tag:blogger.com,1999:blog-8522220863321921021.post6638774591146887122..comments2023-10-25T16:55:47.069+01:00Comments on 10 Value 10: Virtuous Vertu and HMV the DogYorkiemhttp://www.blogger.com/profile/02636254435369847915noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-8522220863321921021.post-57911097929310901932011-03-02T09:38:13.156+00:002011-03-02T09:38:13.156+00:00Anon
I took the market cap from the LSE website. ...Anon<br /><br />I took the market cap from the LSE website. It could be that because the share price was jumping around so much, I forget to refresh the screen - apologies - but at £70m it makes it look even cheaper!<br /><br />In terms of numeric detail, yes I do want to get bogged down in them - the more the better. It's easy to get caught up in emotion when every press report screams along the lines of 'sell...it's going bust...head for the hills' etc. The price dropped c20% yesterday as there was a huge imbalance between buyers and sellers (a ratio of 1:19 per LSE yesterday). Did the underlying value fall by 20% yesterday? Maybe, maybe not.<br /><br />For the time being, I'm in the 'maybe not' camp. The market is pricing HMV at <4x PER and <2.5x EV/EBITDA, which is very cheap for a conventional share. Ok, it's not a conventional share and, as you rightly point out, if it was really priced for failure, the share price would be a lot lower if not zero. <br /><br />The higher debt levels and adverse working capital are a huge cause for concern, and the near-time future of the company will be in the hands of the banks. I am not going to disagree with the structural issues, but can I see a future for a profitable multi-channel music retailer? Probably <br /><br />I am prepared to stand aside from the herd for the time being and will revaluate my position as and when new information comes to light. I am expecting a rocky roadYorkiemhttp://10value10.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-8522220863321921021.post-79973642414217122322011-03-01T20:27:16.606+00:002011-03-01T20:27:16.606+00:00"The shares dropped over 20% to 16.5p in earl..."The shares dropped over 20% to 16.5p in early morning trade, giving the Company a market value of £88m."<br /><br />16.5p gives HMV an MCAP of 70m. The company was worth 88m yesterday. Interesting analysis, but I disagree with one or two things. <br /><br />"HMV is priced for failure based on a PER of 4x and an EV/EBITDA of 2.5x. "<br /><br />I don't think 4x PER is priced for failure. I'd say 4x represents some troubles, but a reasonable chance that the company will return to profits in the future. I'm not sure HMV's chances are that great. <br /><br />I don't think you need to get bogged down in the numeric details with HMV. Qualitative questions are all that are required. <br /><br />Is it likely that HMV will return to full health? I think no chance whatsoever. This 'structural decline' is perminant. <br /><br />Can it change the ship before it sinks? I think not. HMV live is obviously a viable busines, but it's profits will easily be swallowed by the main business's loses.anonnoreply@blogger.com