Madamswer, Your point about REH's average employed capital being...

Madamswer,

Your point about REH's average employed capital being "immature" is spot on. I am quite confident that in the next few years, the return will gradually go back up.

The chairman made a very interesting comment in one of the AGMs a few years ago. He said that his late father taught them that in this world the best place to invest is in a business (i.e. REH), and the second thing is property. This is why REH has been continuously building up its property portfolio. Not only a property portfolio is a hedge against landlords arbitrarily increasing rents, but it's also a good investment on its own.

As I'm sure you already know, REH's annual report has a section that states the current value of land and buildings.

This table list the current value of land and buildings from 1998 - 2015:
1998: $63.1m
1999:$66.6m
2000: $76.5m
2001: $80.8m
2002: $88.1m
2003: $103.9m
2004: $114.2m
2005: $145.6m
2006: $160.8m
2007: $186.3m
2008: $233.2m
2009: $257.0m
2010: $263.4m
2011: $276.7m
2012: $278.9m
2013: $301.1m
2014: $328.3m
2015: $342.7m

As you already know, this sizable property portfolio has been built up using purely retained earnings, without raising any debt or issuing any shares.

Over the past 17 years, it's been growing at a CAGR of 10.4%.
Over the past 10 years, it's been growing at a CAGR of 8.9%.
Over the past 5 years, it's been growing at CAGR of 5.4%.

I am hoping that the CAGR can go back up to around 7-8%. This way, the property portfolio will double in value in about 10 years time.

Incidentally, in the past 3 months before the result announcement, like yourself, I had been increasing my holdings in REH. The price was not cheap but reasonable for such a quality company. I wish I had been more aggressive in the buying.