Home Reit Share Discussion Threads

[sr2day] 23/10/2015 13:57

when sentiment is negative the shorters will hammer it. i reckon,they will take it to below 1£,possibly to 90p before closing.so i would not hurry to buy in just yet.good business thouigh,will surely attract predators.

[fizzypop] 23/10/2015 13:32

Interim ex-divi 12 Nov 2015, paid 21 Jan 2016. 1.0p dps

[dangersimpson2] 23/10/2015 10:19

DD4,

Including the total NPV of the lease commitments in the debt of a trading company doesn't give the full picture imo. If you wanted to value HOME on a liquidation basis then it's right that shareholders wouldn't see any return becasue of the cost of paying off the leases. But this is ignoring that each of those leases is a store whose sales is generating cash for the company. Excluding a few problem stores (which is where the onerous lease provisions come in) theses are assets for the company becasue they enable it to generate cash in excess of the lease cost with little capital requirements.

If liquidated today every retailer, supermarket and cinema chain in the UK would see no return to shareholders because of the lease costs but as successful cash generative businesses why would you liquidate them? There are very few companies that you can invest in today that would see any return to shareholders in liquidation why would we expect HOME to be any different?

The second thing about considering these lease commitments as debt is there will be no or very few covenants against these. Like the trade creditors and in contrast to bank debt the power to dictate terms tends to be with the large retailer. This is why mrf's argument that a potential goodwill accounting change is going to cause problems is just nonsense.

Thirdly it seems highly unlikely that HOME would secure leases or trade creditors against their financial services loan book. Which means that they could generate c.£550m of cash in a short period of time if they wanted to. They could even return c£550m of cash to shareholders if they wanted. I'm not saying this is the best thing to do since they use the financial services division to run a lot of their promotional activities (interest free credit etc.) just that it is an option and lease commitments or trade creditors couldn't stop them.

[usmcgs] 23/10/2015 09:19

Yep but not sure if it is at specific times. If not then they chose now

[discodave4] 23/10/2015 09:10

"The remuneration of non-executive directors includes fees which are to be used to purchase Shares twice a year."DD

[usmcgs] 23/10/2015 08:35

RNS directors buying @ 131.4 :)

[spob] 23/10/2015 04:46

Total net debt (1,587.0m)

The Group uses the term 'total net debt' to highlight the Group's aggregate net indebtedness to banks and other financial institutions together with debt-like liabilities, notably operating leases.

The gross lease commitments are GBP2,181.0m (28 February 2015: GBP2,342.2m), the discounted value of these leases is GBP1,780.1m (28 February 2015: GBP1,914.4m), based upon discounting the existing lease commitments at the Group's estimated current long-term cost of borrowing of 4.3% (28 February 2015: 4.1%).

[paulypilot] 23/10/2015 01:33

This is another "back up the truck" moment, like I did with FCCN at 22p - see relevant thread, time-stamped here.

Have now tripled my holding in HOME, close to size of my BOO position. It's a total no-brainer at 118p, if you take into account the Bal Sheet strength.

Easy 50% upside from here, in my view, in short term, and 100% in 1-2 years in my view, with very limited downside.

DYOR as usual, just my opinion.

HOME has £1bn market cap, but its Bal Sheet is unique for a retailer, in that it has about £638m in consumer credit assets sitting in debtors. Together with net cash, this means the EV is almost nil!!!

Seriously, this is a total no-brainer at 118p. Copper-bottomed by net tangible assets, but it's a profitable, internet retailer, £5bn pa sales, with excitement coming from same-day delivery.

Probably the stock that I am most excited about right now. Will be buying more at 120p tomorrow. Lots more.

DYOR - I am tipsy, so ignore everything I say after 10pm lol!

Regards, Paul.

[diku] 22/10/2015 23:34

Homebase is very expensive shop...who buys from that shop?..and as for Argos they just too much unnecessary stuff in that catalogue...it weighs a ton!....

[discodave4] 22/10/2015 21:14

Dangersimpson / MRF,Don't wish to fuel the argument but think you are both right to a degree with regards to their net debt.No accountant, but the accounts do include a net debt of £1.58b, however, this is a non GAAP measure and the only debt relates to off balance sheet operating leases.Would assume that the lease costs are also included in the operating expenses of the income statement (is this correct?), if so then IMV they have no significant levels of debt.Your views appreciated, thanks.DD

[solanki2000] 22/10/2015 14:31

Exactly! MRF not sure what you've actually looked at to get thesd figures. It's got over 180 million in the bank, little debt and transparent accounting, if anything too open and honest with investors. Is no issues, just oversold due to fear and amount of short interest this stocks always held!

[dangersimpson2] 22/10/2015 13:29

That you happen to think posters sound like the ones of companies that had problems is not a logical argument as to why a company will struggle, particularly when the company fundamentals don't bear any resemblence to each other. I prefer to make investment decisions based on facts combined with a conservative assessment of the most likey future outcome not on illogical inferences of the style of advfn postings.

I'm perfectly aware of the sort of banking covenants that can be in place. They tend to be debt/equity, interst cover etc. But when you don't have any long term debt these terms don't matter. Also we are talking trade creditors that tend to have much looser terms than debt. So to argue that Home Retail will have future problems with trade creditor terms based on equity ratios that may or may not be changed by future accounting regs is frankly ridiculous.

[my retirement fund] 22/10/2015 12:57

kalkanite, I did not compare home to hmv or yell, re-read my post! I compared the posters to the posters on these boards a number of years before they went bust! They were all saying the same kind of things. In fact go ahead and trawl those threads they still exists, that will make your eyes water.

Reading what you and the other poster I dont think you are aware that loans are based on equity and equity gets trashed when goodwill is written off.

To name a few theres Jessops, ROK, hmv, yell, woolworths. Click on financials above to get an overview. Hope ive been some help, sorry for shouting earlier!

[sr2day] 22/10/2015 12:33

ARGOS,they stopped the catalogues for a while,now it is back and sitting in the stores for those who visit to take.if they really want this exercise to be effective they should mail one to every household and it will not cost much more.homebase,is not competitive on price and needs to be revamped.one good thing they have same day delivery and this will definitely helps.

[kalkanite] 22/10/2015 12:32

MRF

You compared Home with HMV & Yell which is odd.

HMV sold CD's - They are extinct now that we can live stream music on any appliance we want to.

Yell - Yellow pages that tried to go digital but was up against the likes of google that can search for businesses for free. Why would you want to pay Yell for a free service?

Goodwill - As an investor you can take or leave the Goodwill figure, it is purely an accounting figure and nothing to do with profits or balance sheet strength.

HOME sell stuff that people genuinely need, they are looking to the future to expand in what is becoming more and more the norm for shopping.... online. There will be an enormous amount of investment in the infrastructure for this but anyone who wishes to look further ahead than 3 months should see this as a solid long term investment.

There are so many PIs with a short time frame when selecting investments, that's great for the LTBH as it creates the type of buying opportunities that we have here.

[dangersimpson2] 22/10/2015 12:26

Not sure where you are getting your net debt claim from but it doesn't seem to be from reading the balance sheet.

So it seems that you aren't able to name a single company who's trade creditors took fright due to goodwill impairment. I'm sure there are plenty who had bank debt covenant issues or whose trade creditors took fright when they reported significant losses ...but due to goodwill impairment are you really serious?

[my retirement fund] 22/10/2015 11:58

dangersimpson2 your clearly very green!

This company has 1.5 billion of goodwill, what do you thing will happen to the equity level if its forced to make whopping impairments.

I can see the company currently carries significant net debt and the market is valuing the business at around .95 Bill at the moment !

The stockmarket is littered with deceased companies who's creditors took fright when the equity evaporated, far to many to even begin to list !

[jonny33] 22/10/2015 11:26

Remember this stock has a history of being shorted, it was running are c20% of stock a few years ago, and was one of the most shortet shares on the block at the time, yet it recovered from a all time of low of 62p to £2.15 before dropping back, what I like about this share is the volatility, it's a safe company and if you call it right there's some big bucks to be made from this.

[solanki2000] 22/10/2015 11:02

Exactly, business is sound and fast track delivery is game changer. Stock is way over sold but it's one if the highest shorted stocks in the footie 250 so it's open to attack if the results are not good

[dangersimpson2] 22/10/2015 10:55

u813061,

Onerous lease provision is on the balance sheet. The whole lease on the balance sheet is a misnomer for retailers imo. It matters if you have a company in a wind down - of which there is pretty much no chance. As a trading company only the onerous lease provision matters.

my retirement fund,

I'm not sure what world you are in where trade creditors care about the goodwill on the balance sheet when deciding to extend credit to the debt-free, cash generative, very large retailer? Can you point to a single example where goodwill write down has had any impact on the trade working capital of any company?

[my retirement fund] 22/10/2015 10:33

I think to sceptics, I would say look at the goodwill. Surely this is telling you everything you need to know.

£1.5 billions pounds of goodwill. This cannot be hidden for ever, it will have to be written down, recent accounting changes will probably bring the requirement for this to a head in another 12 months time. Where will that leave creditors and their covenants on previous arrangements and in turn the companies cash flow and cash in hand position ?

[dealer1972] 22/10/2015 10:08

gap at 113.3p might get closed if you're lucky!

I would expect the gap at 150p to be closed following black friday sales figures release.

[sr2day] 22/10/2015 10:04

From a chart point of view,no support until 90p.net asset position about 110p.

[u813061] 22/10/2015 09:52

Cash is on the balance sheet
Leases are off the balance sheet, some of which are onerous
The Net Asset position is misleading, as is the Homebase position since once you close your worst performing stores like for like sales will improve

Be careful out there