TRS - The Reject Shop

[Clansman]

I control like diddly of TRS stocks. So I obviously cannot decide what the high and mighty will sell the entire shop for.

Simply saying what I reckon they're worth... and over the medium term, assuming tougher trading conditions, quite a few store closures, reduced sales... TRS is still worth at least $5.

Over the longer term, say over 5 years to 10... it's worth at least $10 even if earnings just "normalises". ie. chugging along as it has the past decade or so.

Mate, you can pull my arguments apart and laugh at it. I'm cool with that. But to just say you reckon it's this and that without any reason behind it... just doesn't add any weight you know.

And yes, APA will need a massive bailout - bailout from the gov't or from shareholders/debtors extending terms etc. Without it, the entire empire will collapse. I've discussed APA at length some tme ago... I do check in and out of it now and then, its constant fund raising "for growth and expansion" just confirm it.

I thought you just checked in on APA from time to time to see how far wrong you constantly get it?
You need to lose the hubris because it isn't warranted. To suggest APA is a bad business and TRS is a good business is amateur hour. Ask yourself this question "Given the events of this week, without the $2.70 offer, would the TRS share price even have a 2 in front of it?"

 

[luutzu]

...It's pertinent to note that it's an all in cash offer and right now... cash is well.. you know the rest.

Why is it pertinent about the offer being cash?

The raider isn't another retailer or publicly listed company... what else could the offer be? Hope and prayers?

I also like their offer letter. Such amateurs.

Look TRS, you guys su[ks. Things are going to get really, really tough. Let's get your pain over with accept our generous "all cash" offer. Be glad you've found us. You welcome.



I doubt anyone could steal candies from a 5 year old with that kind of "kindness". Look kid, you don't want this smelly, sugary lollipop. It's really bad so let me have it.

 

[luutzu]

I thought you just checked in on APA from time to time to see how far wrong you constantly get it?
You need to lose the hubris because it isn't warranted. To suggest APA is a bad business and TRS is a good business is amateur hour. Ask yourself this question "Given the events of this week, without the $2.70 offer, would the TRS share price even have a 2 in front of it?"

I never said TRS is a "great" business. Just that it's not a bad business. In general, it's quite impressive for a retailer.

It's not going to grow and take over the world like Wal-Mart and such. But it's not going to collapse the way other retailers around the world has lately. So at anywhere below $5, it's very reasonable for the medium to long term investor.

APA is a ponzi.

If you want, I can prove it to you.

And no, I haven't been wrong. Its share price was around $8 to $9 some 3 or 4 years ago when I looked into it. What's the price now?

But that's why I don't short stocks. Not smart enough to know what scam people will pull to lift the share price.

But ey, APA's boss just said he's seeing plenty of "growth" opportunity. About $4B's worth. Better save up to take more shares to be issued soon.

 

[Clansman]

Why is it pertinent about the offer being cash?

The raider isn't another retailer or publicly listed company... what else could the offer be? Hope and prayers?

I also like their offer letter. Such amateurs.

Look TRS, you guys su[ks. Things are going to get really, really tough. Let's get your pain over with accept our generous "all cash" offer. Be glad you've found us. You welcome.



I doubt anyone could steal candies from a 5 year old with that kind of "kindness". Look kid, you don't want this smelly, sugary lollipop. It's really bad so let me have it.

You've got it in one. Doing that critical thinking course twice is really starting to pay dividends. If you did a 3rd time, we could really go places with your development.
You've encapsulated how things will play out almost perfectly. Just the minor oversights. You've put amateurs in the wrong place, remove the word guys and substitute there. There's nothing amateur about the offer. Xmas is coming.

 

[sptrawler]

If the stock is under pressure, there wouldn't be a better time to do a raid on something like the Reject shop.
Times are tough the market is scared and as Clansman says, "Christmas is coming".
What better time to pick up a shop selling low cost bling?

I think between now and the election, there will be a lot of market movement, the U.S market isn't going to be stable.
Add to that the loony political posturing over renewable energy here, and it is a recipe for chaotic markets. IMO

 

[luutzu]

You've got it in one. Doing that critical thinking course twice is really starting to pay dividends. If you did a 3rd time, we could really go places with your development.
You've encapsulated how things will play out almost perfectly. Just the minor oversights. You've put amateurs in the wrong place, remove the word guys and substitute there. There's nothing amateur about the offer. Xmas is coming.

Dude, have you been following me? 'cause you're starting to scare me

I really should have do that course a 3rd time though. But passing is alright.

Seriously, you buying or selling TRS?

If you're buying, sure, buy anywhere under $3, or lower if you can.

If you're selling... you should get to know what you're holding better. That way, you can then pull an Allensford and tell them that $2.70? Are you serious? The business is really, really bad... it's worth $1.90, tops.

anyway, apologies if I offend. In case there's some emotional attachment to the stock and such.

 

[Clansman]

Dude, have you been following me? 'cause you're starting to scare me

I really should have do that course a 3rd time though. But passing is alright.

Seriously, you buying or selling TRS?

If you're buying, sure, buy anywhere under $3, or lower if you can.

If you're selling... you should get to know what you're holding better. That way, you can then pull an Allensford and tell them that $2.70? Are you serious? The business is really, really bad... it's worth $1.90, tops.

anyway, apologies if I offend. In case there's some emotional attachment to the stock and such.

If there's an emotional attachment to the stock, it's very obviously on your behalf because you're the one who has decided ( incorrectly ) that it's going for $5. I'm the one who is saying it's going to go much closer to the bid. We will see who goes closer to the pin. Judging by your posting history, it's unlikely to be you. Take some of your own advice and get to know what you're holding better so that on a forward basis you can have a better understanding of where you messed up.

 

[luutzu]

If there's an emotional attachment to the stock, it's very obviously on your behalf because you're the one who has decided ( incorrectly ) that it's going for $5. I'm the one who is saying it's going to go much closer to the bid. We will see who goes closer to the pin. Judging by your posting history, it's unlikely to be you. Take some of your own advice and get to know what you're holding better so that on a forward basis you can have a better understanding of where you messed up.

Dude, I'm already in the green at the current bid. Sure, not by much, but it could be a lot worst right?

Don't know man, if you think APA is a great buy at $20B+ while TRS is a lucky to go for $80m... something's not working.

Here's something I learnt in "Critical Thinking"... probably the second time round ... You gotta back up your premises and propositions with facts and evidence. Else it's just opinions.. and every hole has a few of those.

You like cash right?

That's the sign of a good business.
Not "great", but not struggling, not pulling scams. Just getting the cash in from operations. Uses that cash to invest and pay dividends.

Now, TRS netted $36M from its operations last year. It averages some $30m p.a. going back to 2013.

Except for 2012 and 2013, its operations more than enough to pay both the bills and the shareholders and capital expenditure. That's how businesses ought to be managed for their owners. Not going to them and ask for more every six months or year for "more growth opportunities".

See how after the investment [blue] activities ended in FY14, operating cash averaged higher? They call that investment bearing fruit in the business world.

What's more. TRS had already finish its major capex last FY. This FY will see more cash... hopefully flow to shareholders. As for workers... they're being "more efficiently" rostered and so aren't going to enjoy the benefit. But that's another story.


Returns

Not out of this world awesome. But quite respectable. A point or two shy of WalMart in its return and operating profit on capital employed.

So not as impressive given the size and scale of WMart. But not a terrible use of capital by any mean.

 

[luutzu]

If the stock is under pressure, there wouldn't be a better time to do a raid on something like the Reject shop.
Times are tough the market is scared and as Clansman says, "Christmas is coming".
What better time to pick up a shop selling low cost bling?

I think between now and the election, there will be a lot of market movement, the U.S market isn't going to be stable.
Add to that the loony political posturing over renewable energy here, and it is a recipe for chaotic markets. IMO

Trying to work out why they're announcing the takeover when they've only gotten about, what, 2%?, of the company?

Don't think they have other companies/subsidiaries loading up.. else they would have to, by law ?, announce that right?

I'd thought that for a company with such low market cap and being pushed down this much, you would at least acquire some 10 to 15% before you'd announce your intention to take over... after the board call you in to ask a few questions.

So maybe not a serious offer? Just something to do to raise the price of their TRS investment? BUt then they're billionaires so $80m is peanuts right?

 

[aus_trader]

I get the feeling this might not be the only company that may be targeted to be acquired at low prices since many companies have fallen sharply lately.

Just my opinion but I reckon this is an opportunistic low-ball bid to grab the Aussie retailer Reject Shop Ltd (TRS) by some private equity group Allensford. This shows there is good value in some of these Aussie stocks given the price fall.

 

[Klogg]

The more I think about this, the more I think luutzu is right. Perhaps $5 is a little much (or maybe I'm short sighted), but definitely something with a $4 in front of it makes sense.

When you buy TRS, you're not buying quality. We all know that. But you have a decent set of stores from which you could easily prune the worst performing ones. In fact, you get 351 stores in total.
If you look at operating lease commitments, $100m of the $300m total (5 year total) is rolling off within the year. Assuming the average lease cost per store, you get a third of stores, or ~115 stores rolling off.
Because of this you can very easily close the worst performing stores without having to payout any leases.

That would immediately uplift the viability of the company longer-term.

There are other improvements to make, but in my mind this is trading relatively cheaply. Keep in mind I haven't convinced myself enough to take a position...

 

[luutzu]

I get the feeling this might not be the only company that may be targeted to be acquired at low prices since many companies have fallen sharply lately.

Just my opinion but I reckon this is an opportunistic low-ball bid to grab the Aussie retailer Reject Shop Ltd (TRS) by some private equity group Allensford. This shows there is good value in some of these Aussie stocks given the price fall.

Sigma healthcare is also interesting.

 

[aus_trader]

The more I think about this, the more I think luutzu is right. Perhaps $5 is a little much (or maybe I'm short sighted), but definitely something with a $4 in front of it makes sense.

When you buy TRS, you're not buying quality. We all know that. But you have a decent set of stores from which you could easily prune the worst performing ones. In fact, you get 351 stores in total.
If you look at operating lease commitments, $100m of the $300m total (5 year total) is rolling off within the year. Assuming the average lease cost per store, you get a third of stores, or ~115 stores rolling off.
Because of this you can very easily close the worst performing stores without having to payout any leases.

That would immediately uplift the viability of the company longer-term.

There are other improvements to make, but in my mind this is trading relatively cheaply. Keep in mind I haven't convinced myself enough to take a position...

I haven't got a current position in TRS either just for disclosure although I have held shares in the past. My point is how opportunistic these takeover bids are at a time when the price has fallen so much. Since I don't have a position in TRS (hence don't have any emotional attachment to it), let me look at the whole situation from an outside by-stander point of view:

Companies go through rough patches in their life cycle, even some of the great ones have gone through near bankruptcies and tough trading conditions. For the long-term shareholder of a company to see their investment perform well it usually takes time since share prices don't go up a ramp. So for the patient investor it used to be that they can hold on during periods of share price downturns given that their company will dig itself out of the hole and come out better and stronger.

That's how things used to be and what's happening more and more now is that long-term investors get shafted with low-ball opportunistic take-over offers by either private equity firms or by larger companies. They prey on these targets when there is a tough business conditions and share prices have rock bottomed. Then they bid at a tiny premium above that share price and put a lid on any chance for the price to recover for the loyal shareholders who might be 50% to 90% down on their investment.

 

[aus_trader]

Sigma healthcare is also interesting.

KGN also... My pick for the December stock tipping competition.

 

[luutzu]

I haven't got a current position in TRS either just for disclosure although I have held shares in the past. My point is how opportunistic these takeover bids are at a time when the price has fallen so much. Since I don't have a position in TRS (hence don't have any emotional attachment to it), let me look at the whole situation from an outside by-stander point of view:

Companies go through rough patches in their life cycle, even some of the great ones have gone through near bankruptcies and tough trading conditions. For the long-term shareholder of a company to see their investment perform well it usually takes time since share prices don't go up a ramp. So for the patient investor it used to be that they can hold on during periods of share price downturns given that their company will dig itself out of the hole and come out better and stronger.

That's how things used to be and what's happening more and more now is that long-term investors get shafted with low-ball opportunistic take-over offers by either private equity firms or by larger companies. They prey on these targets when there is a tough business conditions and share prices have rock bottomed. Then they bid at a tiny premium above that share price and put a lid on any chance for the price to recover for the loyal shareholders who might be 50% to 90% down on their investment.

too true.

A bit tough buying at reasonable prices, watch the thing drop like a rock... then some opportunists come along to sweep it all up, locking in your losses.

Then there's RCR Tomlinson where it looks like the bankers and lenders hint at extending loans if only they'd raise extra equity. Then oppss... let's just take the new cash and bankrupt the bastards.

But then there are also cases where I've waited a bit to bottom feed, thinking that things might get worst and so no rush... then they got an offer or the market quickly rerate fo rno apparent reason.

Lots of luck in this game when I think about it.

 

[mcgrath111]

Having a quick look at TRS and noticing NTA at 5.23 (Comsec figures, so off by 5-50% - Also can the s*** TRS sells be classified as assets?)

In all seriousness, i'm tending to agree that another offer will come for TRS, I'm more conservative and say $3.20 - $3.50 range), yet still a bit of upside from today's $2.73)

It's a crap company and not a stock I hold, yet it's damn tempting. As Klogg mentioned, the network of stores is huge! - I have no doubt PE could rip the guts out of this and bring it back to market at $4.50

 

[bigdog]

ASX Announcement
3/12/2018 9:10:26 AM Supplementary Bidder's Statement

"THE REJECT SHOP DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU REJECT THE OFFER"

This document reports fifth reason on page 3 and perhaps a VG reason to not accept!!

816

 

[Clansman]

I have a strong suspicion one of the next announcements out of TRS will have the phrase " in the absence of a superior offer" in it.

 

[luutzu]

Allensford will either have to drastically raise their bid from the current low-ball, I'm screwing with you, price or else someone else will take it from them.

They'll soon learn to not be so greedy. People aren't stupid. I mean, telling TRS shareholders that the business is terrible but they really wanted it... seriously? Have they workshopped that strategy or got it from watching kids playing?

Here's something interesting... Seeing how it's unlikely that TRS is going broke, even under the current/coming retail crunch. As a going concern, over the medium term TRS is worth at least $6.89... that would give investors, on average, an 8%p.a. return.

Unless everybody shops online for everything... and Australia does have the internet for a couple decades now... TRS have shown they could manage their earnings surprisingly quite steadily.

At $6 to $7 for that 8%p.a. returns folks.



If I'm a chartist, and I guess I kinda am seeing how I can read charts better than tables...

Noticed how for every year since 2013... whenever the earnings slide or gain, the algo's valuation and the market's pricing goes the same way?

Except for FY 2018 where the business performance goes up but the market price goes down.

So either today's market can see the doom that's coming a year ahead, or they're behind the curve. And this curve they really shoot through the floor post the FY18 results release.

The Xmas season might be as anticipate, but the market might see that things aren't that desperately bad.

For historical comparison, below is The Washington Post.

Buffett bought all his ~10% in it by mid 1973.

According to Buffett, the stock was depressive and he got in at about $100m cap when it ought to be some 4 to 5 times that.

Business improves after he got in but still the market price drop [note the orange arrows going down].

I think Kay Graham bought stocks back and also split it couple years after Buffett bought... but share price picked up.


So if we believe that analysts are generally brilliant forecasters, or they're missing the actual company's results and tar TRS with the general retailing environment at the moment.

 

[sptrawler]

One would think the post Christmas results, will give an indication of how the business is travelling.
I haven't noticed a change in customer traffic, at the two that I walk past on a regular basis.