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Or too early to tell? 400k bought to 65k sold. Praying this was the nadir.
I've been watching this for a very long time and took my first bite today. Hopefully I can add over the coming days at around this level.
This has come through a crucible of fire as a result is extremely lean with any capital spent in the most efficient and effective ways. Its been way oversold and the turnaround is already into full swing, the market simply hasn't recognised it yet.
The majority of those buys were mine. Nothing fancy I’m afraid, just bed & ISA. Sold roughly the same amount a few days prior.
Think we'll see a fair few B&I trades coming over the course of the next few days/weeks.
The board have taken a pay cut (when does that ever happen?)
Debt increased by rental asset purchases are offset by future rental cash flows and will eventually be sold off
Higher depreciation due to rental assets, goodwill write down and electricity re-charge increased losses by £5.5m on paper only.
Margins improving
No more rental asset purchases which take a while to convert to profit
Buyout still on the table
Bridgedogg
Agree 100%
Personally - success for me lies in agreeing a buy-out by a third party
Refreshing that the board have taken a pay-cut - this is a good business and the leadership team are not only invested financially - i genunely believe they care and beleive in the business
I see no reason why the but-out won't happen - talks have been ongoing for a while now. It would not surpirse me if we wake up to the news at anytime now.
Agree 0%
A loss is a loss
You don’t get points for trying hard but still losing
I prefer to did a little deeper than the headline figures.
A loss is an accounting loss - a historic measure
EBITDA is a better indicator of the underlying performance
Thought I work out the companies EBITDA margin over the past 4 years. Long way to go to get back to the ~10% days.
Year end
5.49% 11/23 (+23%)
4.47% 11/22
8.38% 11/21
9.06% 11/20
I’d have to disagree when it comes to the depreciation of the rental assets.
Used smartphones do depreciate, so those losses to equate to a reduction of capital within the company and are genuine losses unfortunately.
You ok Rob?
EG
I agree but the rental income should be greater than the depreciation (otherwise what’s the point?) so it’s just swapping out for future revenue IMV
@Redh3rring Going back to your post 12 Mar 2024 12:37 about directors options grant. Is your inference that they will want 45p+. Or, that they just don't exercise their options?
I’d say it’s swapping out for past revenue, not future revenue.
They buy an asset. Rent it out for a year. After that year, the rental income hits the P&L, and the depreciation (33%) also hits the P&L at the same time.
As you say, the value of the rental income should exceed the depreciation (or they will be making a loss). But it wouldn’t be in exchange for future revenue. Because as the asset continues to generate revenue (assuming it continues to be rented out), it would also continue to depreciate.
Personally I’m not sure I agree with the 33% depreciation figure. It would be interesting to see the split of models out for rent, but if they are newer models that’s quite ambitious I’d say.
33% is very fair as theyre only renting devices they have purchased. So the depreciation is on the buy price of a second hand device.
Id imagine they have much more accurate figures, but i can only see it being lower than 1/3
33% depreciation is borderline I’d say. It’s very model dependant.
Apple could well depreciate less than this as they tend to hold value well.
Google, oneplus, oppo etc would likely depreciate more than this.
Fold / flip phones have depreciated A LOT more than 33% in the past year.
One of the biggest risk factors in used handsets is price volatility, and I think there’s a danger in using a broad brush calculation of 33% to measure something which is very variable and has a significant impact on the P&L.
Personally I’d prefer to see them focus on getting stock in and shifting it ASAP. So was glad to read that they seem to be focusing less on the rental space based on their EOY report.
This is all managed with a price intelligence file which takes into account historic trends etc. Already mentioned this but all the main trade in houses have their systems pulling on ai and business intelligence. Really it’s the least of concerns as long as assets in field are constantly subject to revaluation on BS. If not, it’s a non cash impact but as rightly pointed out, affects the balance sheet value.
Cash generative is the key here. Park the rest for the minute…the company needs to show cash heading in right direction.
Just as well banking covenants are not linked to market cap!
From what I’ve read in the accounts they aren’t constantly subjecting the assets to constant revaluation. They’re just writing 33% off the value per year.
EG777
I'm not being rude - but if I had to choose between an anecdotal comment on how devices depreciate from you VS trust that the company accountants in conjunction with the auditors are doing the right things I know where my oney would go
You have to rememebre that their stock is not brand new in the first place. Like cars, a new phone will depreciate significantly when unboxed and used; 33% feels reasonable for 1 years worth of normal wear and tear on a device that will already have depreciated from new.
Hi Hedge,
Could you point me to the time I asked you to take my views over the accountants? I missed that bit.
FYI - it’s not anecdotal, you can find the depreciation data on music magpies own website if you care to look. I have also been in the used mobile industry for circa 20 years.
The fact is, the accountants/auditors are using one method for revaluing their balance sheet. I am not questioning this is correct from an accounting perspective. But When it comes to actually realising the values of those assets, if you believe they have all depreciated by exactly 33% each year, I would question if you have any prior experience with the erratic price movements of the secondary used phone market.
EG - I was not trying to be rude as I say. Sorry if he post came across badly. Tbh - it's a bit of a non-story. Believe it or not, accountants do like to keep things simple where they can. It would be crazy to think they would depreciate on a unit by unit basis.
You are correct - it is reasonable easy to gauge the depreciation from the MusicMagpie Website. (33% seems about right)
Two popular examples : (80% if their business will be on iPhone and high end Samsungs)
Samsung S23 (entry level SKU) 128GB 'very good condition'
£440
Samsung S22 (entry Level SKU) 128GB 'good condition'
£290
35% Depreciation (S23 to S22 is 1 year different and I have compared a Very Good condition with a Good condition)
iPhone 14 (entry level SKU) 128GB 'very good condition'
£520
iPhone 13 (entry Level SKU) 128GB 'good condition'
£370
29% Depreciation (iP14 to iP13 is 1 year different and I have compared a Very Good condition with a Good condition)
As Josey says
What we want to see from MMAG is improvement in Cash and EBITDA generation - back to pre pandemic levels.
Their most recent update suggested that the numbers are moving in the right direction
Hi Hedge,
I think 33% is reasonably accurate (some models will hold value better, some worse). The concern for me with the rental market is “Rental income” minus “Depreciation” = “profit”. So the depreciation is quite a critical factor.
It’s why I’m not a big fan of the business model. And completely agree with regards to cash generative sales,
My view is that they should keep it simple, and stick to buying the phones in and shifting them ASAP before depreciation has chance to erode any margins significantly.