GLB - Globe International

[galumay]

Wow. Up another 17% today. Its like owning a stonk, but its a clothes horse.

 

[Trav.]

@galumay I am interested in your thought process for this one mate.

You hold in your SMSF and presumably thinking long term investment. You have a couple of extraordinary days and share price up ~ 60% on no news etc

a. Hold and go with the flow
b. Set trail stop to lock in gains
c. Exit / Take partial profit.
d. Other

Any feedback appreciated mate.

 

[finicky]

Jaw dropping chart for a retailer.

History – Globe International Limited

globecorporate.com

 

[galumay]

Any feedback appreciated mate.

I would be lying if I said it hadn't given me pause for thought! I have thought about whether selling all or some of the position would be a good idea. So far I have taken no action. Historically I have nearly always been wrong when I sold part of any of my winners, they have kept on winning and I missed out on further gains.

The way I see GLB is that the market is now pricing it as if the growth and resultant earnings will continue indefinitely - instead of as a one off lollapalooza of Covid & mania for roller skates, this is clearly insane and at some point in the future the market will reprice it to a more sensible range.

The benefit for my holding is that I very much doubt it will retrace to anywhere near the price I paid for it, it was cheap based on its pre covid earnings IMO. Secondly I am going to be earning a massive dividend yield while the boost in earnings flows through.

At this stage my inclination is to do nothing, I find as a default position it more often than not turns out to be right over the long term!

The HY accounts will allow a better understanding of what is actually happening inside the business, and then seeing how management allocate capital will inform my longer term view on the business.

As @finicky says, its just jaw dropping for a clothes retailer!

 

[Trav.]

@galumay thanks for taking the time to respond, and pointing out a couple of the longer term investment points that you consider.

 

[basilio]

I would be lying if I said it hadn't given me pause for thought! I have thought about whether selling all or some of the position would be a good idea. So far I have taken no action. Historically I have nearly always been wrong when I sold part of any of my winners, they have kept on winning and I missed out on further gains.

The way I see GLB is that the market is now pricing it as if the growth and resultant earnings will continue indefinitely - instead of as a one off lollapalooza of Covid & mania for roller skates, this is clearly insane and at some point in the future the market will reprice it to a more sensible range.

The benefit for my holding is that I very much doubt it will retrace to anywhere near the price I paid for it, it was cheap based on its pre covid earnings IMO. Secondly I am going to be earning a massive dividend yield while the boost in earnings flows through.

At this stage my inclination is to do nothing, I find as a default position it more often than not turns out to be right over the long term!

The HY accounts will allow a better understanding of what is actually happening inside the business, and then seeing how management allocate capital will inform my longer term view on the business.

As @finicky says, its just jaw dropping for a clothes retailer!

Honestly galumy I would seriously considering taking the money and running. I think you recognised this immediately

The way I see GLB is that the market is now pricing it as if the growth and resultant earnings will continue indefinitely - instead of as a one off lollapalooza of Covid & mania for roller skates, this is clearly insane and at some point in the future the market will reprice it to a more sensible range.

Perhaps wait for the dividend declaration and striking date and say thank you ? Just my opinion ( from too many times waiting too long to take the profits ) These are also unaudited results . Is there a chance a closer look will highlight inconsistencies in the figures ?

This wouldn't be the first time such things have happened.

 

[galumay]

I think maybe the reason I see it differently to some investors is that I am not really concerned either way about volatility, my focus is on the business I initially became a fractional owner of, and whether I am comfortable still owning that business. At this stage nothing has come to light to change my view that the business is a well run, profitable business, debt free, strong free cash flow and high ROIIC. I believe it will continue to provide a sufficient IRR such that I am rewarded as a part owner.

For me the concern with thinking about selling just because the price has gone up, is that I stop thinking like a business owner/investor and start thinking like a speculator/gambler, focussing on the share price rather than the business, and thats a dangerous habit IMO.

As I said previously, when my cost base is so low, I really dont worry about the volatility, it could drop by 50% tomorrow and my returns would still be very good. I realise not many would share my mindset - but thats what makes markets functional - participants with different strategies, processes and objectives.

 

[basilio]

I'm going to guess that Globe like many other companies made out like bandits on the Job Keeper subsidies. I'm thinking they managed to get millions of dollars of wage costs paid the Feds and this has sharply increased this years profits becasue they still managed to continue selling.

It would be interesting to see if there is a realistic long term plan for continued sales and profits at the current level evn if that takes a couple more years to properly establish. That goes back to Galumy confidence that the company is indeed well run with a good future.

 

[galumay]

Not sure about the quantum of JK payments, they did get a PPP hardship 'loan' of $1.5m from the US Gov. which is likely to be forgiven, but sits as a liability on the balance sheet at the moment. They got JK early on, but I doubt they qualified from EOFY onwards given the steep growth in revenue. They didn't break out the JK payments in the AR so its impossible to quantify at this stage.

 

[galumay]

H1 2021 results out today, surprised me with just how strong the report was. Who knew that hippies flogging skater fash & roller skates would be such a massive business in a pandemic??!!

As it turned out global assistance for the pandemic, including Jobkeeper accounted for less than $1m in total, so insignificant in the results.

Crazy times, I never had any expectations of these sort of returns when I tentatively took a small position 2 years ago, luckily I added as I saw the business performing beyond what I initially expected. My view was that it was a good little retailer, well run by the founders and likely to provide a satisfactory divvy and low single digit growth!

 

[galumay]

Update for full year 2021, looks like the second half has exceeded expectations as well. Now a triple bagger for me, looking forward to see the Annual report in detail in August.

 

[galumay]

Well I think that blew anyone's expectations out of the water! Amazing for a bricks and mortar clothes horse. I haven't read the report in detail yet, but the headlines are great! Divvy up nearly 200%!

 

[So_Cynical]

I sold out 3 years ago at 2 dollars to then watch the price bottom out around 1.20 and now 6.60 so goddam, you're right then you're right then your wrong.

 

[galumay]

GLB results for 2022 released, not surprisingly the incredible positive impacts on the business from Covid have dissipated and there is a fair reversion to the mean! Will be interesting to see how the SP holds, they did maintain the divvy at the same rate.

As explained in the annual report, as well as the expected downturn, other factors impacted cash flow and earnings, including inventory build, property purchase and extra tax liabilities. The outlook from the board was muted, clearly expecting continued headwinds in the short term and telegraphing a likely drop in dividends for 2023.

When looking thru the last 3 or 4 years of results its clear there is still a fair growth pathway allowing for the aberration of 2021, I am sure the market will react negatively, but I am happy to continue to be the part owner of what I consider a good little business.

 

[omac]

Any opinions / info on the spill at the AGM? Trying to understand who voted against the remuneration as the brothers own 68 % of the co. and the vote was 56 % against adoption.

Keen on the FXD brand and potential for overseas growth but less keen on the board setup, could be more professional. also anyone have any idea on what year FXD expanded internationally? I can't find any Rev / Brand / Region break downs in the AR.

 

[galumay]

GLB finished the FY2023 with a pretty depressing result at first read, can't say it was a surprise as I knew the impact of the roll off of the massive tailwinds through Covid were always going to hit this years results hardest.
The interesting thing when you drill down into the report is to realise that if you remove the outliers of the Covid years then the results this year show a growing business with improving fundamentals.

There may be an opportunity if the market misreads the results and punishes the share price, which I expect. I think it's worth thinking about what the value is of the business now and watching for any opportunity to increase position size at a discount.

 

[galumay]

A much better result than I expected for #GLB, managed to increase profit on lower sales, great cost control and helped by recovery from the excess inventory post covid.

My comment after last year's disappointing result resonates after reading this years!

The interesting thing when you drill down into the report is to realise that if you remove the outliers of the Covid years then the results this year show a growing business with improving fundamentals.