Only in illiquid smallcap land could you find a stock like Michael Hill $MHJ.AX - 8 consecutive qtrs of SSS growth despite on/off lockdowns; a loyalty program growing 4x in a yr, and structural margin improvement under new mgmt - trading at 4x EBIT w massive net cash...🤔🤔
Work to be done to figure out how sustainable the improvement is but given it started well before COVID; has continued growing thru COVID; and online sales still only 6% of group (ie not massive rush to online), I think it has legs...
Consider also that group EBIT margins still likely only 11-12% vs NZ margins in the low-20s (smallest mkt so its not about scale). Plenty of room to improve margins as loyalty biz/repeat customers increases, lower costs thru rent renogs, etc...
This brand has been around for 40 yrs, it is not some fly-by-night new-fangled thing. Aus/NZ will remain largely closed for next 18mos. What will the punters spend their money on? Stuff like this...
V illiquid stock so tiny position for me given this but I expect the founding family either LBOs it or sells out to P/E once operational turn around complete. 4x EBIT (and I think ~6-7c DPS, ie 7.5% div yield) at current seems wrong for a potential multi-yr consumer growth story.
Long small. This is illiquid. DYODD, GLTA 🙏
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