Kathmandu IPO: A tough Mountain to Climb

Buy a good company for top dollar a few years back, load it up with debt and try to flog it off in an IPO when the market the company operates in is crashing faster than a cheap hooker can get her knickers off, is your next thought where can I sign up?

There has been talk about an IPO for the outdoor retail chain Kathmandu over the last few days and various figures have been thrown around, including one reported in Stuff.co.nz from the Australian Financial Review (where this rumour was first reported) that puts the asking price at between $NZ 500-600 million dollars.

Considering that the company was sold off by founder Jan Cameron and other partners in 2006 for just over $NZ $500 million at the peak of its then earning power, in a retail market that was on fire, the rumoured asking price is way over the top especially when one considers these key points:

1. The dire condition of retail worldwide

2. Debt levels of $187 million VS assets of $331 million to July 2008

3. Profit down from $13.7 million to just under $9 million to July 2008

4. Interest costs for the year to July were $20.9 million, up from $18.2 million the year before.

5. A retail scene that is unlikely to recover soon.

These figures are a full year old and come before the massive decline in retail worldwide so we could assume that the company is now on the bones of its arse profit wise, with even more debt and almost twice the overheads the company had back in 2006 because store numbers have almost doubled.

One big drawback is that the company possibly selling Kathmandu, Goldman Sachs and Quadrant Private Equity, is missing one vital key to the retailer's success, Jan Cameron herself.

Jan got out of her company at the right time, for a great price and has used the proceeds of that sale to buy beaten down retail stocks like Pumpkin Patch Ltd [PPL.NZ], Postie Plus Group [PPG.NZ] and kick off a number of brand new start up retailers like her Nood Homewares business and Dog's Breakfast.

A good exit by Jan, and a bad possible re-entry by Kathmandu.

To be avoided.

Disclosure: I own PPG, PPL shares


Related Share Investor Reading

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Kathmandu @ Share Investor

Kathmandu IPO: What is it worth?
Kathmandu IPO: Retail Interest High
Kathmandu IPO: A tough mountain to climb
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Bryce the Banker: The Final Insult

Every good story deserves at least a trilogy, 1 2 3 and others limp on for a forth far less satisfying installment that is disappointing when compared to the original blockbuster.

This has been the case with Bryce the banker, my own personal banker at ASB Bank in Albany.

This time I called Bruce about a small loan of about $25,000.00 that I wanted to pay off early.

Easy right?

Well no it wasn't.

The upshot is that I will be charged around 500 bucks for the privilege of paying off my loan 2.5 years early.

So what is my beef this time you ask?

Well, when re-negotiating this loan almost 3 years ago I asked some specific questions and got some specific answers from those questions.

My questions were:

1. will I be able to pay off lump sums easily without incurring penalties?

2. can I pay the loan off early without getting slam-dunked with a fee?

Not a problem was the answer to both these questions.

Well apparently it is a problem now and Bryce quite chirpily pointed out that the fees and charges were in my loan document that I signed, and he is right, they are.

But Bryce I asked the pertinent questions, was answered in the affirmative, so trusted the personal banker at the time (not Bryce) that I was getting the deal I thought I was.

But Chief you should have read the fine print in the contract said Bryce.

I know, but your representative at the time told me...you get the fast revolving point and I have had all my business with you for nearly 20 years... wheres the LOVE where is the LOYALTY Bryce!

But the contract Chief, the contract ! - say it in your head with the voice of a very small Mexican with a lisp wearing a white suit and smoking a big cigar.

My point is, regardless of the contract, I was told verbally in the main points of the loan, that no costs would be incurred by me for being a diligent wee boy and paying off my loan early and I went on my merry way with my lovely loan.

Also I have paid off two large lump sums of $10,000 in the past and incurred no fees or charges.

To cut this forth installment short I am taking my bank to the banking ombudsman and the small claims court for breaking the Fair Trading Act - mis-representing a good or service for sale.

The main point of this rather disappointing sequel?

If you have a problem at your bank, don't roll over and ask to be taken from the rear, get on top and try to screw the scrum straight, you will at least feel better and you might even get a positive outcome. You can guarantee if you don't pin them to the wall they will continue to get your pants around your ankles at every opportunity.

Bryce is no longer my personal banker, I fired him for calling me Chief way too many times - once is enough, can you believe that?- and now the manager of Albany Branch is handling my accounts.

I am also looking for another bank.


Banking @ Share Investor

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Discuss this topic @ Share Investor Forum



c Share Investor 2009

Live streaming of Michael Jackson Memorial

This is the live streaming of Michael Jackson's memorial held at the Staples Center in Los Angeles.

Rest in peace Mikey.

c Political Animal 2009

Stock of the Week: Auckland International Airport

This Stock of the Week is a culmination of a number of additions to a stock in my portfolio that started from an original purchase of 1000 in 2006.

Auckland International Airport [AIA.NZ] makes up a bigger part of my portfolio this week as I almost doubled my holding to 5000 shares when I bought 2000 yesterday, at the 52 week low no less -that wont last, my purchases always dip after I buy in.

The share price closed at $1.53 today, close to the 52 week low of $1.51, still a bargain in my humble opinion and that is the main reason I picked it this week.

The share price reached a high above $3.60 less than 2 years ago and at less than half that price now it has a gross return of over 8% on offering, good considering returns on any other asset class these days.

The company is doing OK during the economic downturn, with a relatively stagnant profit and will perform to expectations once the economy recovers.

I like the company and bought more because of its monopoly status and the fact that several parties have taken large stakes in the prospect that the new National Government will be more relaxed to foreign ownership.

The Auckland Supercity's arrival in less than 2 years also puts the question of council ownership of airport shares up for grabs.

Above all the company is a good long term prospect for profit and therefore an increase in stock price.

Good luck!

Stock of the Week Series

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