 cps in 2016 (when I first bought into HLG)
https://www.hallensteinglasson.co.nz/annual-report/2016
As mentioned above, I think they're on track for EPS of 90 cps this year.
That's a 10 year EPS CAGR of 14.65% ! and the forward PE is only 11.  PEG ratio is only 0.75 based, (anything less than 1 is exceptional value) on 10 year CAGR and a PEG ratio of only 0.34 on the current EPS growth @ 32%. 
HLG, ask me how I feel about this result lol - Swooshing away all the negativity for the weekend.  https://www.youtube.com/shorts/31B70wHE-yU

[winner (n)]

Sales on an annual basis (rolling 2 half year numbers) broken through the 1/2 billion dollar mark

Momentum seems to be the buzz word of the year .... with the current momentum HLG have I don't think it'll take another 100 years (or whatever) to do the next 1/2 billion

[Clearasmud]

Not sure how many people realise this but EPS was 22.93 cps in 2016 (when I first bought into HLG)
https://www.hallensteinglasson.co.nz/annual-report/2016
As mentioned above, I think they're on track for EPS of 90 cps this year.
That's a 10 year EPS CAGR of 14.65% ! and the forward PE is only 11.  PEG ratio is only 0.75 based, (anything less than 1 is exceptional value) on 10 year CAGR and a PEG ratio of only 0.34 on the current EPS growth @ 32%. 
HLG, ask me how I feel about this result lol - Swooshing away all the negativity for the weekend.  https://www.youtube.com/shorts/31B70wHE-yU

Funny I first bought in in 2016.
Great minds thinking alike or was I listening to you?

[winner (n)]

H1 NPAT % sales jsut over 10%

Getting back to where it was a few years ago

Average the last few years has been 8>7%

[Basil]

Funny I first bought in in 2016.
Great minds thinking alike or was I listening to you?

Lets go with great minds think alike lol.  I certainly made the yield case very clear back then.  Was trading on a gross fully imputed yield of 15% back in August 2016 when it was $2.70.  Back then it was a no growth company and I only ever bought it for the outstanding yield and never expected any growth.  Its funny how things work out sometimes.  EPS was 23 cps back then and on my modelling they're going to do circa 90 cps this year.  Amazing growth story  that's still not well understood or appreciated by Mr Market despite this being the oldest listed company on the NZX.  Go figure...

Sales on an annual basis (rolling 2 half year numbers) broken through the 1/2 billion dollar mark

Momentum seems to be the buzz word of the year .... with the current momentum HLG have I don't think it'll take another 100 years (or whatever) to do the next 1/2 billion

My modeling has them doubling sales to ~ $1 Billion in FY31, 70-75% of that in Australia.  Huge runway for growth over there extending out at least 30 years.

[winner (n)]

Basil mentions the about $1 per share in cash in the bank .....about $60m

I love how HLG cut and paste this bit into updates - The balance sheet for the Group remains strong and stock levels continue to be well controlled.

Suppose that means seeing they are going gangbusters there's even more cash in the bank

[entrep]

I swear I'm not trying to pollute the forums with AI information but I just do find it interesting to see what it comes up with and what it latches on to when I feed it previous posts plus the latest financial statements. And of course nothing beats human analysis. Without human analysis, direction, and intuition the AI is essentially worthless. Anyway this is the last one that I'll post for a while since I'm keenly aware that this is meant to be a forum with discussion between human participants.

HLG at $10: BUY. Strongly.

I'm going to make the case plainly. The H1 FY26 result changes everything, and the market hasn't caught up yet.

The Number That Matters Most
H1 FY26 NPBT: $39.5 million.
Stop and absorb that. In the first half alone, HLG has generated 67.7% of the entire FY25 full-year profit. And this is the traditionally weaker half – the winter/autumn season, not the blockbuster Christmas/summer period.

The trajectory through the half was accelerating:

First 7 weeks (Sep report): sales +12.9%
First 18 weeks (AGM): sales +13.8%
Full H1 (26 weeks): sales +14.6%

Momentum was building, not fading. And the NPBT growth of +32.1% was more than double the sales growth, meaning margins are expanding rapidly. The H1 FY26 PBT margin was 14.3%, up from 12.5% in H1 FY25. That's 180 basis points of margin expansion in six months. Operating leverage is kicking in hard.

What FY26 Actually Looks Like

Everyone is still anchored to Forsyth Barr's pre-H1 forecast of 75.1c EPS. That number is stale. Here's what the data actually points to:
H1 FY26 NPBT: $39.5m (known)
H2 FY25 NPBT was: $28.5m

H2 includes the key Christmas/summer trading season. With NZ rate cuts flowing through, Australian consumer confidence at 3.5-year highs, competitor store closures handing Glassons customers and prime mall locations, and new stores annualising – a conservative 15% growth on H2 gives:
H2 FY26 NPBT: $32.8m
Full-year FY26 NPBT: ~$72.3m (vs $58.4m FY25 = +24%)

At the FY25 effective tax rate of 32.4%:
FY26 NPAT: ~$48.9m
FY26 EPS: ~82 cps

And honestly, 15% H2 growth might be conservative given H1 ran at +32%. Even if H2 only delivers +10% growth, you're looking at 78-79c EPS.

At $10, you're paying 12.2x genuinely achievable FY26 earnings that are growing north of 20%.

The Sum-of-Parts Slaps You in the Face

Let me value the pieces separately, because lumping everything together obscures where the value actually sits:

Glassons Australia

FY25 NPAT: $22.5m, growing 15-20% annually
FY26 estimated NPAT: ~$26-27m
Universal Store (UNI.ASX), the closest comparable, trades at 19x earnings
At 18x: $468-486m = $7.85-8.15 per HLG share

Glassons New Zealand

FY25 NPAT: $13.4m (up 25% on PCP as NZ recovers)
Mature but profitable, improving with rate cuts
At 12x: $161m = $2.70 per share

Hallensteins (NZ + AU)

FY25 NPAT: $3.3m (trough earnings in deep NZ recession)
Some optionality as NZ recovers and AU footprint expands
At 8x: $26m = $0.44 per share

Net Cash

$58.3m cash, zero debt
= $0.98 per share

Property

Investment property $3.0m + land/buildings at fair value $29.3m

Net of what's embedded in segments, call it ~$0.30 per share

Sum of Parts: $12.27 - $12.57 per share

The stock is at $10. That's a 20-25% discount to what the pieces are worth today, before any further growth.

Why the Market Is Underpricing This

1. NZX perception discount

The NZX still prices HLG as a New Zealand cyclical retailer. It isn't one anymore. 53% of sales and 59% of NPBT come from Glassons Australia. If this business were listed on the ASX with the same growth profile, it would trade at 16-18x forward earnings, not 12x. Briscoes – a purely domestic NZ retailer with flat to declining earnings – trades at 19x. That's absurd relative to HLG.

2. Liquidity discount

Thin trading means institutional investors can't build meaningful positions easily. Fiordland Moose said it took months to accumulate at $5.50-5.60. This structurally suppresses the PE. But the underlying business value is independent of how many shares trade daily.

3. The Hickman sell-down created a false narrative

The estate dumping ~500,000 shares (60% of daily volume) drove the price from $8.80 to $6.85 – a 22% crash that had nothing to do with fundamentals. The shares were absorbed, the overhang cleared, and the stock recovered. But the episode reinforced a "volatile, risky" perception that lingers.

4. Hallensteins drags the headline numbers

Hallensteins earned $3.3m NPAT on $107m sales. It's effectively dead weight. Strip it out and you have a $363m revenue business earning $36m+ NPAT with a growth rate of 20%+. That deserves a premium multiple, not a discount.

What Makes This Different From a Typical "It's Gone Up a Lot" Situation

Yes, the stock has risen from $6 to $10 – a 67% gain. Normally that would make me cautious. But consider:

FY24 EPS was 57.8c. FY26 EPS is tracking ~82c. That's 42% earnings growth in two years.

The stock is up 67% but earnings are up 42%, and the H1 FY26 result shows the growth rate is accelerating. The PE has expanded from ~10x to ~12x forward – that's a modest rerating for a company whose growth profile has fundamentally improved.

By FY28, at $10 you're paying 9.3x earnings for a company that will likely still be growing at double digits. And collecting 55-70c+ dividends along the way.

The Structural Growth Story Is Intact and Strengthening

The Glassons Australia growth engine has three gears, and all three are engaged:

Gear 1 – Same-store sales growth: ~10% in FY25 on top of multiple years of similar growth. Brand heat is real and sustained.
Gear 2 – New store openings: 2 stores opened in FY25. Management has signalled 2-5 per year. Post new warehouse (ready H2 FY26), the pace can accelerate. At ~NZ$6m sales per store and ~9% NPAT margin, each new store adds ~$540k to NPAT. Five stores/year = $2.7m incremental NPAT = 4.5c EPS.
Gear 3 – Competitor collapses: Mosaic Brands (Noni B, Rivers, Millers – 185 stores), plus other failures, are vacating prime mall locations. The Annual Report notes HLG is "exploring new store opportunities when the right opportunities arise" and capex commitments for store and distribution centre fitouts have nearly doubled to $1.86m.

The population-adjusted store opportunity:

NZ: 35 Glassons stores for 5.3m people = 6.6 per million
AU: 40 Glassons stores for 27m people = 1.5 per million
At just HALF NZ density: 89 stores (vs 40 today)
That's 49 more stores at $540k NPAT each = $26.5m incremental NPAT
That's an additional 44c per share in earnings from store rollout alone

Even at a glacial 3 stores/year, that's 16 years of visible growth runway. At 5/year, it's a decade.

The Insider Activity Seals It

From the General Disclosures in the Annual Report:

Tim Glasson sold 699,479 shares off-market on 27 June 2025 to family members at $7.72/share. This isn't selling because he's bearish – it's estate and succession planning.
James Glasson purchased 297,927 shares through his trust on the same date at $7.72/share. His holding went from 515,064 to 812,991 shares – now worth $8.1m at $10. Combined with his $934k annual compensation, James has years of salary invested in the stock.
When the CEO running the fastest-growing division puts $2.3m of his own money into the stock, pay attention.

The Risks (Because I'm Not an Idiot)

Fashion is fickle. Glassons could lose its brand heat. But 10+ years of consistent growth through multiple fashion cycles suggests something more durable than a trend.
FX can bite. NZD/USD at 0.59 is tough. But gross margins held at 59.3% through FY25 despite this, and the NZD has been recovering (back to ~0.60). Forward cover of $84.7m provides 6-12 months of protection.
Hallensteins could get worse. True. But it's already only 8% of NPBT. Even if it goes to zero, EPS drops from 82c to ~76c. At $10 that's still only 13.2x.
Liquidity is thin. Valid concern if you need to sell in a hurry. Build your position over time and don't invest money you need back quickly.

None of these risks fundamentally challenge the thesis. They're speed bumps, not roadblocks.

The Call

BUY at $10. Target $13 within 18 months. That's 13x FY27 estimated EPS of ~94c plus dividends of ~65-70c over that period. Total return: ~37%.

This is a business with:

✅ 20%+ current EPS growth, accelerating
✅ A decade-long visible growth runway in Australia
✅ $58m cash, zero debt
✅ A deeply committed CEO/heir who just bought $2.3m of stock
✅ Operating leverage now demonstrably kicking in
✅ Competitors collapsing around it
✅ A forward PE of 12x, half what comparable ASX retailers trade at

The stock is at $10 because it's listed on the NZX and the market still thinks it's a Kiwi clothing shop. It's not. It's a $250m+ and rapidly growing Australian fashion brand with a NZ legacy business bolted on. The day the market fully prices that – or someone makes a takeover bid for this absurdly cheap, cash-rich, unlevered growth business – is the day you wish you'd bought more at $10.

[Dolcile]

Hold up. Do they normally make more money in the first half or the second half ?

[Pierre]

Hold up. Do they normally make more money in the first half or the second half ?

Entrep's AI got that bit wrong. HLG has just reported for 1HY26 which includes the Christmas/summer season and is their best half. Their FY ends on August 1st.