The cherry picking has started! Kathmandu Holdings Ltd (ASX: KMD) was the first cab off the rank on Tuesday when the embattled outdoor retail group confirmed it has received a takeover offer from fellow New Zealand-based retailer, Briscoe Group. The offer is a very clever one in my opinion, as it comes at a time when Kathmandu's earnings appear to have bottomed and the shares represent good value.
The problem is that it could actually be a frustrating development for the company's long-term shareholders as it's been a surprisingly terrible investment since listing in November 2009 at $1.70. The shares reached a peak of $3.85 in early 2014 but climbed back down the sizeable hill to trade at around $1.11 before the takeover offer.
At today's price of $1.51, shareholder are still in the red after six years!
The Next Takeover Target
People look for potential takeover targets in the hope that the shares will rocket higher upon receipt of an offer. This was certainly the case for Kathmandu as the share price surged 25% from $1.26 to $1.55 on the day.
Luckily for investors speculating on the next takeover target, there are a few quality options left in the retail space; Myer Holdings Ltd (ASX: MYR) is trading at its 52-week low and is among the most shorted stocks on the ASX, with around 20% of all shares sold short recently. Earnings are expected to continue falling over the next couple of years but if the management team can stabilise earnings a potential suitor could be very interested in its 10% yield!
OrotonGroup Limited (ASX: ORL) has also had a rough time of late. The share price is down 52% over the last 12 months following a slower-than-expected recovery after the company lost the agreement to distribute Polo clothing in Australia. It's now taken on the GAP and Brooks Brothers men's fashion brands but results have been below par. The full-year result is going to be extremely important and investors will look for an improvement on the $1 million trading loss recorded in the first half. Importantly though, Oroton also has a strong brand, like Kathmandu.
Other options include Billabong International Limited (ASX: BBG), Pacific Brands Limited (ASX: PBG) and even Metcash Limited (ASX: MTS).
