Undervaluved HMV Group's share price.....

IronWolf

Nanpy wrote: »

HMV still looking undervalued?

http://www.bbc.co.uk/news/business-12605912

Even more so imo. With a market cap of £75m, net assets of around £40m as at end of October, and profits still expected around £30-40m, they dont look too shabby, if you bought HMV outright now you'd be laughing after a year or two.

foxwales

HMV's share price is down 13% today.

I can't remember the last time I went into HMW, either I buy CD's DVD's and Games online or through Itunes.

There is no way HMV can keep it's head above water in the digital age, where it's cheaper and easier to buy digital instead of tangible items.

With more people buying mobile phones with large capacity storage and operating systems similar to that of your home PC, then the movement of digital data is more so.

HMV's shrinking market:

CD's - Itunes, Play, Amazon are the biggest retailers. Add in that you can take your ipod with you and plug it into your car, plug it into other computers to get the latest digital music, buy particular songs rather than whole albums or equivalently more expensive tangible single formats.

DVD's - Play, Amazon, Lovefilm, Sky Box Office, Virgin on Demand + numerous others, which offer cheaper products and products that can be stored and accessed when ever you want.

Games - Play, Amazon, GAME, Direct to Drive, Steam. Again offering cheapers products and also digital versions stored in a database.

Unless HMV tries to diversify quickly the only way is down for them in my opinion.

Based on recent share price performance, I may even put some money on stocks falling more.

IronWolf

foxwales wrote: »

HMV's share price is down 13% today.

I can't remember the last time I went into HMW, either I buy CD's DVD's and Games online or through Itunes.

There is no way HMV can keep it's head above water in the digital age, where it's cheaper and easier to buy digital instead of tangible items.

With more people buying mobile phones with large capacity storage and operating systems similar to that of your home PC, then the movement of digital data is more so.

HMV's shrinking market:

CD's - Itunes, Play, Amazon are the biggest retailers. Add in that you can take your ipod with you and plug it into your car, plug it into other computers to get the latest digital music, buy particular songs rather than whole albums or equivalently more expensive tangible single formats.

DVD's - Play, Amazon, Lovefilm, Sky Box Office, Virgin on Demand + numerous others, which offer cheaper products and products that can be stored and accessed when ever you want.

Games - Play, Amazon, GAME, Direct to Drive, Steam. Again offering cheapers products and also digital versions stored in a database.

Unless HMV tries to diversify quickly the only way is down for them in my opinion.

Based on recent share price performance, I may even put some money on stocks falling more.

But a companies worth isn't entirely dependent on its future prospects. Just because they will do worse in the future doesn't mean the shares are an automatic sell.

The future looks bleak but I think the pessimism around HMV has driven down their shares below their intrinsic value. They are still a profitable company, and there will always be some demand for physical products.

foxwales

That's true, but when HMV's market share is shrinking, it's only a matter of time before the profitability of the company starts to shrink too.

Masomnia

The current management is making attempts to diversify, moving into live music, ticketing etc. Whether it'll pay off is anyone's guess I suppose.

sabretoothtigger

foxwales wrote: »

That's true, but when HMV's market share is shrinking, it's only a matter of time before the profitability of the company starts to shrink too.

If they are still making a profit then its a cheap price for the company I guess. Declining profits is not half as bad as making losses which is what the market fears I presume, is that correct or not is the question

VT82

IronWolf wrote: »

Even more so imo. With a market cap of £75m, net assets of around £40m as at end of October, and profits still expected around £30-40m, they dont look too shabby, if you bought HMV outright now you'd be laughing after a year or two.

Net assets of £40m, eh? Is that by book value?

Can't see that materialising in the event of a winding down and fire-sale somehow. Try restating the balance sheet assets at disposal value, add the costs of administrators, and the shareholders would get nothing should the worst happen.

Have they got much debt to refinance coming up? It wouldn't take much. Some big suppliers to pull their credit line perhaps?

It's a bit risky to vouch for a company where a moderately loud wicked whisper could bring them down.

sabretoothtigger

Ive heard several times they are well capitalised. Rumours bringing down a company is more likely with banks where they are always leveraged and often heavily reliant on daily credit swaps. Is HMV debt that unsecured


Im not very good at looking through these things and also its historical but this should be some guide :

http://www.sharecrazy.com/share2607share/share.php?disp=share&epic=HMV

Total Assets (m) 705.400 Total Liabilities (m) 605.000
Total Equity (m) 100.400 Cash & Equivalents (m) 29.700
Net Gearing (%) 81.557 Gross Gearing (%) 85.767
Net Assets (m) 100.400 Op Cash Flow (m) 65.9
Debt Ratio 34.763 Debt-to-Equity 0.088
Assets/Equity 7.026 Cash/Equity 29.582
Quick Ratio 0.204 Current Ratio 0.653

Market cap is now 68m and PE says 1.92

initiated discussions with its main lenders ahead of an expected covenant breach later this year.

This article says debt is the reason why they so low, 130m this year

Last July, HMV refinanced a £240 million revolving credit facility with its existing group of eight banks. The facility is due to expire on 30 September 2013. The key terms and conditions of the facility, including the covenants and the margin on drawings, are currently LIBOR +2.25%.

Doesnt sound too unprofitable

Music and games retailer HMV Group PLC (LON:HMV) said trading conditions since the last trading update on January 5 have remained challenging and as a consequence, it now expects pretax profit before exceptionals to be moderately below market expectations. Consensus forecast for the figure is £45 million

So thats 130m of debt but hopefully 45m of profit also and a company valued at 68m.

So long as they not dropping off a cliff in future sales and it appears not, that does seem cheap. Obviously worries on the debt terms is not good, seems their is leeway

funkyfreddy9k

sabretoothtigger wrote: »

So long as they not dropping off a cliff in future sales and it appears not, that does seem cheap. Obviously worries on the debt terms is not good, seems their is leeway

but with suppliers having credit insurance problems that could well be a cliff around the corner. thats going to be a much more urgent issue than the overall debt level I'd have thought.

Share prices down 21% today.

sabretoothtigger

Obviously Im missing some greater problem with insurance cover then. It would be strange if a profitable company went broke. I would guess the banks will cover them, it'd look bad and anyway money is best put to use at reasonable return/risk


They were down 10% today but mostly recovered.

ZEN is another company I was looking at with high cash value and low market cap (about equal), no great debt there apparently just a company model in doubt, they make superconductors. High asset value most likely but not working