Monnari Trade SA : a cheap Polish apparel company with hidden assets
Monnari Trade designs women’s apparel (including footwear) and sells it under its own brand (Monnari) through its own retail network. It also sells haberdasheries. Contractors produce the company’s apparel, in China and other Asian countries. Allmost all revenue comes from Poland.
The company operates 178 self-owned shops. Furthermore it sells through 20 franchised shops and 12 Femestage shops. The company also sells its products as a wholesaler, through its online store and through other online channels. The focus is on retail and therefore the wholesale segment is small.
The market cap is about 140 million PLN at 5.6 PN per share. The stock is cheap based on EV/EBIT and EV/Revenue. The stock also trades much below book value.
Multi-year metrics and a high value of Gross Profit/Total assets suggest good earnings quality. Moreover, the balance sheet is strong with low leverage, a high current ratio, lots of cash and no significant debts. Furthermore the Piotroski score is high.
Substantial shareholders: the CEO Miroslaw Misztal (with affiliates) 43.7%, FAIR Sp. z o.o. 10.0% (about 15% of the votes). The percentages are based on the share count net of treasury shares, which is 25.38 million shares.
Related party transactions: in the first half of 2024 the CEO earned 300k PLN. According to the annual report he earned 653 PLN in 2022. Furthermore the company paid 1.3 million PLN of rent to related parties in the first half of 2024 and also in 2023.
The company does not pay a dividend. From 2016 until and including 2020 this company has paid out to shareholders, mainly through share repurchases. Also in 2022 and 2023 the company has repurchased shares but total spendings on repurchases in 2022 and 2023 were not significant.
Also in 2024 the company repurchased shares. The company stopped repurchasing shares at the end of October 2024. The repurchases until 30 June 2024 were not significant but together with repurchases in July, August, September and October total repurchases in 2024 could be significant. The number of shares repurchased recently can be checked from public disclosure here. I have not done that because it is time consuming.
Part of the assets is property. If we take for liquidation value the current assets plus the book value of the property minus the book value of the liabilities then Liquidation Value/Market cap is almost 1.5. So, this is also a net-net like stock.
Fellow substack writer hiddenzlotys also wrote on Monnari Trade in March 2024, in more detail than me. After reading his post I suspect the property is worth more than book value.
From hiddenzlotys’ post I think Monnari’s stake in the original book value of the land would be about 8 million PLN. The rest of the about 70 million PLN of book value on Monnari’s balance sheet is finished buildings or almost finished buildings. Slightly more than half of the land was sold for 85 million PLN in 2022. Monnari’s 70% stake in it was worth about 60 million PLN.
I do not think the book value of the remaining land was adjusted after this land transaction. So, I think book value of the property is almost certainly much below market value. Therefore, I estimate the market value of the property at 110 million PLN. I think this is conservative. In that case Liquidation Value/Market cap is equal to 1.8.
It makes sense to repurchase shares instead of paying a dividend when the stock is undervalued and certainly when the stock trades much below liquidation value. But with such a small stock repurchasing shares might be difficult because of low trading liquidity.
My take: extremely cheap Polish apparel microcap based on EV/EBIT. I think it is also cheap based on Liquidation Value/Market cap because of substantial hidden value in its property holdings.
Strong balance sheet. Multi-year metrics suggest good earnings quality. I have not found any governance issues. I think this company is shareholder friendly.
I also like the substantial buying by the CEO, mentioned in hiddenzlotys’ post. I think this a good stock for a small position.
Disclosure: long Monnari Trade SA.