The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Genghis, I wasn’t trying to be funny with you the other day, (if it came across like that)
You’ve put some good info on this board and I appreciate it 👍
The problem with jumping in when inflation comes down & interest rates fall is that everyone jumps in then & you pay a premium for the reduced risk. Like saying i'll buy when the covid vaccine is found!
Register- yes but you’re subtracting goodwill from equity for a debt to equity ratio when you shouldn’t be. Il help you out some more
Mars equity- £640m. - minus its debt what are you left with? (Your 100s of millions in the red)
Nex equity- £1380m - minus its debt what are you left with? (Your not in red at all, there’s the difference)
Also be careful with those ASSETS on the balance sheet even leases have to be recognised as assets so they don’t own them all anyway
Everything will rally on rate cuts but cyclicals, beaten down more imo
I have a funny feeling your quick dip with a name change would I be correct register ? 😊
Dont understand this fear of debt and inflation.
The interest payments go up but inflation is eroding the value of the debt. As long as your earnings are inflation adjusted and the debt doesnt increase , i.e.. its historical debt
Inflating away debt is the best way of getting rid of it , till it no longer becomes a burden
PC, this is why I’m specifically looking at underlying assets, which are the collateral to my investment. I don’t see any value in goodwill whatsoever. It all gets written off eventually, cash and property doesn’t.
Having done a bit of research I’m going to hold off all companies with high debt for now, and jump in when inflation starts coming down.
In the meantime, I’ll go mostly into housebuilders, which I think are massively oversold (specifically PSN) considering there’s been no house price crash as was feared. Should be “safe as houses” we shall see.
Registerme
In terms of NEX ..I see it as a company that will improve its performance over the next 2-3 years ...I am not looking at its "worth" as a company at the moment ...overly.......merely focused on what the performance of the ongoing results will achieve ..... and the ROCE, Operating profit, ebitda , earnings , margin etc.....those are what matter to me ....I have no intention of owning NEX so dont have to focus too much on its "worth"
OK it has debt ...but what matters isnt the debt..it is what the debt achieves as a return... and yes ...what the debt costs to finance
I would do the same with MARS ..and if you want ..see which is "achieving" as a result of using assets and money in the business
Goodwill stuff... tends to be adjusted annually ..not so much at half year...so NEX annual isnt for a while...so why focus on the goodwill ..I dont see a H1 adjustment this time ...so...i dont care about the goodwill ...at the moment ...and I doubt the market does....at the moment
"So what’s cheap and what’s not? It’s really hard to tell these days. "
Yeah..and therein lies the rub...
You/we are facing the realisation that we are up against the Investment banker traders , shortersetc....they are the ones who sell it down, bounce it around and ultimately decide when you rise it again .....spend your time figuring them out...and just focus on what you think their next trading update will say ...IMO
If you are looking to buy MARS company then spend time working out its " worth"
If you are looking for say a 20% return on buying their shares, then what it is supposedly worth is of little use ....the markets dont trade on " worth" and " value" ....it is more focused on what the next Trading performance is , and merly on the performance of the BOD in terms of their responsibility with the using the assets etc ...
VOD is worth more that the share price..but the SP is all about pricing the performance of the BOD and what returns they achieve with the assets
Hindy, I always write off goodwill. It can easily be massaged either way. It just represents how much a company has overpaid for something. MARS wrote all its goodwill off in the latest accounts. Nex wrote some off too.
PC, yes sorry I mean priced at 3x more when on the face of it, MARS is worth more in terms of book value and profitability.
The reason I compare with MARS is the SP has suffered for the same reason- debt. I thought it was great value at 50p. It’s now 30p but it will probably get cheaper still. So what’s cheap and what’s not? It’s really hard to tell these days.
Personally, I think both nex and Mars will rally at any hint of interest rate cuts, otherwise I can’t see any reason for them to stop falling.
"and nobody able to tell me why nex is worth 3x more, "
I am finding your posts confusing because you keep using different terms and intermixing terms like price and value ....
Terms like "worth" are so vague really...you need to be more specific ..
Comparing across sectors isnt always a good idea when just taken at an isolated moment....IMO .... money moves in and out of sectors and you can think a company is good and cheap only to not realise the market is flowing out of there until a later time period ...it all is not at all easy trying to compare within different sectors
I would look at MARS and NEX separately....just compare within sectors ...that is what analysts will do...compare peers
Goodwill has nothing to do with equity
Goodwill is recorded as an intangible asset
your subtracting the goodwill from the equity when you shouldn’t be that’s where your going wrong
Give me some numbers Hindy. I’m not sure what you mean.
The equity figures I’ve given are the bottom line on the balance sheet. I.e assets- debt. Nex goodwill is listed in the notes as being £1356m, the total equity being just over that at 1390m so about 34m book value exc goodwill. I just put the Mcap next to it to show how the market values it compared to the book value.
😂 mate I said v it’s debt not it’s market cap
Also goodwill is not recorded as equity it’s recorded as an itangible asset, so you will have to do your sums again
Marstons- 648m equity- no goodwill. £201m Mcap
Nex- £34.5m equity excl goodwill. £687 Mcap
The mind boggles. The chart suggests nex is cheap, the fundamentals suggest it’s overpriced.
Because Marston’s has negative equity v debt
This doesn’t
PC, your comments regarding return on debt. Doesn’t that issue apply here?
Personally I am more interested in book value than profit. I see it as collateral, which also helps for capital raising. Most businesses will have a bad year at some point, so buying based on good income that turns bad will tank the investment, and the business will be more vulnerable to such events without assets backing it up.
Having had my fingers burnt in marstons for its debt, and nobody able to tell me why nex is worth 3x more, I think I’ll pass on this one. Thanks to whoever mentioned housebuilders though, will probably spread across a few of them.
I noticed the former CEO of nex (Dean Finch) when it was doing well is now the PSN CEO.
Pub chains priced on earnings, ROCE,margin, Ebitda, Op profit...usual CPI stuff ...not property values...look at Spoons..
Debt has to provide a targdt return against the debt cost....hence they hate VOD ...which isnt getting enough out of having the debt
I think house prices will dip down more but not crash....sellers negotiate across their chain...so if one loses 5% price then that is tried along the line....to keep market moving..
All relative for movers
I have to re look at house builders...but market seeing writedowns then on over valued book assets and goodwill stuff ...if price now below NAV....looks a red flag trap over something...needs knowledge on it I think
Paddy, are you invested in nex? Interesting that you say Mars debt burden is high when it’s around a billion less than nex, and is property backed.
Re the housebuilders, I can’t see them getting to those levels unless something bombs the whole market, they already look oversold with all the doom in the media, but time will tell I guess.
HBs are aimed at FTB market. That market is almost no existent in the current climate IMO!
Avoiding for now. I can't see any reason atm to buy in. I'm sure TW will test £1 again & PSN i expect to go sub £10. Will buy at those type of levels not before!
Paddy, interesting that you’re avoiding HB’s.
They look very attractive to me considering how much they’ve fallen compared to house prices which haven’t really fallen at all. Some have a NAV lower than the market which is crazy when you consider the NAV is made up of houses and cash.
I've looked @MARS a few times before but stayed clear thus far. It's now getting to a level where i will be looking at taking a position though. Very high debt burden there so quite a risky one but i think probably decent value as they have sustantial freehold assets in their portfolio.
House prices won’t come down, there’s too much demand and unemployment is very low. It will just curb the crazy 10% increases per year. Mortgages have only gone from about 3.5% last year to 4.5% now. It’s nowhere near as bad as the media would have you believe.
Anyway, we digress. What makes people think this is cheap at over 3x the price of marstons? I’m not recommending marstons btw, it appears to be in free fall having fallen another 10% since the director buy last week. Good opportunities eventually but where is the bottom?