QAV #632- Confidence Is Up/Down!

QAV 632 Club
[00:00:00] Tony: Okay.
[00:00:00] Cameron: wel­come, back to QAV Tony, episode 632, 8th of August, 2023, you’re back in Syd­ney!
[00:00:08] Tony: I am. Yeah. It’s sun­ny today.
[00:00:10] Tony: It’s been a bit win­try, but it’s nice today now. It’s good.
[00:00:13] Cameron: That’s good. How was your trip back through Wag­ga?
[00:00:17] Tony: good. Good. We played golf a cou­ple of times. Drove back up. We had a, we had an 18th birth­day on Fri­day night that Rud­dy and I and Jen­ny went to, which was love­ly. A friend of ours has a daugh­ter who’s 18. So that was nice. Spent the week­end social­iz­ing a lit­tle bit.
[00:00:33] Tony: It’s been good.
[00:00:34] Cameron: right. The 18th birth­day par­ty with a bunch
[00:00:36] Cameron: of 60 year olds.
[00:00:38] Tony: Yeah. It was. It was all the, it was all the adults friends, real­ly.
[00:00:41] Cameron: right.
[00:00:42] Tony: Yeah. But yeah, we’ve known her all her life. So it was, it was fun. I asked her if she’d been to see the Bar­bie movie, cause she looks a bit like a Bar­bie. Don’t mean that in a bad way.
[00:00:51] Tony: She’s quite an attrac­tive blonde 18 year old. And she said, yeah, it was real­ly bor­ing.
[00:00:57] Cameron: Chris­sy was going to see it with a bunch of female friends [00:01:00] yes­ter­day, but she’s got a nasty cough, so she pulled out, but yeah, it’s doing well. Done like a bil­lion dol­lars at the box office.
[00:01:07] Tony: Yeah. It’s amaz­ing, isn’t it? And Mar­got Rob­bie put it all togeth­er too.
[00:01:10] Cameron: Did she? She put it togeth­er. Good
[00:01:12] Tony: Appar­ent­ly. Yeah.
[00:01:13] Cameron: Do you know how many films have done a bil­lion dol­lars at the box office?
[00:01:17] Tony: No, I don’t.
[00:01:18] Cameron: I thought it was like maybe 10. 53 now. Bar­bie is the 53rd movie to do a bil­lion dol­lars. I remem­ber when like Titan­ic was the first movie to do a bil­lion dol­lars. Now there’s 53 of them.
[00:01:31] Tony: I remem­ber when Titan­ic was, was cost­ing near­ly a bil­lion dol­lars to make and Rupert Mur­doch showed a rough cut of the Titan­ic going down at a News Corp annu­al gen­er­al meet­ing just to silence the crit­ics and every­one walked away going, yeah, it’s going to make
[00:01:46] Tony: bil­lions.
[00:01:46] Cameron: And it did.
[00:01:48] Tony: And he was right.
[00:01:48] Cameron: Well, speak­ing about going down, Tony
[00:01:51] Cameron: And I’m not talk­ing about the 18th birth­day par­ty the mar­ket’s had a rough week. Why?
[00:01:57] Tony: Yeah. why?
[00:01:57] Tony: is it so?
[00:01:59] Cameron: [00:02:00] Sand in fun­nel sup­port­ed by
[00:02:01] Cameron: string. Glass and a half of dairy milk choco­late.
[00:02:04] Tony: Gosh, I met Julius Sum­n­er Miller. He taught at my school.
[00:02:07] Cameron: You’ve told me, Yeah.
[00:02:09] Tony: Yeah. Well, the stock answer, Cam, is that inter­est rates either went up, no, went up or looked like going up in the States again. So the mar­ket did­n’t like it, but I’m not sure that real­ly applies here. And I think our stocks have been doing fine.
[00:02:22] Tony: I, I noticed Pil­bara resources up a fair bit this week after there was an an update on or an upgrade to the, the, what do they call it? The amount of resources that they declared that they
[00:02:35] Tony: can mine. So that was good.
[00:02:37] Cameron: Well you obvi­ous­ly haven’t seen what hap­pened to Myer today.
[00:02:41] Tony: No.
[00:02:41] Cameron: Myer can nev­er win with Myer. It’s down 14% today.
[00:02:47] Tony: you are. ha
[00:02:49] Cameron: I saw this in the ABC not
[00:02:50] Cameron: long before we went to air. Myer shares have slumped after a fore­cast weak­er than expect­ed prof­it for the 2023 finan­cial year. The retail­er pre­dicts that after [00:03:00] tax prof­it will come in between 69 to 73 mil­lion, up 15 to 21% from a year ago.
[00:03:06] Cameron: You would think that’s good, but below a fore­cast of 88. 5 mil­lion by finan­cial news ser­vice Refini­tiv. Like, who’s lis­ten­ing to Refini­tiv? Why are we lis­ten­ing to Refini­tiv all of a sud­den? When, why do they get to decide what should hap­pen? Myer says sales rose 12. 5% from the 2022 finan­cial year to 3. 6 bil­lion.
[00:03:27] Cameron: That’s despite dete­ri­o­rat­ing trad­ing con­di­tions over the first half of 2023. So, seri­ous­ly, what the hell? Their, their prof­its are up, their sales are up. Share price is down 14%. Like, give me a break. That’s not right.
[00:03:41] Tony: Con­sen­sus down­grade. That’s. One of the things that dri­ves the share mar­ket the most is fore­casts, and we all know how good fore­casts are, and we all know that stock­bro­kers are inclined to gild the lily with fore­casts when they talk to their clients, and as soon as some­one comes out and says, yeah, that fore­cast isn’t going to be [00:04:00] met, even if they make up a lot more mon­ey this year than last year, share price drops.
[00:04:04] Tony: And it’s a, it’s kind of a strange thing in the share mar­ket, real­ly. A, that you lis­ten to stock­bro­ker fore­casts or, or ana­lyst fore­casts, and B, Myer should have been doing a bet­ter job of guid­ing them down if they are meet­ing with those ana­lysts along the way. To come out with a sur­prise down­grade is nev­er a good look.
[00:04:21] Tony: And this is con­fes­sion sea­son for Myer, because they, they don’t report in August, they report in Sep­tem­ber. Oh, sor­ry, they announce their results in Sep­tem­ber, they report they fin­ished, they rule their year off in July.
[00:04:33] Cameron: So this is a con­fes­sion, I guess.
[00:04:35] Tony: Yeah,
[00:04:36] Cameron: Myer Chief Exec­u­tive John King said we con­tin­ue to tight­ly man­age costs, inven­to­ry and cash to ensure we have a strong bal­ance sheet as we begin FY24, where we expect the ongo­ing uncer­tain­ty around the macro­eco­nom­ic envi­ron­ment to per­sist. I thought he was going to say, you know what, you can all just bite me.
[00:04:53] Cameron: That was a bloody good result. Leave me the hell alone.
[00:04:56] Tony: yeah, they should, but he’s try­ing to be polite, I guess.
[00:04:59] Cameron: It’s [00:05:00] prob­a­bly why I’m not the chief exec­u­tive of Myer.
[00:05:02] Tony: Well, John King is pret­ty expe­ri­enced. He should have known bet­ter than to have a sur­prise down­grade. He should have been out there much before, a long time before this,
[00:05:10] Cameron: Well, he’s, he is, isn’t that what he just did? He just guid­ed the mar­ket.
[00:05:15] Tony: Yeah, a bit late though, he would have known about this. Because Myer, you know, the inter­est­ing thing about Myer is they do more than half of their busi­ness in the first half at Christ­mas time, so some­thing’s gone hor­ri­bly wrong in the sec­ond half, which he would have been part of, and know­ing as it went, he should have been out there a lit­tle bit ear­li­er, I would have thought, let­ting peo­ple know it’s good, but it’s not as great as the ana­lysts are say­ing.
[00:05:36] Cameron: Like, it’s just, this is my expe­ri­ence from like last year with Myer all over again, it’s just, it’s up 25, 30, 50%, and then you just watch it slide all the way back down to become a rule one.
[00:05:48] Tony: Oh, it’s a bug­ger, yeah.
[00:05:50] Cameron: Well, Tony, speak­ing of con­fus­ing news, I was look­ing at the ABC before we went to the air. Two sto­ries back to back in the ABC today. The first [00:06:00] one is busi­ness con­fi­dence picks up even though costs rise. The Nation­al Aus­tralia Bank says busi­ness con­fi­dence has lift­ed slight­ly to be back in pos­i­tive ter­ri­to­ry in July.
[00:06:09] Cameron: How­ev­er, it is still low at two index points. Busi­ness con­di­tions eased one point to 10 index points. Trad­ing con­di­tions, employ­ment and prof­itabil­i­ty were all steady accord­ing to NAB chief econ­o­mist Alan Oster. He says busi­ness con­di­tions con­tin­ued to show resilience in July and have been broad­ly steady in the past cou­ple of months at above aver­age lev­els.
[00:06:29] Cameron: The very next sto­ry says con­sumer con­fi­dence falls. Con­sumer con­fi­dence remains deeply in pes­simistic ter­ri­to­ry amid high inter­est rates, high infla­tion and the slow­ing econ­o­my. West­pac and the Mel­bourne Insti­tute say con­sumer sen­ti­ment dropped 0.4 per­cent to 81 in August. West­pac senior econ­o­mist Matthew Has­san says the Reserve Bank inter­est rate paus­es last month and this month have done lit­tle to lift con­fi­dence, prob­a­bly because the RBA has warned that more rate ris­es may be need­ed.
[00:06:58] Cameron: He says con­sumers are wor­ried about [00:07:00] infla­tion. includ­ing recent fuel and ener­gy price ris­es with pres­sure on fam­i­ly finances and con­cerns about rates and the eco­nom­ic out­look. Now, call me crazy, call me stu­pid, but I would have thought if con­sumer con­fi­dence is low, busi­ness con­fi­dence would also be low see­ing as con­sumers are the ones that are spend­ing the mon­ey on the busi­ness­es and so if con­sumers are wor­ried that they’re not going to spend mon­ey and there­fore busi­ness con­fi­dence would be low, but appar­ent­ly I don’t know any­thing.
[00:07:26] Tony: Yeah, I don’t know. I mean, con­sumers are being dri­ven by inter­est rates, which I guess busi­ness is too, to a cer­tain extent. Oh, I’ve got no idea why they’re dif­fer­ent. Just spec­u­lat­ing. I sus­pect they see, I mean, the talk about reces­sion is lift­ing and sup­ply chains are open­ing up and infla­tion’s com­ing down a lit­tle bit.
[00:07:43] Tony: So that’s prob­a­bly stok­ing busi­ness con­fi­dence, but, but mort­gage hold­ers, res­i­den­tial mort­gage hold­ers are still expe­ri­enc­ing high, a quick rise in inter­est rates, which should be hurt­ing is my guess.
[00:07:55] Cameron: Well, there you go. Oth­er news? Cok­ing Coal. [00:08:00] In our when we put out our buy list yes­ter­day, we said Cok­ing Coal was a sell. Then I noticed that meant Stan­more was a sell because they’re Cok­ing Coal. I went to dou­ble check that this morn­ing and I looked at the chart again and I think it is a sell .
[00:08:16] Cameron: I think it’s above the sell line. Do you have a look at it? What do you
[00:08:20] Tony: Yeah, I agree. I think it’s a buy, accord­ing to the chart. The only ques­tion I have is that’s, that’s the graph that we use a rolling month­ly futures con­tract for, isn’t it? So we don’t real­ly get a five year month­ly graph for cok­ing coal.
[00:08:33] Cameron: No.
[00:08:34] Tony: Yeah, so it’s, yeah, I might just try and dig around and maybe you can do the same and try and find a five year graph for cok­ing coal if we can.
[00:08:41] Cameron: I think we did that and that’s how we end­ed up with this one. I think this is the only one we could find the last time we did that, but
[00:08:47] Tony: I know.
[00:08:48] Cameron: things might have changed.
[00:08:49] Cameron: Alright, well, port­fo­lio updates our port­fo­lio’s still doing the same, still two and a half times the index since incep­tion [00:09:00] it’s been a, I don’t know, rel­a­tive­ly Qui­et week, I guess.
[00:09:04] Cameron: Noth­ing much has real­ly hap­pened. Haven’t had to trade any­thing in the last week. No real­ly big high­lights. Do you have any high­lights from our port­fo­lio in the last week, Tony? I think the biggest per­former was PLS as of today, because it’s gone up, as you said. The worst per­former was prob­a­bly LAU, Lind­say Aus­tralia, it’s tak­en a bit of a hit.
[00:09:27] Tony: Okay,
[00:09:28] Cameron: I mean, it, we bought it at 42 cents and it’s cur­rent­ly 1. 22, so I’m not com­plain­ing to the Lind­say broth­ers, but still, it’s, it’s come back a bit. Don’t know why, maybe a lit­tle bit of prof­it tak­ing, who knows.
[00:09:40] Tony: well,
[00:09:41] Tony: the
[00:09:41] Cameron: had a cou­ple of div­i­dends in there too, so it’s, it’s been a cork­er of a stock.
[00:09:46] Tony: Yeah, good. The week­ly report I got from Navexa, which is the cal­en­dar week last week, says the worst per­form­ing stock was Cred­it Corp, which we spoke about last week, com­ing off again because it’s fore­cast­ing less than what [00:10:00] ana­lysts are fore­cast­ing, so the stock is down 12%. But ASG, Auto sports groups, was up 11. 11%. 11. 11%.
[00:10:08] Tony: Last week,
[00:10:09] Cameron: last week. real­ly?
[00:10:10] Tony: Hmm. So that’s between 31st of the 7th and the 6th of the 8th, accord­ing to Navexa.
[00:10:16] Cameron: Well, it’s come off a lot since then.
[00:10:19] Tony: Okay.
[00:10:19] Cameron: At the moment, they’re say­ing I’m look­ing at the last sev­en days and it’s say­ing it’s down 1. 22%.
[00:10:26] Tony: Hmm.
[00:10:27] Cameron: So, oh no, that’s just today. No, it’s up 0. 83% in the last sev­en days. So, I don’t know. It must have tak­en a turn. I nev­er know. Your num­bers are always dif­fer­ent from my num­bers.
[00:10:37] Tony: Yeah. I just used the report Navexa gives me for the cal­en­dar week, week before. Any­way.
[00:10:41] Cameron: Any­way, not a lot of move­ment.
[00:10:43] Tony: No, it’s actu­al­ly kind of eeri­ly… Qui­et, isn’t it, for a report­ing sea­son? Often­times peo­ple are sec­ond guess­ing what’s com­ing out and sell­ing and trad­ing trad­ing, on results, but haven’t seen much of that yet.
[00:10:58] Cameron: You haven’t noticed any­thing? You’re [00:11:00] still doing down­loads of the stocks with the that have come out with their finan­cials a cou­ple of times a week? No?
[00:11:06] Tony: Nah, nah, unless I’ve got some­thing to buy or sell, I’m not. And I haven’t at the moment, so every­thing’s rea­son­ably above its, its sell lines, which is good. It’s nice to have a sta­ble port­fo­lio for change.
[00:11:17] Cameron: So what invest­ing stuff do you have to talk about this week, Tony?
[00:11:22] Tony: A cou­ple of things. I’ve got an update on the work that Ryan has been doing for us and it’s, it’s still prob­a­bly a week away from being com­plete­ly final­ized and I’ve asked him to put, put the major points into a Pow­er­Point pre­sen­ta­tion, just a short three slide deck that we can share. It’s look­ing like though, apart from the fact he’s got dou­ble check num­bers, etc.
[00:11:45] Tony: It’s look­ing like though, as I thought, there’s no dif­fer­ence from buy­ing top down on the buy list to buy­ing bot­tom up on the buy list, or lit­tle dif­fer­ence any­way. So that, we can put that one to bed. Which is kind of coun­ter­in­tu­itive, because you think if the [00:12:00] QAV score was high­er, it would be a bet­ter buy, but it was­n’t com­ing out that way.
[00:12:05] Tony: And he’s also done a fair bit of work on whether Rule 1 should be 10% or 20%, and despite some ear­ly results show­ing 20% was bet­ter, again it’s come out as lit­tle dif­fer­ence in terms of ROI. So, I’ve said, yeah, so the only dif­fer­ence that we found, or that he found, is that there are much less trades if you use 20% com­pared to 10%.
[00:12:30] Tony: It’s kind of a net net, you get the same sort of returns whether you use 10% or 20%. So I’ve asked him to go back and put in a trans­ac­tion cost and see what the dif­fer­ence that makes to the returns. So he’s going to come back next week and let us know if it makes a big dif­fer­ence or not.
[00:12:46] Cameron: What fig­ures is he using for the bro­ker­age cal­cu­la­tion?
[00:12:49] Tony: I’ve asked him to use 0.4 of a per­cent, which is what I use. which is what I pay with Bal­lieus. So he’s going to use that.
[00:12:57] Cameron: So chang­ing rule one from [00:13:00] 10% to 20%. on the sur­face of it did­n’t make any dif­fer­ence.
[00:13:04] Tony: It, it did­n’t make any dif­fer­ence to the returns, but it made a big dif­fer­ence to the num­ber of times we had to sell. And he also point­ed out that it made a big dif­fer­ence to the, the rule ones after rule one. So there are almost no rule ones after rule ones at 20%, but there are a lot of rule ones fol­low­ing on the heels of rule ones, like the con­cate­nat­ing sells, the death spi­ral, if you use 10%.
[00:13:26] Cameron: So you’re say­ing that if we leave it at 10% the results are the same and there­fore we might as well move it to 20% and then have to trade less?
[00:13:35] Tony: Cor­rect. That’s what I’m think­ing, but I’m going to wait until I get the final results next week.
[00:13:38] Cameron: Wow! That’s that’s a big change to our process­es if it comes out that way at the end.
[00:13:46] Tony: Yeah, will be. And you know, it’s lim­it­ed to three, like three years worth of analy­sis, but it’s fair­ly rig­or­ous. So I’ll release it. And I’ll prob­a­bly just do it as a tri­al myself for a while, first of all to see. You know, what the kinks up and then [00:14:00] yeah, we might make a change lat­er on this year.
[00:14:02] Cameron: So has he looked at 25%?
[00:14:05] Tony: No, no. And look, to be fair to him, it’s a, it’s a real­ly man­u­al process to what he’s doing. So he’s got the buy, all the buy lists we’ve issued. And he goes back to the start and he just starts mak­ing. I think he made six or eight port­fo­lios from dif­fer­ent start­ing dates and then trad­ed all the way through.
[00:14:25] Tony: And because we don’t have great automa­tion, like he’s check­ing for com­mod­i­ty sells man­u­al­ly, he’s, you know, using the Bret­ta­la­tor for three point buy lines, which you’ve got to do man­u­al­ly as well. So there’s a fair bit of man­u­al work there. It’s, it’s quite time con­sum­ing to say, okay, go and try 17%. or go and try 25%. So we just did 10 and 20.
[00:14:44] Cameron: Yeah, hope­ful­ly we can build some sort of soft­ware app that’ll enable us to speed up the regres­sion test­ing. But that’s that’s, oh, that’s fas­ci­nat­ing. Thanks for doing all of that. Thank you to you and Ryan for look­ing into that. I’m sure that’ll make all of our lives a lot eas­i­er if we did­n’t have to do [00:15:00] as many rule ones.
[00:15:02] Tony: yeah. So hope­ful­ly I’ll have some­thing to pro­duce next week on that one. What else have I got? I’ve got a pulled pork to do cam on I’m going to do it on Nick Scali, which popped up on the buy list again this week. I think I may have done Nick Scali years ago, or at least in the past, but I’m going to do it again.
[00:15:18] Tony: And I think it’s, it’s a good com­pa­ny. It’s worth high­light­ing. So Nick Scali, the, the tick­er code is NCK. I’ve owned it in the past, don’t own it now, and it’s been off the buy list for a while prob­a­bly because of COVID and COVID relat­ed issues. And I’m doing the analy­sis on the results that we have avail­able today.
[00:15:39] Tony: And this com­pa­ny does­n’t report until the 22nd of August. So the num­bers we’re using are six months old and we’re wait­ing for new ones. It’ll be two or three weeks before we see them. But as you know, I I’m hap­py to buy. A com­pa­ny that comes into the sit­u­a­tion, even though we’re wait­ing for new num­bers.
[00:15:57] Tony: Might be, if peo­ple are out there a bit more con­ser­v­a­tive, they [00:16:00] can, you know, hap­pi­ly wait until we get new num­bers. But gen­er­al­ly I find, if some­thing pops up on the buy list dur­ing report­ing sea­son before the results, espe­cial­ly retail com­pa­nies which tend to be more cycli­cal and volatile than some, you know, some of the oth­er com­pa­nies that we look at.
[00:16:16] Tony: As we saw with Myer today. I’m hap­py to buy them because if they’re trend­ing up com­ing into report­ing sea­son, usu­al­ly that means the ana­lysts have fig­ured it out and are expect­ing a good result. There could even have been a leak of infor­ma­tion some­where along the line as well. But any­way it’s usu­al­ly a good sign.
[00:16:31] Tony: Not always, but usu­al­ly. So, have a look at it. Nick Scali, if peo­ple aren’t aware of them, they’re a fur­ni­ture store net­work. A bit like, you know, Har­vey Nor­man. that kind of thing, but they do offer brands across the whole eco­nom­ic spec­trum from dis­count through to pre­mi­um. And the big change in their busi­ness last year was they acquired a com­pa­ny called Plush, which has boost­ed sales and prof­it for [00:17:00] them which has been, been good for them going on their last results.
[00:17:03] Tony: So this is going back to Feb­ru­ary or March prof­it was up 30 from mil­lion to 60 mil­lion net prof­it after tax. And what was it? I don’t have the sales num­bers in front of me, but sales were also up, so some­thing sim­i­lar. So big, big boost to prof­it from acquir­ing Plush throw­ing off lots of cash flow, which we like, and they’re pay­ing down the debt that they took out took on to make that acqui­si­tion.
[00:17:31] Tony: So work­ing well for them. They, they said in that prof­it result that they were able to extract 20 mil­lion a year in syn­er­gies from the two brands, and that they’ve done a lot of work to bring Plush into line with the prac­tices and process­es that Nick Scali use. So they’ve tran­si­tioned to Nick Scal­i’s point of sale and they’ve adopt­ed, you know, the poli­cies and pro­ce­dures in terms of drop ship­ping, because a lot of Nick Scal­i’s busi­ness is you go in, [00:18:00] pick a sofa or a bed that you like, and then they deliv­er it to you in 12 weeks time and they man­u­fac­ture it Over­seas. So they have a very stream­lined man­u­fac­tur­ing process. Busi­ness is inter­est­ing. It’s been around for as long as I have, 60 years ago. It was, it was start­ed in Syd­ney and they large­ly import, I think they might import all their fur­ni­ture, as I said, through our drop ship method. They have cur­rent­ly 107 stores in Aus­tralia and New Zealand.
[00:18:27] Tony: They called out in the last results that they thought that they could get up to 180 stores, so there’s still plen­ty of room to, to grow in the ANZ mar­ket with­out can­ni­bal­iz­ing the cur­rent offer­ings. And they also now have an online pres­ence, which is increas­ing as well. So it looks like there’s a fair bit of growth avail­able for this com­pa­ny.
[00:18:48] Tony: The big thing I like about Nick Scali as well is that it’s He does have an own­er, founder, still run­ning the busi­ness. A guy called Antho­ny Scali, so not the Nick of the name, who I think was their [00:19:00] father, but the son, Antho­ny. And he still has he’s a direc­tor hold­ing about 14% of the shares. And I remem­ber a year ago, maybe a few years ago now, he went and bought out his sib­lings.
[00:19:12] Tony: So it’s just him, and he’s been run­ning the busi­ness for a long time. Prob­a­bly work­ing it with his father. And still holds 14%. So it’s one of those sto­ries of own­er founders doing well and focus­ing on, on the process that got them to where they are. So that’s good The num­bers. The ADT for this, for this stock is 1. 847 mil­lion per day. So it will be big enough, I think, for most of our lis­ten­ers. I’m doing the analy­sis of the price of 10. 67 which is less than the con­sen­sus tar­get. At that price, the stock is yield­ing just over 7%. So that’s a tick from us because it’s above the mort­gage rate. Stock Doc­tor Finan­cial Health is strong and steady.
[00:19:54] Tony: I’ll just call out the ROE for this com­pa­ny. I don’t focus on ROE in the check­list, but it’s high for this com­pa­ny. [00:20:00] I know some peo­ple do. It’s near­ly 73%, which is huge. The PE for this com­pa­ny is 8x. Which is, you know, prob­a­bly get­ting up there for a QAV stock, but it is the low­est of the last six halves, so it gets a tick from us for that.
[00:20:14] Tony: Prop­Caf, like­wise, is 6. 27 times, so it’s get­ting up towards our sev­en ceil­ing. So this, this com­pa­ny is start­ing to get… a bit expen­sive for us, but it’s just sneak­ing in at the moment. IV1 is 6. 79. So the share price is above that, but it’s just below IV2, which is 11. 82. So we score it for that.
[00:20:36] Tony: Can’t score it for book val­ue. It’s book plus 30 is only 2. 69. And I think the rea­son for that is it’s the It’s car­ry­ing lots of intan­gi­ble assets which is the good­will from the Plush acqui­si­tion. So that’s on the bal­ance sheet at the moment affect­ing the book val­ue and NTA even worse. Fore­cast, inter­est­ing­ly enough, the con­sen­sus fore­cast earn­ings per share for this com­pa­ny is a drop of [00:21:00] 10%.
[00:21:01] Tony: Noth­ing I could see in any of the announce­ments from the com­pa­ny sort of sup­port­ed that. So I’m not sure where that num­ber’s com­ing from, but cer­tain­ly, you know, with the increas­es we saw from the Plush acqui­si­tion, I’m not sure There might be a sur­prise on the upside. I’ll leave it at that. I’m not sure that’s going to hold.
[00:21:16] Tony: So, but any­way, it gets a neg­a­tive one score for decreas­ing EPS in our check­list. It is a new three point trend upturn. So let’s just come back on the buy list. It does have con­sis­tent­ly increas­ing equi­ty, which is always a good sign. And all in all, the qual­i­ty is 14 out of 16, or 88%. And the QAV score is 0. 14. So not near the top above the bot­tom. And pos­si­bly if it keeps going the way it’s going, it might fall off the, the buy list if the price increas­es too much fur­ther. I mean, it is, it is a dis­cre­tionary retail stock. So we have lots of dis­cre­tionary retail stocks on our buy list at the moment.
[00:21:55] Tony: Super cheap accent AX1, [00:22:00] accent one, I think it is a shoe com­pa­ny, et cetera, et cetera. And they’re. You know their sales have been hit by dis­cre­tionary spend­ing dry­ing up because of inter­est rates ris­ing so they are back on our buy list but there will come a day when they turn around and become buys again and this this is looks like it’s the case for Nick Scali.
[00:22:19] Tony: Risks are obvi­ous­ly inter­est rates if they do stay where they are or even increase that could even­tu­al­ly hurt sales but I also think too there’s a lot of talk around them in the , finan­cial press at the moment about hous­ing con­struc­tion short­falls and prob­lems and prices going up and builders not being able to rene­go­ti­ate fixed price con­tracts or, or canselling them rather than rene­go­ti­ate them.
[00:22:44] Tony: And one of the key dri­vers of peo­ple buy­ing fur­ni­ture is mov­ing house. So that might be a. a dif­fi­cul­ty that they face in the near future. But their risks, we’ll see what hap­pens when they announce their results. But at the moment, I think it’s a buy and peo­ple could have a look at it and do their own research.
[00:22:59] Cameron: Did you know that [00:23:00] Nick Scali is still alive?
[00:23:02] Tony: No, I did­n’t.
[00:23:03] Cameron: Still alive, still a con­sul­tant to the com­pa­ny and a non exec­u­tive direc­tor.
[00:23:08] Cameron: I found this sto­ry about him from the Syd­ney Morn­ing Her­ald, 1983. Says, 30 years ago, Nick Scali arrived in Mel­bourne on an old Greek ship, the Hel­lenic Prince. He had 10 pounds in his pock­et and a lit­tle Eng­lish.
[00:23:21] Cameron: The minute his feet touched Aus­tralian soil, he was trans­ferred to a train and railed straight to the immi­gra­tion camp at Bonag­illa, Vic­to­ria. He was a long way from home, Reg­gio Cal­abria, south­ern Italy, where his par­ents had a suc­cess­ful small goods busi­ness and bak­ery. I was 18. I had no trade or pro­fes­sion.
[00:23:40] Cameron: It was very dif­fi­cult, but I was adven­tur­ous, he said. With­in a few days, Nick had packed up and set off on a work­ing trip around Aus­tralia. I thought, if I don’t do it now, I nev­er will. I’d heard that Aus­tralia was a huge coun­try, still in its nat­ur­al state, and lots of birds to see. I love birds, he said.
[00:23:56] Cameron: Don’t we all, Nick? He returned to Mel­bourne, enrolled in [00:24:00] night school Eng­lish class­es for a year and began to assess the eco­nom­ic sit­u­a­tion. It was pret­ty dis­as­trous. Food, cloth­ing, there was no qual­i­ty mer­chan­dise, and it was so far from every­thing. In 1955, Nick Scul­ly set up an elec­tri­cal appli­ance com­pa­ny.
[00:24:15] Cameron: Most of my cus­tomers radi­ograms and fridges. Love a good radi­ogram, don’t you, Tony?
[00:24:21] Tony: I do. The old 301, beau­ti­ful.
[00:24:23] Cameron: what’s a radi­ogram? I got no idea, I was
[00:24:25] Cameron: being
[00:24:26] Tony: We used to have a radi­ogram. It’s, it’s a, it’s a, a stereo record play­er and radio all in the same big tim­ber unit with the
[00:24:34] Cameron: All those big tim­ber box things that were in the liv­ing room? Is that what they were called?
[00:24:38] Tony: Yeah.
[00:24:39] Cameron: They were migrants and they need­ed every­thing to set up home. They’d ask me if I could help them get their fur­ni­ture. That was the start. By 1958, he was buy­ing and sell­ing local fur­ni­ture, but because he was dis­sat­is­fied with the local prod­ucts and the lack of crafts­man­ship, Nick began to import from Italy.
[00:24:54] Cameron: From Italy, you can buy mod­ern fur­ni­ture, Baroque and tra­di­tion­al, says Nick. They real­ly know how to [00:25:00] make fine fur­ni­ture there. Ital­ians have been
[00:25:02] Tony: Grand Sale, Grand Sale, Grand Sale.
[00:25:05] Cameron: Com­prara, Com­prara, Com­prara! Fran­co Coz­zo! God, that’s so drilled. I haven’t seen a Fran­co Coz­zo ad in 30 years.
[00:25:16] Tony: Oh, did you see that there’s a doc­u­men­tary about him on the ABC a cou­ple of months
[00:25:19] Cameron: that would,
[00:25:20] Tony: Some­one’s paint­ed a mur­al in Footscray on the side of a wall fran­co
[00:25:25] Cameron: God, the first like 20 years I lived in Mel­bourne, just Fran­co Coz­zo late night TV. What a, it was fan­tas­tic.
[00:25:32] Tony: Well, you just, you said ital­ian Baroque Fur­ni­ture And that made me think of Fran­co Coz­zo.
[00:25:37] Cameron: And then you go past a Fran­co Coz­zo shop and you go, yeah, I’d nev­er buy any of that stuff. It looks ter­ri­ble, but he knew how to mar­ket. That’s for sure. So that’s there’s, I went and looked on the Nick Scali web­site. There’s noth­ing about the sto­ry of the dad and how it got start­ed, but this is from an old Syd­ney Morn­ing Her­ald.
[00:25:53] Cameron: So there you go.
[00:25:55] Tony: Oh, great. I love those founder sto­ries. They’re fan­tas­tic.
[00:25:58] Cameron: Yeah, I mean they’re usu­al­ly a lit­tle bit, [00:26:00] you know, fic­tion­al too, mythol­o­gized, but I’m sure there’s
[00:26:03] Tony: and Sur­vivor bias
[00:26:04] Cameron: than fic­tion then. Yeah,
[00:26:06] Tony: There was a whole shipload of peo­ple came across with the amount of those.
[00:26:09] Tony: Start­ed a suc­cess­ful fur­ni­ture busi­ness, yeah.
[00:26:11] Cameron: yeah. I like this sec­tion, this is like 1983 jour­nal­ism. At Scal­i’s there are extrater­res­tri­al beds. Round ones set in lotus shaped suede pan­els, reclin­ing beds which adjust to any desired angle at the touch of a gear stick, beds which look like they’d give birth to a Bot­tisel­li Venus beneath eggshell green satin bed heads shaped like shells.
[00:26:36] Cameron: This does sound like Frna­co Coz­zo. There are beds with vel­vet cres­cents ris­ing at one end and set­ting at the oth­er. There are prim and quilt­ed beds with flounced skirt­ing around their legs. These are sen­su­al­ist’s beds. And there are hand carved beds. Sud­den­ly we’re in the built in mod­u­lar bar sec­tion.
[00:26:53] Cameron: This sounds like your style. This is apart­ment own­ing, groovy, sin­gle swinger or young mar­ried [00:27:00] ter­ri­to­ry. Built in radios play soft­ly behind indi­rect light­ing. Dig­i­tal clocks ooze the pas­sage of time, cas­settes turn, light emit­ting diodes dance like laser beams across air­line cock­pit inspired pan­els set in rich, dark leather, glass cab­i­nets with smoke tint­ed doors slide and spring Open at the slight­est touch, Chrome Tubes, Arc, Curve and Reflect, A World, Which Out Hol­ly­wood’s Hol­ly­wood After A Few Cam­par­i’s Or Black Rus­sians, The Fridge Door Is Def­i­nite­ly Bomb And Bul­let­proof, It’s Quilt­ed And Stud­ded Leather, We Move On, I wan­na see all of that, I wan­na go back to 1983 and see a Nick Scali store.
[00:27:39] Tony: Those extra threats for your bed should go on the Josh Rogan, expe­ri­ence. Talk about UFOs.
[00:27:44] Cameron: Joe Rogan, not
[00:27:45] Cameron: Josh, Joe
[00:27:47] Tony: Joe, oh God, have you heard all that stuff? Some­one post­ed a meme on Face­book, it said, Here’s a map of UFO sight­ings.
[00:27:55] Tony: It was a map of Amer­i­ca,
[00:27:56] Cameron: Usu­al­ly in the Mid­west, Ida­ho.
[00:27:58] Tony: sight­ing
[00:27:59] Tony: of 1957 in [00:28:00] Rus­sia.
[00:28:00] Tony: All these dweebs came on to pull him apart.
[00:28:03] Cameron: Yeah. For some rea­son, you know, these aliens trav­el light years come to Earth and then always end up speak­ing to some­one with. Five teeth miss­ing in the mid­dle of Ida­ho. At the end of this arti­cle, get­ting back to Nick Scali, what kind of fur­ni­ture do the Scalis have in their Point Piper home?
[00:28:22] Cameron: Accord­ing to Son Antho­ny, they have spe­cial­ly import­ed cus­tom built fur­ni­ture of the Feath­ered Down vari­ety. My taste is quite dif­fer­ent to what we’re sell­ing, he says.
[00:28:32] Tony: So he does­n’t get the fur­ni­ture from his own store.
[00:28:35] Cameron: From his dad’s store.
[00:28:36] Cameron: you know. That’s young Antho­ny. So yeah,
[00:28:39] Tony: And they were already liv­ing in Point Piper in 1983.
[00:28:43] Cameron: 1983. Yeah. Well, 62, they start­ed that. 83, 20 years. Suc­cess­ful lit­tle busi­ness done well.
[00:28:50] Tony: Yeah,
[00:28:51] Cameron: So there you go. Thank you for doing that pulled pork, Tony. Let’s get into Q& A.
[00:28:56] Cameron: Hey, Alex.
[00:28:58] Alex: Hel­lo?
[00:28:58] Cameron: What do you have for us this week, [00:29:00] Alex?
[00:29:01] Alex: There’s a, well, I guess a com­ment from Mar­cus, so I’ll, I’ll read that out. He says, this is a Hail Mary to the group. As some of you know, I’m trav­el­ing in Europe for four months, so have no PC or tools. Very lucky.
[00:29:14] Tony: I could­n’t imag­ine doing that.
[00:29:16] Alex: For four months?
[00:29:17] Tony: Yeah.
[00:29:17] Alex: Real­ly?
[00:29:18] Cameron: Take a Mac­Book Air. I mean, that’s what I would do. But any­way, you do you, Mar­cus.
[00:29:22] Tony: Yeah.
[00:29:22] Alex: So he says, I’ve cashed out of all Stock, bar­ring sub­stan­tial hold­ings in BBN, my for­mer employ­er. The price has rebound­ed sig­nif­i­cant­ly the past cou­ple of weeks slash today with the earn­ings update, i. e. approx­i­mate­ly 40% up over the last few weeks. I’m hold­ing out for the div­i­dend date lat­er this month.
[00:29:42] Alex: Man­age­ment are going through a tran­si­tion with a new CEO in Octo­ber. Cam, can I request TK does a pulled pork once results are released and in Stock Doc­tor, please?
[00:29:50] Cameron: Baby bunting.
[00:29:52] Tony: Yeah,
[00:29:52] Cameron: Dad­dy’s gone a hunt­ing. Is are you going to do that as a pulled pork today, Tony?
[00:29:57] Tony: No, not today because the results aren’t out yet. [00:30:00] So I’m going to fol­low the request and do it. I think it’ll be next week, but it may be the week after. I looked up Baby Bunting’s date of announc­ing their their prof­its. It’s 11th of August, which is only a few days away. So hope­ful­ly it’ll be in stock Doc­tor by next week and I can do a pulled pork then.
[00:30:16] Tony: But I’ve got to say, I hope Jon has­n’t gone yet because… If you look up baby bunting the bret­ta­la­tor, it’s a, it’s a sell.
[00:30:24] Cameron: Real­ly?
[00:30:25] Tony: not sure the results are going to help, but we’ll see.