I think you're right, ijr1, when you say 'it will still be a good investment' but it's one to put away in the bottom drawer. That is, it has very long term potential. After DPP's surge in 2015 and 2016, it grew to represent 21% or so of my portfolio in April 2017. It's now fallen to under 5% at a time when there hasn't been new capital added (I'm talking capital values as dividends have been withdrawn). However, my accumulation unit value (yes, I'm a unitisier) has still risen by slightly more than the FTSE All World ($), FTSE 100, FTSE 250 and FTSE All Share since April 2016. Even with this huge hit to DPP's capital value, I have had wonderful performers such as Spirax Sarco Engineering and, more recently, MasterCard, which have pretty much made up for it. (That is, they've managed to keep me ahead of these indexes despite the huge hit from DPP.) I believe in a concentrated portfolio.
EBITDA forecasts have recently been revised from losses of £2.1, £1.5 and £0.8 million in 2019, 2020 and 2021 respectively, to losses of £2, £1.4 and £0.7 million. However, it's group breakeven when it will really start singing and that is now looking like 2022 instead of 2020-21. On an optimistic scenario with the current number of shares in issue and a future estate of 600 stores in Poland, then a market cap of £1 million per store gives us £600 million market cap or a share price of about £2.40. That represents a 30-fold capital return on today's share price but we're talking a generation to get there!
On the basis of 2020 estimates, at 5085p ULVR has a forward free cash flow yield of 5.3% and a forward dividend yield of 3.2%. Not cheap, but not a bubble IMHO.
Bought at 2512p in 2013, so at 5085p the share price is up 102.5% and dividends take the total return to about 128%. I hope for steady, moderate growth continuing!
I don't know, ljr1.
DOM's projected turnover for 2021 is £654 million. The current market cap is 1.9 times that (was 2.7 a year ago). They have free cash flow forecast for 2021 at £82 million and net borrowing of £167 million vs £208 million in 2019, so they could borrow £41 million and restore borrowing to 2019 levels in cash terms (and less relative to growing earnings and cashflows).
DP Poland's projected turnover for 2021 is £20 million. Applying the same ratio as DOM now - which is arguably undervalued (1.9) - would get £38 million. That would be a share price of 15p. Would DPP's shareholders accept that? Or 2.7 gets us to a 22p share price.
There have been setbacks for DPP and particularly considerable equity dilution. However, the current store estate *is* profitable and profits per mature store have exceeded original plans. It is not breaking even at the group level due to investment in expanding the store estate and losses as immature stores create a drag. I see greater upside for DPP as an independent company but that's provided they get to cashflow breakeven in 2022 as planned. If not, the greater resources of DOM might help (or even DPEU or the Australian one).
And Berenberg have put out a £105.40 target price - seems very rich to me even on 2021 estimated EPS! Nonetheless, Spirax has paid a dividend since the mid 1960s and maintained or grown it each year, rising at 11% CAGR: that's a business that will grow into a rich valuation and does not stop me holding.
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 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.
What I hope we will see now is a steady progression to group breakeven. If they can get beyond any further capital raisings (they had said in March 2018 that they saw no need for further equity!!!) then that will remove a key risk with the stock. They gave specific targets recently for store openings and sub-franchising and we should see by 2020-21 if these are being met. If not, the risk is for further capital raisings or takeover at a low price.
I hold a large position, average in the teens, and topped up at 8p.
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.
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.
I wonder if the share price will remain above 50p? I think what we can all expect is for the price to crash when it's free to trade it again.
I had two holdings in different portfolios. I sold one in August 2018 at about 416p. I did not see this coming, but had more general concerns about the retail landscape, consumer spending and overcapacity in the casual dining sector. I feel annoyed I didn't sell the other holding!
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.
The free cashflow yield is about 6.5%, which seems a reasonable level to repurchase shares. The problem is they bought back too many at higher prices! Share buybacks need to be done on the basis of buying back shares below their intrinsic value.