Wednesday, 12 January 2011


After poor trading and announcing that they are closing 40 stores, the stock dropped to ~25p.
At this price its worth a small punt. DB have highlighted it popping up on their LBO model, and so too it has on the Raven's. Very roughly after knocking the balance sheet around a little there is back of the envelope £200mm of net debt after some restructuring costs and sales, with that restructuring the business should earn approx 50mm of cash a year, which put on an market multiple you get to about 46p a share. That is aggressive and rather rough, but it was worth putting in the book as a marked to have some more work done on it when time allows, seperating out the value of the chain waterstones. (obviously there are some pretty awful long term structual problems in the sector, internet retailing, the iphone, etc which should be depressing the price)


  1. It makes sense. Similar conclusion to myself.
    The credit insurance was a bad blow though so glad I didn't punt.

  2. Bill, the thing I think doesn't make that much sense about the credit insurance to me is that I can't see why this is a real business problem after xmas? surely they will be looking to reduce inventory anyway.

    I imagine this is driven by insurers' worrying that HMV doesn't make its credit covenants. In which case there might be a rights issue. Which statistical would be a short, however I think that removes idiosyncratic fear and as such would be a buy for me.