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They had a very good increase in sales in Jan / Feb 2018 when they trailed national TV advertising. When the store estate is big enough to make it viable, I think they will have scope to do something similar and 'put the pedal to the metal'. Let's hope!
I haven't posted here for a while last time at 50 stores. This is a growing company with good potential. The last update was promising and the share price is low. So I have bought today. Not expecting a massive rise, more a slow tick up as this has been oversold. If they deliver on store openings and as more stores mature this will get back to the high teens.
I think there's loads of 'bad news' assumed in the current share price, for sure.
We do need to see progress explicitly measured against the new store opening targets they set out in February 2019; progress on sub-franchising; and continuing revenue growth as the company approaches breakeven. Removing the risk of further equity raises will be a key to a higher market valuation, I think. A new CEO should be advised shortly and it will be good to see what they say, too.
All in all a nice update, it’s taking a little while to perfect the DPP best business formula in Poland admittedly but I think this update is solid. The current share price has a mountain of bad news baked in its doh. I do think we are the bottom and should start to this build up a good repeat business Polish fan club looking ahead.
Peterson, you put forward some reasonably coherent arguments but I would still care to differ.
Christopher Moore might have stumped up 1/2 million but I'm damned sure he could go to any spread-better and buy put options at 7.5p for a tiny fraction of the £100K profit this would secure for him during any lock-in period.
He's taken about as much risk as me stating Man City, Liverpool and Tottenham WON'T be the 3 teams relegated this season.
I also don't really buy that Shaw got the growth rate wrong ... I think store growth was quite acceptable and sustainable for a few more years. I think the market got ahead of itself valuing DPP at 50p and I profited nicely from that rise 10p-20p-40p in quite short period. I felt 40p+ back down to 25p was slightly oversold, this reversion to 10p is wholly unjustified. But now that the BoD have indicated there willingness to shaft the shareholders for their own personal gains, there is no real way of placing a fair value on this company
Scatologist - this placing was structured very simply ... Peter Shaw and his friends got to buy a significant % of the enlarged market cap at well below fair value, small shareholders weren't allowed to participate and got diluted
I’ve done many rights issues and a couple of placings but this one seems a bit different. Can anyone enlighten an old fool how this one is structured. Thanks in advance.
I bought more at 8p and will potentially buy more if the price seems attractive.
However, I think the risk of dilution will only really go away once they're at group level breakeven and able to progress their expansion plans through internally generated cashflows and subfranchising.
Or is 10p just close to the Theoretical ex-rights price? I appreciate this wasn't a Rights Issue but using the blended methodology. So 14.25p * 153m + 6p * 93m = 250m at c. 10p. As I have mentioned in another post 10p (with the money banked) 10p is not an illogical current valuation for the business with all current info on the table. And Mr Market is also reacting to the fact that issue got away, the Broker Option was filled and we now have a cash runway for several years of operations. Personally (and call me super naive) I think the ability of MM's to manipulate is over estimated. For every seller there needs to be a willing buyer accepting the given price. But being an investor here I probably am naive :)
At the end of the day some comfort must be taken from the directors' participation. And here I'm particularly thinking of Christopher Moore. He is obviously a wealthy individual. But at the end of the day no one, however wealthy, invests almost £500K into something they believe is a complete turkey. And before people pile in to say that it's just to ST flip there's no way. 1. The brokers would have insisted on some sort of lock-up and 2. liquidity isn't the best here, so any serious selling would cause the SP to tank hard again. Clearly he believes there is value at this level. That doesn't mean I don't believe that this raise shouldn't have been done as a Rights Issue nor that it shouldn't have been done earlier when the SP was higher to avoid the brutal dilution. In retrospect Peter Shaw was clearly an ostrich with his head in the sand praying for a miracle that never came. And again (with hindsight) the biggest red signal was the lack of franchisee take up in recent years. Charitably this is where the plan fell apart as it ultimately it meant a higher cash flow / investment burn than had been budgeted and a return cap in hand to shareholders. So mis-management has clearly played a part. The unsustainable spend of the aggregators has played a part. The question remains, is the model sustainable outside of the biggest cities? It seems to be unequivocal that based on the EBITDA of the oldest stores / splits that it has worked in the Capital. And sensibly management have signalled they will focus there / big cities. The answer will of course determine whether the business can ultimately even survive or actually thrive. Is the realistic end target 100 stores or 300+ stores. Valuation wise we currently have a business with a mkt cap post placing of c. £25m, so 250m shares times 9.88p. Minus £6m of cash that's an EV of £19m. That values each of our current 64 stores at roughly £300k, so roughly in line with DPEU. As for the future? Well assuming that the new raise is sufficient to get to a profitable estate of 100 stores at £0.1m of EBITDA each. Super, super crudely that would be £10m. Apply a multiple of 10x (below both DOM and DPEU) and you have £100m. So with current NOSH that's 40p. An estate of 150 stores (which was the original target) would be 60p. And so on. I am fully sympathetic and concur with the opprobrium being heaped on management. But with a large long position that I reluctantly added to at 8p I am hoping that they will pull that 50p rabbit out of a hat. And my one of crumb of comfort (and the reason I averaged down) is that we are dealing with a world famous brand, an operating model that has proven itself in both developed and emerging markets, 2 commissaries that can support national store growth, etc, etc. Will it be enough I guess only time will tell...
The shares are 30% above placing which will take forever to clear . MMs pumping to rinse shares through .
I note the 'broker option' has been filled.
Well said
Recently read bill browders book red notice (a scary but brilliant read), stared the scams oligarchs used to rip existing shareholders off including selective rights issues and dilution. However UK should not be a mafia state like Russia.
I will write to the chairman, cfo and their inv rel buffoon clearly stating my displeasure at being ripped off by individuals who have benefitted from their shocking performance.
I assume nothing can be done with the Lse / fca etc
You've raised legitimate issues about the nature of the capital raising.
Looking back, it would have been nice for them to take the opportunity to raise more equity when the price was 50p or more in late 2016/early 2017 or even above 40p through much of 2017/18. They could have raised far more with far less dilution.
Why wasn't this done by way of a rights issue ... because the insiders wanted to screw the small shareholders and the Financial Regulator is a toothless waste of space.
I find it particularly irritating that the scumbag Peter Shaw is allowed to double his personal holding in this insider deal so that he comes out ahead. Even worse is the bigger scumbag Chris Moore CEO of Domino's Pizza UK who has trebled his own holding. Its difficult to tell whether this is a vote of confidence in the company or whether he is simply taking a quick profit ... buy at 6p and flip at a minimum of 8.5p.
There really should be some stock exchange rules against this sort of behaviour.
I'm starting to warm to the Chinese way of dealing with this sort of stuff
.... identify the recalcitrant director and execute him
I bought more at 8p. :-)
I assume part of the size of the discount is because it’s not underwritten, so brokers are demanding a massive one to ensure it gets away. What annoys me is that if you’re doing something of that size and scale then just make it a rights issue, allowing all shareholders to participate pro-rata. Based on last week’s delayed announcement I suspect that CEO / board were hoping to avoid a capital raise and the penny dropped that there was no alternative. Being charitable a placing can be organised much faster than a rights issue. Although with over £1.5m of liquidity there is no immediate need for capital.
Bottom line. Yes. It’s a sh*t show. In a best case scenario this will be the final raise. Assuming it is sufficient to get to 100 restaurants at £0.1m EBITDA equals £10m EBITDA. Applying a 5x multiple gives £50m. With a new NOSH of 150m we have a theoretical future price of c. 30p - one day, ignoring NPV and assuming all stores can be LT profitable.
Personally it’s a harsh lesson. No more pre-profit VC style investments. Call me an optimist but I still believe there is LT value here and there is no point exiting at this point. But it’s basically one to file and forget about for at least 36 months...
'The Placing Price of 6 pence per share represents a discount of approximately 58.2 per cent. to the closing mid-market price of 14.35 pence per Ordinary Share on 6 February 2019'. Ugh. Desperate times or what!!
Well whatever trades are shown at is irrelevant. You just brought into a turd. RNS’s very misleading talking about double digit growth every quarter and paying for Edison to write nice things about them. Truth is they are no where near to breakeven, second Dilution, hugely discounted so PI’s don’t really believe the story. At least the clown behind on this is leaving by mutual agreement. Pizza’s not so popular in Poland and can’t hold market share without costly advertising by their own admission. We got the usual blame the weather thrown in. All rather pathetic I’m afraid BOD members.
Yesterday I bought 1888 DPP shares. It showed as a sell. I was wondering how many other people experience this. I also note next update is March 26th if any one is interested. Seems very quiet on here. I guess everybody is waiting for update. For me this is oversold dyor and good luck!
Odd indeed. The update will now likely be c. 6 February.
No trades at all showing & share price rises 4 +% :/
Hardman's revised revenue estimates for 2018, 2019 and 2020 respectively are down/down/up from (annual % growth) 33 to 24%, 33 to 16% and 28 to 33%. They see revenue in 2020 ending up at £20 million instead of £23.6 million.
On group EBITDA, they now see a deficit of £0.5 million in 2020 instead of a surplus of £0.45 million. This is interesting because they've cut revenue forecasts for that year by about £3.6 million, which might imply that they expect revenue growth to be slower to 2020 but with less of an impact on the bottom line. Perhaps an implication stemming from management's focus switching even more to profitability on the existing estate, rather than revenue growth?
The current market cap is partway between estimates for 2019 and 2020 revenues. However, on revised estimates we see revenue rising from £6 million in 2016 to £20 million in 2020 - it's still growing very quickly in absolute or relative terms.
If I remember rightly, when they trialled some TV advertising earlier this year then the like for like sales spiked 40% or so. That sort of promotion will work best when the store estate is larger and the business has more scale. They are still expecting an increase to 100 stores by the end of 2020. The plan is 145 stores by end 2023.
From what I can see, basically profitability at a group level has been pushed back a year and they think sales growth will be softer in 2019 - but still strong, positive growth in double digits.