Q: Peter and His Wonder Team
I have been following this company for years and am wondering if this might be a good time to buy. I trust they will survive the HBC bankruptcy. In other words is this a reasonable contrarian play...your thoughts please. Thanks!
I have been following this company for years and am wondering if this might be a good time to buy. I trust they will survive the HBC bankruptcy. In other words is this a reasonable contrarian play...your thoughts please. Thanks!
5i Research Answer:
We think REI will be able to manage HBC's exit. The valuation is quite low at 9X cash flow, and, all things considered, the units have held up relatively well, down 6% YTD and up 2% in 52 weeks. The distribution was raised in February and payout is a decent 60%. We would not expect much from the sector, considering economic conditions, and minimal growth is expected (consensus). Still, this seems reflected in the valuation, and any good news would likely be quite positive to the stock. We would consider it 'OK', for income, overall. We are just not so sure this is a 'good' time to buy. 'Accumulate' slowly might be a better strategy.