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JBH - JB Hi-Fi

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Weren't same store sales negative for FY11 too? Or is that my imagination.

Hardly surprising that margins are starting to get squeezed. Opening up new shops with diminishing returns while existing stores are going backwards.

The price deflation in flat panels is amazing. I wonder what will happen if the Koreans start doing it with other browngoods or even whitegoods.
 
Fundamental Analysis of “JB Hi-Fi Limited (JBH)” - Part 5 - 16/12/2011
==============================
Liquidity ratios:
With calculating these ratios we could have an understanding of the company’s ability to liquid quick enough to pay its short term liabilities.

1- Current ration and Quick Ratio:
In 2011 current ratio was 1.45 compare to 1.25 in FY2010 but quick ratio (which we have taken Inventory out of current assess) in FY2011 was 0.27 compare to 0.33 in FY2010.
The most noticeable reason for this is increasing the inventory as we mentioned earlier.

At the first look we might be worry about these low ratios, but when we compare these numbers with previous years and the averages, there is no unusual about these ratios. (Fig 16) .

jbh-currentquick ratio.png
Fig16 – Current and Quick Ratios

As a general rule when we want to compare liquidity ratios we should consider the kind of business. Also if this ratios are too high, it could show that company cannot utilise its assets (or not using enough borrowing, Leverage) in order to produce profit.


2- Debt Ratio:
This ratio calculates as total debt dived by total assets and shows the leverage company has used. The more of this ratio is more risk company willing to accept in order to generate profit by utilising the leverage (Debt).
Debt Ratio was 80% in FY2011 compare to 59% in FY2010. This increasing was because of increasing of the Long-Term debt of the company due to its share buy-back plan in FY2011.
JB HiFi should be careful not to let debt increase more or the risk of company to repaying its debt would be increased. (Fig 17)

jbh-debt ratio.png
Fig17 – Debt Ratio
To have better understanding of the company liquidity we calculate the “Cash Conversion Cycle”


3- Cash Conversion Cycle (CCC):
This could show the length of time (in days) that a company uses to sell the inventory, collect receivables and pay its accounts payable.
To calculate CCC we should calculate below ratios first:
• DIO (Days Inventory Outstanding) : this gives us how many days would take that Inventory turns to sales (as cash or payment receivables)
DIO for FY2011 was 58.7 Days compare to 56.3 Days in FY2010. This was 59.7 Days in FY2009, shows that JBHifi turns its inventory around 55-60 days to sales (average).
This only should be compared with the same business if we want to have a valid comparison and commentary, but it shows consistency on this figure.
• DSO (Days Sales Outstanding): this numbers give how many days would take (average) company to collect on sales that go to account receivables.
For JBH , DOS in FY2011 was 1.3 days compare to 1.5 days in FY2010 which is very short time. This shows that most sales in JB HiFi have been done as cash sales and paid immediately. This eliminate the risk of having bad creditors and problems with too much and long-time Account Receivables.
• DPO (Days Payable Outstanding) : this shows after how many days (average) company is paying its payables to suppliers
DPO was 21 days in FY2011 compare to 44.6 days in FY2010 and 50.4 days in FY 2009. It shows company is paying its payables to suppliers sooner than before.
• CCC(Cash Conversion Cycle) :
• This could show the length of time (in days) that a company uses to sell the inventory, collect receivables and pay its accounts payable.

CCC is combination of DIO,DSO and DPO. CCC was 81 days in FY2011 compare to 102.3 days in FY2010 and 112.1 days in FY2009.

This shows that company ability to sell its inventory is improving. Company has sold its inventory 20% quicker than 2010 which is a considerable improvement to turns its inventory to sales, collect receivables and pay its accounts payable. (Fig 18)

jbh-ccc.png

Fig18 – Cash Conversion Cycle (Days)

Profitability Ratios:
These ratios show how effectively company use its resources to generate profit. We already have studied the Gross margin, operating margin and Net profit margin.


ROA (Return on Assets):
This figure shows how profitable a company is relative to its total assets. ROA was 18.14% compare to 17.25% in FY2010 and 15.77% in FY 2009.
The company has a healthy and improving ROA. (Fig 19)

JBH-ROA.png
Fig19 – ROA


ROE (Return on Equity):
This figure shows how profitable a company is compare to its average shareholder equity. ROE was 60.3% compare to 45.4% in FY2010. JB HiFi has always had a strong ROE. In FY2011 the outstanding improvement for this ratio was more because of Equity reduction due to Long-Term debt increment as share buy-back plan performed. So also the profitability compare to equity has improved but there was a cost of Long-Term debt increment.
The company has a healthy and improving ROA. (Fig 20)

jbh-ROE.png
Fig20 – ROE
 
Profit downgrade today.

This was AFTER they said xmas time should bring in stable growth compared to last yr lols.

Guess this is the reason it's in the top 10 shorted stocks list?

Poor retail stocks can't get a break
 
Wow yes quite a drop today. I can't say I'm that surprised though, as at least here in Hobart all big retail stores were extremely empty up until a month or so ago.

Regardless of the general retail economy, they just can't compete with the internet / amazon and more and more people are realising they don't need to get stiffed by Aus retailers unless it's a large heavy item that can't be posted for a reasonable cost.

Disclosure, I don't hold, sold out at about $15.
 
ROE said:
You cant beat scuttle butt technique from Uncle Phil Fisher :)

http://www.theage.com.au/business/little-christmas-cheer-for-jb-hifi-20111215-1owh5.html
Click to expand...

Hardly a surprising downgrade and in fact they have probably done well to limit it to what it is. Trading conditions in retail for this year have absolutely been atrocious, I should know as a retailer. And it all started in March 2008 and has only gotten worse.

Maybe the last two 25 basis points interest rate reductions will help a little.
 
Chasero said:
Ouch!!

David jones profit downgrade saw it drop ~20% right in 2 days?

JBH looks like it's going to do the same!!
Click to expand...

Here are a few comparison (from WebIress).

Code / Trailing PE / Div yield / Price to Assets

DJS / 8.36 / 10.14% / 2.03
MYR / 8.47 / 9.7% / N/A
HVN / 8.84 / 5.71% / 0.96

JBH / 14.74 / 5.13% / 26.32 (before today)
 
skc said:
Here are a few comparison (from WebIress).

Code / Trailing PE / Div yield / Price to Assets

DJS / 8.36 / 10.14% / 2.03
MYR / 8.47 / 9.7% / N/A
HVN / 8.84 / 5.71% / 0.96

JBH / 14.74 / 5.13% / 26.32 (before today)
Click to expand...

I only know what Dividend yield means :)

What does P/E mean?

I wiki'd it being:

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

Market Value per Share/Earnings per Share (EPS)


*Lost*!!



What does P/E reflect?

The higher the better?

I noticed that MQG became a substantial shareholder of JBH on 15/12/11, one day before the share price dropped 15% in value?! Though not sure what an FPO is...
 
Chasero said:
I only know what Dividend yield means :)

What does P/E mean?

I wiki'd it being:

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

Market Value per Share/Earnings per Share (EPS)


*Lost*!!



What does P/E reflect?

The higher the better?

I noticed that MQG became a substantial shareholder of JBH on 15/12/11, one day before the share price dropped 15% in value?! Though not sure what an FPO is...
Click to expand...

FPO = fully paid oridinary shares. Means basically a normal share (as opposed to partly paid shares, or preference shares etc).

P/E = Share price / earnings. It reflects how much the last buyer was willing to pay in multiples of a company's earning. Imagine your local coffee makes $50k a year... how much will you pay for that business? $150k? Then you've just applied a P/E of 3.

It's a simple ratio but it's interpretation are varied. High P/E may mean the share price is expensive relative to earning, or it may mean that people are paying a high multiple because earnings are likely to grow in future years.
 
skc said:
FPO = fully paid oridinary shares. Means basically a normal share (as opposed to partly paid shares, or preference shares etc).

P/E = Share price / earnings. It reflects how much the last buyer was willing to pay in multiples of a company's earning. Imagine your local coffee makes $50k a year... how much will you pay for that business? $150k? Then you've just applied a P/E of 3.

It's a simple ratio but it's interpretation are varied. High P/E may mean the share price is expensive relative to earning, or it may mean that people are paying a high multiple because earnings are likely to grow in future years.
Click to expand...

Wow, thanks for that.

I think I'll keep on the sidelines on JBH.. for now.
 
Chasero said:
Anyone think JBH will bounce off $12?

I think it's extremely oversold atm.. $12 is a 2 yr low isn't it?

Oh well, I bought a small parcel today.
Click to expand...

Chasero said:
I think I'll keep on the sidelines on JBH.. for now.
Click to expand...

Patience is not your style, is it? :)

When you say bounce do you mean $12 is support or resistance?

Fundamentally, a conservative view might be that JB's growth phase is finished, and the industry will continue to experience margin compression. What multiple would people (not you, but others) put on a share that has flat to falling profit?

That's probably a sensible base line imho. Anything substantially below that would make it a buy opportunity.
 
skc said:
Patience is not your style, is it? :)

When you say bounce do you mean $12 is support or resistance?

Fundamentally, a conservative view might be that JB's growth phase is finished, and the industry will continue to experience margin compression. What multiple would people (not you, but others) put on a share that has flat to falling profit?

That's probably a sensible base line imho. Anything substantially below that would make it a buy opportunity.
Click to expand...


$12 as support.

I see, thanks for your view :)
 
McCoy Pauley said:
An interesting article from Business Spectator predicting the demise of JBH:

http://www.businessspectator.com.au...nline-s-pd20120102-Q4UFW?OpenDocument&src=sph
Click to expand...

Thanks for that, it was a good read. I agree with the gist of the article, however I'd like to spread the vibe to a more general level amongst all retailers. I just don't have confidence in MYR or DJS anymore. Things were barely discounted during the xmas and New Years' sales, and even the amount of people browsing seems to have decreased.

The other day I was travelling up the escalator in MYR, and thought "bloody hell, why do I have to travel up 8 floors to get what I want?"

These days, everyone wants everything now. It takes 2 minutes to do an internet search, maybe an additional minute to price compare. That is a lot better than fighting your way up 8 levels in a department store (especially as people get more lazy).
 
The other day I was travelling up the escalator in MYR, and thought "bloody hell, why do I have to travel up 8 floors to get what I want?"
Click to expand...

I came to that conclusion in Myer many years ago!

Not a desirable retail experience, IMO.

:(
 

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