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Myer Shares – Bargain Buy?

The plunge in Myer’s share price in recent months have many investors looking at adding Australia’s most well known fashion retailer to their portfolios. Currently trading at a share price of around $2, it certainly looks cheap when you consider that the company is expected to pay a fully franked dividend of $0.14 this financial year.  In addition to this, the retailer is scheduled to reopen a number of newly acquired and refurbished stores in the coming year.  This is expected to help increase revenue for the fashion giant.

However, to play devils advocate, what if it doesn’t?  Since its initial listing back in 2009, the company has struggled to increase operating revenue from its operations.  The firms current explanation of store closures for refurbishment may explain this years decline in operating revenue, but what about the other five year?

Earnings per share has decreased each year, and except for the marginal gain in 2013, the same is true for the firms operating revenue.  You have to ask yourself if perhaps there is a fundamental change in the market which is working against the retailer.

Myer's Operating Revenue and EPS

Myer’s Operating Revenue and EPS

I suspect that the popularity of online shopping has greatly eroded away the growth potential of the company.  Although I do believe the retailer has a solid customer base, it is failing to win the hearts of the more tech savvy and price sensitive working class that has emerged in recent years.  Online retailers are providing consistently higher quality products, many of which now rival if not outperforms what is being offered by Myer.  With express shipping, and free returns now becoming the norm for online retailers, you have to consider why customers would shop at Myer; and it certainly has nothing to do with their prices.

 

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Qantas – Incoming Turbulance

Australia’s only Flying Kangaroo

 

 

 

5000.

That’s the number of full time equivalent (FTEs) employees the airline plans to axe by FY2017; with 4000 of these redundancies expected to be completed by the end of FY2015.  News of the job cuts have made headlines across Australia, with union talks now underway, and parliament debating on whether Australian tax payers should offer a crutch to the struggling airline.

Investors were not please either, with the company posting a quarterly loss of $235m, driving the company’s shares down nearly 9%, opening at $1.277 on Wednesday, and closing today at $1.165.

Its obvious from the company’s balance sheet that business is not exactly booming.

Intense competition from Virgin, and low-budget airlines such as Tiger have eaten away at Qantas’s dominance in the market, and increasing fuel cost are further adding to the pain.

At this stage, a government handout seems unlikely; SPC, Ford, Toyota, and Holden all failed to do so, and there is no indication the government will budge for the Australian Airline.

Personally, I do not believe a government handout will save jobs in the long term.  The simple fact of the matter is that there is not enough business to sustain the number of employees and the fleet that the company currently holds.  No amount of union talks can change that.  At best, all we can hope from the unions are more favorable redundancies packages.  At worst, an employee strike, which will only further exacerbate financial problems.

Whatever eventuates, the hard fact is some jobs will be lost; almost nothing will change that.

Newcrest Mining – The Golden Child Returns

The rise in gold, and falling Australian dollar has definitely given the troubled miner some breathing room.  After reaching a low of $6.96 back in December, the company’s shares closed today at $11.45.

A remarkable 64% return for those ballsy enough to invest in the company when it had hit rock bottom.

The road to recovery was not easy.  Waves of redundancies were made across the board, as the company struggled to cut cost to compensate for the falling gold price, and lower than expected production values. Peter Hay has since replaced Don Mercer as chairman, and Sandeep Biswas is expected to succeed Greg Robinson as the new CEO in the second half of 2014.

These changes, along with a positive quarterly report is instilling some confidence back in the miner.  Still trading at below its book value of $12-13 per share, the company is a bargain for those that believe the company can continue to deliver.

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