Everything that glitters is not gold
by Peter Switzer
The smart guys in the Myer room were thinking like editors when they had stunner, Jennifer Hawkins, feature on the cover of the prospectus.
However, when it comes to investment, as with most things in life, you have to remember that everything that glitters is not gold. And the upcoming Myer float might be a case in point.
The listing for 2 November, the day before the Melbourne Cup, might have special significance as investing in this company looks like a punt compared to other investments such as the Big Four banks.
Do your homework
To be fair, the floating of this company is a testimony to the good management of the CEO, Bernie Brookes, and the private equity team that rescued this great brand from the nincompoops that used to run the old public company.
That said, anyone thinking about playing ball with this new initial public offering, Myer MKII, should do some homework before signing up for this one.
By the way, the whole pitch has been clever as you have to be Myer One card members or an employee to get some shares and so there have been people signing up to become members to get the shares.
In fact, this strategy will be good for building loyal customers who have a vested interest in spending their money at the stores they own!
Market outlook positive
On the good side, the outlook for the market is positive over the next year and so the share price should ride up with the market. The CEO, Brookes will remain and that’s a good thing as is the brand building, which has been very professional to the standard of service in the store and the clever use of cover girl Jennifer Hawkins.
At first blush, the expected share price, which could range between $3.90 and $4.90, looks on the high side for a company that was dumped three years ago.
The owners look like pocketing 500 per cent on the half a billion they outlaid to get the company. Respected company valuer Roger Montgomery estimates the company as good value at $2.70 and he thinks the price that is being put to the market is nearly as ‘hot’ as the cover of the prospectus, which of course stars our Jennifer. (This was a great line and I wish I had thought of it first.)
Before you jump in, make sure you compare some other companies that could do better over time and which could be in better industries. After all, department stores have question marks over them with the attack they have faced from specialty stores.
Once upon a time department stores used to attract 14 per cent of the retail dollar but have been cut back to eight per cent because we now go to Rebel for sports gear, Freedom and IKEA for furniture and there are new age icons such as Harvey Norman and Bing Lee for electricals.
If the share price was lower I would give the business the thumbs up, but make sure there is not a better share out there you should be investing in. Don’t get sucked in by the glitz and the glamour.
If “there’s no other share like Myer” to steal an old David Jones line, then go for it but make sure you do some comparison shopping first!
(I am going to get Simon Bond on my program SWITZER on Sky News Business Channel to do this comparison shopping for us tomorrow night.)
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Published on: Wednesday, September 30, 2009blog comments powered by Disqus