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Value I think you misunderstand the Fitch reference you offer. First Fitch are a credit rating agency and their job is to rate businesses for the credit rating that should be applied to their borrowings, the article you quote which is from DEC 2020 is entirely positive , it raises OCDO's credit rating,(which effectively lowers the interest rate at which they can borrow)and implies they will need no further cash until 2023 and further suggests that the credit markets will be entirely happy to provide that cash .
The articles I attached outline things in more detail
“The 15-minute delivery model requires a fundamentally different operating model and infrastructure to what Ocado has today, so they are quite simply not placed to compete, even if they wanted to,” says Simon Geale, executive VP of supply chain consultancy Proxima.
enough said ... end of
valueplay
I have no doubts that contracts for the new 600 Bots will come - no doubts
Just have to be patient...
I suggest you invest in them -- head over to Deliveroo
" They've raised huge amounts of capital from investors who see the profitable path for the ahead. "
I am sure on a global expansion of that kind of model .....and eventually some consolidation probably ..
Meanwhile..... I will keep my eye on the price drops of those Ocado Convertible Bonds which have fallen during the tech sell off.and Ocado "scare" stories ....and no doubt some dubious parts of the market will want them down as low as possible to scoop them up cheaply ...
Poker,
Ocado cash call mid 2023 is my view, see Fitch article also. Needing more cash is ok but there's a lot of pressure, as costs are currently rising greatly, on obtaining new contracts to show more light at the end of the tunnel.
Those big new contracts may come, we will see in time.
That's your view. I believe them to be a lot more of a threat than just couriers. They've raised huge amounts of capital from investors who see the profitable path for the ahead.
The articles I attached outline things in more detail
"That date could becoming nearer though as Ocado retails EBITDA falls and the retail environment be ones evermore challenging."
How about you put some proper figures down instead of all this blah,blah about how bad everything is
You are hardly being an analyst - here now are you ??
Draw up an excel sheet of figures and show this " becoming near" in more factual terms
Valuplay,
" Trade and other receivables increased by £119.6 million to £324.4 million driven by a growth in prepayments
relating to a number of initiatives relating to the manufacture of capital assets such as advance payments, prepayments for long lead items and a virtual warehouse to hold some assets prior to delivery to CFCs under construction."
Ocado Zoom isnt their main business venture though
Gorilla, Getir, Deliveroo Hop, Ocado Zoom, Globo, Delivery Hero - yes they are all competing .... like couriers
Casapinos,
I see Ocado raising more funding around middle 2023. That date could becoming nearer though as Ocado retails EBITDA falls and the retail environment be ones evermore challenging.
Fitch ratings amongst others also see a cash call from Ocado coming next year..
https://www.fitchratings.com/research/corporate-finance/fitch-affirms-ocado-at-b-outlook-stable-02-12-2020
The consumer is more and more requesting a smaller amount of items to be delivered in a shorter time. This damages the economics of the Ocado model and boosts the ultra fast delivery model.
Let's see how things pan out in the coming months
Poker,
Ocados model is to finance the majority of CFC build costs up front and receive revenue from some up front fees but mostly from fees received as a percentage of the value of the goods that flow through the CFCs. The contracts are not public information but this info is what has been outlined before when contracts have been announced.
Valueplay
ultra fast delivery model is the most expensive with the least number of products to choose from - and are designed to be single deliveries to each customer within about 10 minutes distance - fast food, drinks, milk ... almost like Uber Eats kind of need .. I saw one to a construction site the other day - the guy had FOUR items ..I watched him
- not multiple deliveries for many customers for a must bigger range with a much bigger delivery van !!
How much can you fit on the back of an e-bike or a scooter , exactly ??
Globo kind of stuff -
You have to also take into consideration the deposits received from clients with regards to the builds - which may be included in the £800m spend
" Partners ordering CFCs today will be able to go-live quicker, at lower cost, and achieve higher margins and return on capital"
Walmart announced a " 60% rise in capital expenditure to increase automation and strengthen its supply chain through projects such as massive high-tech distribution centres."
Pokerchips,
Many brokers see the ultra fast delivery model severely eating into Ocados revenues/market share. I'm not saying I fully agree with that but it's a possibility. Below are a few articles with info, there are many more out there:
https://www.proactiveinvestors.co.uk/companies/news/954983/supermarkets-facing-existential-threat-from-ultra-fast-delivery-upstarts-954983.html#amp_tf=From%20%251%24s&aoh=16534931723480&referrer=https%3A%2F%2Fwww.google.com&share=https%3A%2F%2Fwww.proactiveinvestors.co.uk%2Fcompanies%2Fnews%2F954983%2Fsupermarkets-facing-existential-threat-from-ultra-fast-delivery-upstarts-954983.html
https://www.thegrocer.co.uk/online/is-ocados-tim-steiner-right-to-shrug-off-ultra-fast-grocery-delivery/658655.article
We differ in opinion, great, that's what discussion boards are about, best of luck
Value .. I hesitate to disagree with you as I know you are a long-termer here.....BUT I think you seriously underestimate OCDO's cash position, at the last AR they were cash positive (cash assets £1.4bill, liabilities £1.3bill) and their finance costs were £35 mill per annum. even after the recent sharp SP falls the company is valued at 4X liabilities and I have little doubt that if they needed to they could, even in a rising interest rate environment, raise funds at a reasonable rate. I do not expect a cash call on investors in the foreseeable future.
Only last September OCDO issued £500 mill(oversubscribed) notes due 2026 with a coupon of 3.875% and IMO that would be the source , if needed, of further funding.
Valueplay
good luck
too argue that Gorilla or Delivery Hop deliveries on an e-bike are competing with main family Ocado shopping deliveries is ... ...well..
Ocado and MKS wont want such small deliveries .from a van .if they do..they will introduce a similar e-bike /scooter scenario alongside
Gorilla and Hop pick their short deliveries from a small closed warehouse - TINY in comparison
Just in time grocery delivery is a different scenario but it is a method of delivery that the customer is increasingly requesting. I believe you are underestimating their capacity for growth and expansion. As their networks have grown costs have fallen. The economics around costing re just in time delivery is very opaque, just as Ocados contracts and tech costings are.
From Ocados final results:
Total capital expenditure for the Group is expected to be around £800 million driven by accelerating roll out of OSP worldwide
? 30% UK, of which 60% dedicated to the continued roll out of CFC and Zoom sites, inclusive of land, build and MHE cost, given consolidation of the Ocado Retail joint venture
? 50% International, reflecting an additional 8 CFCs to go-live during the year, of a total of 13 CFCs in build internationally at the end of 2021
? 20% Technology investment to support key areas of OSP platform development including additional focus areas such as autonomy
Ocado is burning through cash at a great rate.
True energy and fuel will be hedged but in all likelihood after their current hedging period those costs will remain very high.
" the cost of tech development will still be sky high"
Last year the tech cost was - £107.2 million - manageable when you have cash and cash equivalent of £1.5 BILLION at year end
Even if revenue lost the 7% increase from last year that would still be £2,331.8 million of 2020
Energy costs will have been hedged for the year and partly for 2023 - they aren't paying spot prices for gas and electricity !!
I havent checked but I would imagine delivery charges have increased to match higher petrol prices
The Bot 600 will be lighter , much cheaper and can be installed in present warehouses as the installation grid system is different
I think you are over-doing it on the downside
Valueplay
Can I suggest you review the cost of a Gorilla or Getir delivery .... not to mention the small 1500 product range and delivery area
It is a different scenario !!...
Ocado Orbit , Ocado Flex , OSP Intelligence for OSP Partners using Ocado Flex - using Core API and Smart API
is WAY BEYOND any small local delivery on the back of a scooter !!!
Chilting,
From memory the reimagined tech is available on CFCs that are due to be completed in 2024+. It will be a cost save from then on but it is already public knowledge and the extent of the cost save has been announced in the reimagined presentation etc. The info is already baked into the share price.
Costs until 2024 will remain at a very high rate, a cash raise will be needed before then. The cost of CFC build from 2024 will reduce but the cost of tech development will still be sky high. Current costs will be rising ever further due to wage increases, CFC build extra costs, fuel and utility bills at high rates etc etc
lol Pokerchips
Putin will be dead before that ever happens
Valueplay
An important point - have you taken account of the lower capital spend advantage that reimagined will bring on all Ocado Solutions Partnerships?
It could be that Ocado is much better funded to achieve its financial commitments than any of us imagine.
Sure Pokerchips. However given that Ocado retail sales are continually sliding are overseas grocery partners looking at different internet grocery models which are growing faster? Preferring partnerships/investment in the just in time online grocery delivery model (getir, gorrillas, deliveroo etc) rather than the Ocado model which is focussed on a full basket shop?
Ocado in a very tight spot currently.
"With these downgrades are further international partners being put off joining up with Ocado?"
You do not do any investment in that kind of thing for just a short term thinking..... why would anyone buy Chelsea football club whilst Putin is suggesting blowing up the UK ?
Business thinks beyond the "here and now" .... a lot of business is already planning out the mid 2020s and ready for 2030
You need to get a mindset of 2023 and beyond ....
Today is the second time Ocado retail has downgraded sales forecasts this year. The market will now be thinking will it happen again in the coming months? With these downgrades are further international partners being put off joining up with Ocado?
Good news that the Ocado retail UK expansion plan is rolling out well and that Marks and Spencers remain fully committed.
Lower EBITDA on Ocado retail means less funds for the Ocado solutions arm (Surplus funds are passed from Ocados retail arm to its tech arm to develop that side of the business further). So again the anticipated cash call on shareholders is becoming nearer.
Ocado management are extremely capable and may well be able to pull off a surprise i.e a big new contract, new finance partner etc but for now the outlook is very gloomy.
Best to all