Briscoe Group BGP

[Basil]

I had been hoping it was a good chance for index inclusion in the December rebalance.  Sometime in 2025 is still looking good either through WHS falling to position 56 in the index at some stage, (compulsory exit), current position appears to be 55, or through the Manawa takeover if approved by the commerce commission.

I have taken a moderate sized position averaging just over $5 at cost on a gross yield of 8% based on cost and am happy to hold and see what happens.  Overlaying the 6 month charts of TRA, HLG and BGP, all in a strong uptrend since the bottom of the retail cycle in Winter, suggests the market is front running a significant recovery in retail spending in 2025.

[winner (n)]

BGP chart looking a bit sad these days.

No inclusion in NZX50 and a profit downgrade not liked by market ......share price back to where it was a year ago.

Maybe later in year might be worth a punt.

[Basil]

Ouch, yeah, clear breakdown through the 200-day MA looks ominous.  From a fundamental point of view at slightly above Rod's minimum $66m, say $67m, that's only eps of 30 cps and after three years of stagnant to declining earnings can anyone really say they are a growth company anymore?  Even if you say retail is at the bottom and its onward and upward from here and they can get back to 38-40 cps again in due course, with more competition coming from the inexorable growth of K Mart, Panda Mart, Cosco and others, I'm not convinced you can make the case it's a growth company.

As many know, I apply a cut through all the B.S., no nonsense PE of 8.5 to no growth companies.  Apply that to this year's earnings and my goodness that's a grim assessment of its spot value so must be wrong but apply it to recovered earnings in FY27 of say 40 cps that's still only 40 x 8.5 = $3.40.  I rate Briscoes a sell and note the TA is saying the same.  I think there's far more compelling investments in the retail space with huge runways for growth that are trading on compelling metrics, namely HLG and TRA, also noting the TA on those two looks very encouraging.

[Left Field]

Impressive result in a tough market

https://www.nzx.com/announcements/448239

Highlights for the full year ended 26 January 2025:
 • Total sales $791.5 million, 99.94% of last year's record sales
 • Gross profit margin 40.37%
 • Online sales as mix of total Group sales 19.69%, (LY 18.72%)
 • Total costs only 1.11% increase on last year
 • Total inventory $5.2 million below last year
 • $58.2 million capital expenditure made during the period
 • Strategic initiatives remain on track and to budget
 • Net profit after tax (NPAT1.) $68.0 million

[Basil]

Big divvy cut for the year, gross yield at $4.60, now 6.8%.

[winner (n)]

Big divvy cut for the year, gross yield at $4.60, now 6.8%.

Only 40% less than last year

I thought Rod was the 50% or 60% off guy

[mike2023]

Big divvy cut for the year, gross yield at $4.60, now 6.8%.

Why do you think the share price has held up so well since the announcement? People seeing through the next 6 months or is a lower yield becoming acceptable for a stable company?

[Basil]

Why do you think the share price has held up so well since the announcement? People seeing through the next 6 months or is a lower yield becoming acceptable for a stable company?

Good question Mike. I think it's widely understood that in N.Z. (unlike many other countries in the world), we've already been in the worst recession for 30 years and it's lasted for well over 2 years so this is considered to be the bottom of the economic cycle for the retail sector.  As you suggest, with interest rates headed down, nearly 7% gross yield is not unattractive.  Some chance of NZX50 inclusion in the future is possibly a factor too.  It's not the worst bet on the NZX by any means but I prefer the growth plus better yield of TRA and HLG.  Rodd Duke is not a young man either so what's the succession plan, one wonders ?

[mike2023]

Thanks. I hold HLG plus TRA and I am eagerly awaiting the results of both. 

[HAWKDOG]

Good question Mike. I think it's widely understood that in N.Z. (unlike many other countries in the world), we've already been in the worst recession for 30 years and it's lasted for well over 2 years so this is considered to be the bottom of the economic cycle for the retail sector.  As you suggest, with interest rates headed down, nearly 7% gross yield is not unattractive.  Some chance of NZX50 inclusion in the future is possibly a factor too.  It's not the worst bet on the NZX by any means but I prefer the growth plus better yield of TRA and HLG.  Rodd Duke is not a young man either so what's the succession plan, one wonders ?

Sharesies recently had Rodd on their podcast.  Two items worth noting:

- mentioned nzx top 50 potentially in the near future
- going to experiment with micro stores in smaller areas or in areas of larger centers that outside major shopping areas.

https://youtu.be/oyglhRg_aKs?feature=shared

[bulltrap]

Sharesies recently had Rodd on their podcast.  Two items worth noting:

- mentioned nzx top 50 potentially in the near future
- going to experiment with micro stores in smaller areas or in areas of larger centers that outside major shopping areas.

https://youtu.be/oyglhRg_aKs?feature=shared

That link is for a 2022 interview. Try this one: https://www.youtube.com/watch?v=ChdLKzeI000&ab_channel=Sharesies

[HAWKDOG]

thanks for the correct link!

[LaserEyeKiwi]

I was more surprised they are looking to get into Australia. I guess retail is getting rather saturated here.

[winner (n)]

Half year sales about the same but profit down about $12m on last year

Things must be tough out there when Rod is hoping ... We remain hopeful that the economic recovery will gradually emerge as the year continues.

https://announcements.nzx.com/attachment/448686.pdf

[winner (n)]

Even $5.95 looks expensive in light of these comments in Businessdesk -

Forsyth Barr equity analyst Paul Koraua said the result was a "good improvement", but the company had lost more margin than they had expected.

However, because the share price has risen nearly 15% since the company was added to the NZX 50 index in June, the investment case has changed, he said.

It is a stock that ordinarily trades on a price-to-earnings ratio of about 13, and it is currently sitting at about 20.

"That's more than three standard deviations away from its historic level," he said. "It just looks super expensive versus where it has historically traded."

A month ago, Forsyth Barr set its target price at $5.95 and downgraded it to 'underpeform' from 'neutral'.