How long have you held TRS?
We own 4.9% of the company and returned to the share register in late 2011. We reduced our holding in the aftermath of the Ipswich floods in anticipation of a significant dislocation to the company’s Qld-NSW supply chain. We added to our holdings again in Aug-Sep 2012.
What do you like about it?
A simple, high-performance retailing story, with a strong record of execution. The company has a big store roll-out ahead of it and is presently reviewing the store portfolio of competitor, Retail Adventures, for potential acquisitions. The stock enjoys a high PE rating but this reflects the growth trajectory and growing perceptions that a revival in consumer confidence is now under way.
How is it better than its competitors?
Financial metrics such as an ROE of 33%, with sustainable EPS growth of 10%+ per annum, to start with. Net debt is actually reducing and inventory management is improving. Its strength of brand and reputation in discount variety retailing.
What do you like about its management?
Management is a seldom-seen combination of business-builders and risk managers. They are experienced in discount variety, from store formatting through to offshore inventory sourcing. Management is Argus-eyed on return on investment and optimising the businesses operational leverage through the cycle.
What is your target price on TRS?
We never set target prices for stocks, preferring to assess the company’s relative valuation and qualitative aspects versus other small companies on an ongoing basis. Some stocks ‘value’ improves despite its share price advancing. Setting exit prices for stocks means you are nearly always selling too soon or too late.
At what point would you sell it?
Not soon. Maturing of the growth profile or if we perceive valuations are too stretched.
How much has it added to your overall portfolio over the last 12 months?
It has added 0.62% to our portfolio performance over the past 12 months (portfolio +15.9%)
Where do you see the value?
Stock has run very hard into and immediately after its interim result. I had hoped it may have paused to afford a buy point.
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