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The Myer listing is one of the few mass market ‘Mum and Dad’ type offers in a long time. Myer will offer 60% to the public and this makes sense for a number of reasons.
Firstly, the public are the shoppers at Myer and they vote with their wallets and yes in theory if they own the shop they benefit as a shareholder and shopper. In theory. If you like beer I reckon it is best to keep separate your thirst and your investment decisions.
My own personal view is that I will leave this offer go as it is not compelling enough.
There is a view amongst many professionals that despite this significant market rally we still don’t know what is around the corner. And I ask myself is this the view of the Myer Board – ‘lets get this away whist the going is good.’
If you are listing a company you want to sell when you can get the maximum return from your initial investment and be confident that you can get the offer squared away. So the process of setting a price is a very finely tuned one.
So hence the approach the Board has adopted via the book build. The book build approach indicates to me some doubts about the Boards balance of price and getting the offer filled. And I can understand their perspective but I am more interested in the perspective of the investor. Is this good value?
So the price will be somewhere $3.90 and $4.90 which would represent a Price Earnings Ratio of 14.3 – 17.3 and a Dividend Yield of 5.3 and 4.3. The yields do not appear that bad but the PEs are in my view far too high.
Perhaps many retail buyers buy for the long term and are happy to put them in the bottom of the wardrobe. But the last thing you want to do is to put them at the bottom of the wardrobe and in the dark of the night the value falls away. That has happened before.
You see the market – for all its sins has run hard over the last few months and perhaps the market was undervalued in March and whilst I would not argue strongly the market is overvalued I cannot say it is good value either.
Buying on listings is never clear cut and there are some in the past I have been luke warm about but made great returns. And vice versa.
An important consideration of me is, is there a real opportunity for a stag profit? That is, the listing price exceeds the ‘buy’ price. In my view a 10% - an oft spoken level for a stag profit – is far from attractive. If I thought there was a reasonable chance of say 20% I could be tempted but my main consideration is that the market has run hard and there is a risk of a correction.
And if I am wrong and the market price on the listing takes off then so be it.
Just some thoughts – the decision of course is an individual one.
Enjoy the ride
Tom Scollon
Chief Analyst
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