Author Topic: HBC.TO - Hudson's Bay  (Read 1603 times)

Contra123

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HBC.TO - Hudson's Bay
« on: April 17, 2018, 05:12:06 PM »
Is there a thread on Hudson's Bay? 
I don't want to get SHLDed, but I thought the situation is potentially interesting.  Be forewarned: it's a SOTP story (ouch).
Stock is currently around CAD 9. Below is an excerpt from their latest investor presentation (Apr 2017) where management tried to argue that a good starting point for a discussion on the 'real' value is around CAD 35 per share.
http://ibb.co/keezwn

Here's what changed in the past 12 months:
 - the stock price is close to the lows since the 2012 re-listing.
 - the operating business' consolidated cash burn got worse
 - lots of stuff going on in the market.  Neiman Marcus is getting closer and closer to Ch11; Nordstrom tried to get sold and failed; Starboard got out of Macy's, but Macy's stock has since recovered some ground; GGP got "taken under" by BAM at a 5% cap
 - general US sales of luxury brand houses (LVMH; Richemont) remain robust
 - the Lord & Taylor flagship was sold for a premium to the value on that page. That deal was accompanied by a US$500m cash infusion that increases the fully diluted share count to at least 234 million shares (the new shares are preferred convertible).
 - there's an activist with a 5% stake that is exerting pressure for the board to curtail any expansion spend and focus on selling or redeveloping the real estate. That activist has reached a standstill at least until the AGM but may re-engage. 

You can play around with the assumptions in the excerpt, e.g. dinging the cap rates and the NOI; you can even assume that the combined value of the aspects not captured in that table (i.e. the retail opco / stores rented from 3rd parties) is negative. But IMO the valuation is interesting.

Some further notes
 - how much of HBC's real estate is owned? I saw estimates ranging anywhere from 30% to 50-60% of GLA.
 - the activist and the usual long pitches think the key here is the Saks flagship 611 5th Ave location in midtown Manhattan. The air rights were sold so the asset can't be redeveloped too drastically, though. But the location is very, very prime, and the 5th Ave market is reasonably hot (4-5% cap rates) AFAIK
 - potentially a quicker way to get some valuation credit from the markets is for HBC's management to list the JVs, but I don't know how easy it would be from a tax & structuring POV and what cap rate the market would demand for essentially a single-tenant REIT
« Last Edit: April 17, 2018, 07:43:32 PM by Parsad »
Disclaimer: Regular guy. My takes are reliably bad & I am the ultimate contrarian indicator.


valueinvestor

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Re: HBC.TO - Hudson's Bay
« Reply #1 on: June 10, 2019, 08:17:25 AM »
Buyout offer @ 9.45.

Guess I've learned my lesson with majority holders. Bought at $16, doubled down at $8 and been underwater for more than two years.


Mephistopheles

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Re: HBC.TO - Hudson's Bay
« Reply #2 on: June 10, 2019, 10:11:14 AM »
Anyone know what is the total amount of owned real estate here? It's a Canadian co so I can't figure it out from the annual report. I want to figure out what sort of price they got on purely real estate basis as I own Macy's.

valueinvestor

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Re: HBC.TO - Hudson's Bay
« Reply #3 on: June 10, 2019, 10:35:27 AM »
Anyone know what is the total amount of owned real estate here? It's a Canadian co so I can't figure it out from the annual report. I want to figure out what sort of price they got on purely real estate basis as I own Macy's.

Last I checked it was $30 CAD per share. Iíll post if I have the spreadsheet still saved.

Mephistopheles

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Re: HBC.TO - Hudson's Bay
« Reply #4 on: June 10, 2019, 10:36:56 AM »
Anyone know what is the total amount of owned real estate here? It's a Canadian co so I can't figure it out from the annual report. I want to figure out what sort of price they got on purely real estate basis as I own Macy's.

Last I checked it was $30 CAD per share. Iíll post if I have the spreadsheet still saved.

Thanks that would be great. Does it include # of square feet and breakdown of trophy properties?

valueinvestor

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Re: HBC.TO - Hudson's Bay
« Reply #5 on: June 10, 2019, 02:22:27 PM »
Anyone know what is the total amount of owned real estate here? It's a Canadian co so I can't figure it out from the annual report. I want to figure out what sort of price they got on purely real estate basis as I own Macy's.

Last I checked it was $30 CAD per share. Iíll post if I have the spreadsheet still saved.

Thanks that would be great. Does it include # of square feet and breakdown of trophy properties?

Sorry it did include both but for some reason could not find it anymore. However, on their investor relations, they provide a breakdown of the properties and square footage in their investor presentations.

peterHK

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Re: HBC.TO - Hudson's Bay
« Reply #6 on: June 10, 2019, 06:13:37 PM »
Don't touch it; mgmt is awful.

They claim RE is worth $30/share, but they're taking it private at $9.45 (and the buyout group controls 57% of the vote, so there's no stopping them). Clearly something doesn't add up here.

They've claimed it's worth $30 since the stock was $16, yet here we are at $9. Says a lot about management's capital allocation ability that they haven't at any time in those intervening years, spun out the real estate or really got serious about monetizing it, or tried to wind down the retail operations to stop the ridiculous cash burn they have going. 

Mephistopheles

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Re: HBC.TO - Hudson's Bay
« Reply #7 on: June 10, 2019, 06:15:23 PM »
Well 57% owned but donít the 43% get to vote among themselves ?

peterHK

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Re: HBC.TO - Hudson's Bay
« Reply #8 on: June 12, 2019, 06:28:52 AM »
Well 57% owned but donít the 43% get to vote among themselves ?

They only need half of the 43%. So maybe it doesn't go ahead, but I mean lets say it doesn't: the existing mgmt. team already has control and has got HBC to where it is today. Maybe you get a higher offer, but they're not going to give you $30, I doubt they'll give $20, or $15; maybe you get $12. Downside is it goes right back to $6. Not a great trade.