Forum Archive Index - December 2001

["Peter" <pmaiden@xtra.co.nz>]

Hard to judge short to medium term trends from a Briscoe's chart - one candlestick does not say too much, but it shows a positive picture.

 

So will have to look at the fundamentals, especially how Briscoes are currently priced compared to other retailers on the NZSE.

 

Some comparisons.

 

Profit Margin (NPAT to sales) - Briscoes are expecting to return 6.0% in the year to January 2002. PRG achieve 3.2%, Kirks 5.8%, Hallensteins 6.8%, Michael Hill 5.3% and The Warehouse 3.5% ( 6.3% in 2000). So Briscoes margins are much in line with other retailers. Briscoes margins are nothing special and would not warrant any share price premium because of this.

 

Price to Sales ( Shareprice as a percentage of sales) - Interestingly Briscoes current price values them at 1.2 times sales which is the same as the The Warehouse trades at. Michael Hill and Hallensteins are both trading at 1.0 times sales. Kirks is at 0.7 times sales while PRG is at a low 0.3 times sales. On this basis the market is valuing Briscoes at the same level as The Warehouse and higher then other retailers.

 

Price Earnings ratio (PE) - At current price of $1.42 Briscoes PE is about 20 - if they achiieve current years earnings. This is much the same as Michael Hill with a PE of 19 and higher than Kirks at 12 and Hallensteins at 14. The Warehouse is at 33 times last years earnings and the market is obviously expecting improved profits, esp from Astralia, in the future. If The Warehouse had achieved the same profit margins last year as in the past their PE would be closer to 20. On the basis of PEs Briscoes is valued at the higher end compared to its peer group on the market.

 

From the above it appears that the market (no doubt as assessed by analysts) has valued Briscoes in line with The Warehouse.

 

As such it is hard to see the price rising much than it's current level in the short term. Over time the share price will no doubt move in line with their performance. If you buy into the growth story than steady shareprice gains will be paid. 

 

The above numbers does confirm the independent appraisal  that PRG is undervalued. It also shows that there is substantial value in the likes of Michael Hill, Hallensteins and Kirks.

 

In looking at these numbers I was quite surprised at the robustness of these retailers. Profits generally have been improving over the last few years - driven from both sales and margins growth. As a group they possibly have been neglected by the market.

 

However we have to admire the performance of Harvey Norman (ASX). A profit margin of 15%. No wonder they can trade at 35 times last years earnings and 5.5 times sales. Maybe the Gerry Harvey connection adds something to Briscoes.

 

Cheers

 

Peter