Little Reason To Be Positive On Just Group

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            [0] => ((JST))
            [1] => ((PMV))
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            [0] => JST
            [1] => PMV
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This story features PREMIER INVESTMENTS LIMITED.
For more info SHARE ANALYSIS: PMV
The company is included in ASX200, ASX300 and ALL-ORDS

By Chris Shaw

In a move surprising no-one in the market Just Group ((JST)) has rejected the advances of Solomon Lew’s Premier Investments ((PMV)), citing an independent expert’s report valuing the company at between $4.78 and $5.28 per share as evidence the cash and scrip offer from Premier valuing the company at around $4.05 was not attractive enough to put to shareholders.

According to Austock Securities the fact Premier needs Just Group more than the other way around means there remains scope for an improved bid, estimating an increase in the offer of something in the order of 15-30c would be enough to get the two sides talking as the current bid is widely seen as opportunistic.

While taking the view the independent expert’s valuation appears a little too high the broker notes Just management has indicated gross margins in the current half have improved and discounting activity is in line with expectations, which suggests the company is travelling ok given what are tougher conditions in the retail sector.

On this basis the broker suggests those investors who believe a revised bid is likely could look to buy the stock at prices below $4.00 per share, while those more inclined to base their decision on a valuation on the stock should look to get set at around the $3.70 mark as this level implies a FY09 multiple of around 10x earnings.

Others to cover the stock are not as agressive, the FNArena database showing six Holds and a single Buy, Citi being the most positive on the expectation of solid earnings growth in coming years and the benefits of favourable foreign exchange movements.

ABN Amro sums up the view of those rating the stock as a Hold by pointing out in the current environment earnings growth will be difficult to achieve, while earnings appear to be tough to forecast in the current market given the independent expert’s report did not even attempt to offer any guidance for earnings for FY09.

Macquarie makes the point there may be little benefit for shareholders in accepting Premier’s offer as shareholders would then be in a far less liquid stock, so it sees no reason to shift from its Neutral rating.

Citi’s Buy rating is matched by a price target on the stock of $4.80, which is the highest in the FNArena database and compares to an average price target on the stock of $4.41.

Shares in Just Group today are little changed and as at 12.50pm the stock was 1c lower at $3.89.

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