Forum Archive Index - September 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Macdunk,
 

>
>If I had bought this share a couple of years ago
> I would have used up all my stop
>losses ages ago.    
>

Maybe.  But I'm not talking a year ago.  I'm talking right now.

>
> The one point you miss Is this dog sold the kennel 
> hard times will hit hard paying the rent.    
>

The WHS dog makes a habit of on selling its kennels too.  It isn't that 
unusual for a retailer not to own the premises they operate from.  Kirks 
(KRK) in Wellington is another example of a 'retailer renter'.

Your point is a good one though, and worth investigating further.

Prior 12 month profit report was $20.7million including a one off 
$10.9m gain from selling the KFC properties.  That meant an 
underlying profit of $20.7m-$10.9m= $9.8m.  Underlying profit for 
FY2003 actually improved to $11.0m with the property sales.  Of 
course that does not fully factor in the PH start up losses in Australia.

Anyway, lets put some numbers on the property sales.   Sold for 
$10.9m and rented back on a yield of, say, 12%.          That means 
around $1.3m in extra rent payments every year.  Spread out over 
94.814million shares, that equates to 1.4c per share.  If they hadn't 
sold the stores the profits per share would be 1.4c x 0.66= 0.9c per 
share higher.  The actual profit lost will be less than that as borrowings 
are now $10.9m below where they otherwise would be.   There is an 
additional interest saving I didn't consider.

I take your point that once the buildings have been sold, they cannot 
be sold again.   But at least this way the buildings have been sold on 
favourable terms.  There will be no need to sell anything should the 
business plan go slightly wrong this year.   I spent a whole post going 
through how strong the balance sheet was, in 'ability to pay back the 
borrowings' terms.

>
> If It goes under that leaves nothing to sell.    
> 

No point in waiting until that stage though.   Better to have the money 
already in the bank.   It is never a good idea to sell land at fire sale 
prices.

SNOOPY


--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"Stay on the upside of the downside, 
Anticipate the anticipation!"




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