August 12, 2014

Billabong And Surfstitch Making Moves

Over the last two weeks, there’s started to be some interesting rumblings on the Gold Coast about Surfstitch. The reports in Rag Trader and Motley Fool suggest that Surfstitch management have been meeting with fund managers to look at buying Billabong out of their 51% of the business in order to publicly list the business. The deal would potentially be worth around $150 million to Billabong, who are also reassessing their involvement in U.S. based online retailer, Swell.

Currently their net debt stands at $175 million so a sale of these two entities would leave them looking likely to be debt free in the near future. Their most recent half year reported a $126 million loss but it was mostly one off charges which when removed, actually left a small profit. Have we seen Billabong’s low point?

If the share price is an indicator, it would suggest we have. Although unsteady, the trend on the shares is up from early May when they hit a low of about $0.42. They now sit at $0.55 – a long, long (LONG) way from their peak but from an investor point of view, as the Motley Fool article points out, “ much of the best gains can be achieved in the early stages of a turnaround – it’s a high risk/high (potential) reward proposition.

by Dave