Member Info for AlwaysInvest

Yes, of course I am bragging about buying 4% lower with some of my buys... haha why wouldn't I wait till it rebounded to say 220-240p? I also clearly state I have bought higher. My average is double digits % higher than current price so not bragging.

I still stand by my it will never go anywhere near 150p stance, so from 190-200p long is the obviously trajectory, this is a cash flowing market leader. You are a braver person than I shorting a company at 200p not far off a single digit FCF multiple with minimal debt.

Famous last words, but feels like bottom may be in, some other retailers whilst mixed we have some strong ones doing ok to decent results, a poor TU already priced in so anything neutral to positive over expectations this will jump to mid 200s.

Glad to have added sub 200p as well as several tranches in 200-215p ranges in recent weeks.

I get the short term bear case. But at these price levels to continue to be bearish seems a poor risk reward. For this to go to say 150p is almost impossible, this would be like a 7 p/e.... I just feel either a bid or a massive buyback or something would come out pror to that.

So where would the bottom be? who knows but the upside in 2025 could easily be 50%+, there will be about 2-3 points where we get some info from CMA investigation, any nuetral or positive news would be a 250p-270p minimum.

Add in some interest rate cuts (2-3, but could be as much as 4 to get us below 4% BOE rate) to boost overall consumer and mean borrowing to buyback a real enticing prospect.

So shorts have done well recently, fair play that is a game I dont play. But from 207p or whatever we are at, its likely a 10-15% ish downside to a 30-70% ish potential upside,

Pets at Home is clearly the market leader and the one others are modelling over. So its arguably Pets at Homes to lose which is normally a good position as the leader.

Also you would probably need to factor in the others shareholder structures which we may not know much about. If outside financiers give money what are the strings? What might that company be giving away? Will they want money back early and any growth then be rug pulled etc etc.

Not saying they wont be better and disrupt Pets at Home, but pets at home for example has and can invest tens of millions a year without giving away any control or IOUs, as long as management are both sensible and competent it can stay first in the pack for many years.

I wouldnt think a buyout could happen competition rules wise, however a bigger threat to Pets at Home would possibly if say 2 smaller competitors were able to merge to compete on scale.

I will ignore the shorts as its not a game I play as not a gambler.

If you are long or thinking of going long, then you really have to ask what has changed in the business since 300p+?

Flat guidance on weaker retail? Well Vets is still growing 15% and spins of cash, you will see plainly Pets has outperformed (business wise) the pet market even on flat retail.

Unless you believe management spent badly on capex (distribution hub, online offering, app, data use etc) then what they said is very accurate, retail environment weak, but they now have in place all the right things that if a bounce or a switch up in consumer spend and confidence then they will outperform.

Even if rev/profit fairly flat or low growth next few years, they will probably churn out:

£80-100m normalised FCF (so 8-10% FCF yield! on todays 1bn mkt cap)

£60m of that will pay out in dividends (would be suprised if they cut but who knows) so 6% yield form today while you wait for pps recovery

Buybacks with the remainder (hopefully).

If I had the ear of management I would actually say even if not enough cash, take incremental £25-50m tranches of debt out (at what 5-6% interest max?) and buyback here for as long as sub 250p certainly but even sub 280p arguably. If pps goes up then no more debt needed and buybacks can reduce, if pps then 300p and above can then divert some cash in paying down the debt or refinance at probably 3-4% in 1-2 years time.

Yep true on insider buys, however with 'corporates' like this I take less signs from buying or lack of, such as Unilever too. But on some more large investor controlled or owner operator types such as HoldCos I do take a lot of guidance from insiders.

I dont come to this site that much, but would I right that most are traders? Across some stocks I own I see most talking about 10-20% moves like its sign of needing to sell etc.

I won't go into detail as most below know the gist but it wasn't a bad set of results considering the market. Now you could sell out and sit the market out, but I havent heard anyone yet saying that in the comments. I know the US market has done way better and may well do, but as I write and even with extra costs and revised guidance we are likely at a 7-8% FCF yield, a 5.4% div yield. low 300p in 5 years time would likely get a 10% CAGR, so I am happily long as I think it will do better than that.

A note on the pets /cost of living thing. Many rightly or wrongly will prioritise pets above most other things, especially vets visits, so unless we believe CMA will decimate PETS vet biz or we decline in VETs side then that is going to provide valuable FCF for many years, covid pets are at peak health now, lots of animals will need some care in next 3-10 years.

Agree with some of what you say Nick, and the market certainly agrees with continued grind down. However I would say Pets is one of the better placed retailers, so the sector may just all do very badly including Pets.

BUT....

Why I like Pets at Home is large part of what they do is something people HAVE to buy, now they can go elsewhere of course, but they have to buy pet food, medicines, and take to vets, even the groomers is a 'must' for many people.

Now with food their own brands (own label and the Wainwrights) offer price points at various levels, I expect they can discount a bit if needs be to win market and these have higher margins.

Their vet business whilst sector has CMA overhang, its very high margin and producing lots of cash.

New app is actually pretty good and getting better, once full in app booking for groom/vets it will be exactly what I have wanted as a consumer.

Logistics hub should hopefully offer some efficiencies too.

So the key questions are:

- Will Pets lose, maintain or grow market share in their key markets/products?

Unless they lose significant share in a short period, they likely provide either good or excellent value from here at mid 270's

- Low debt

- Cash producing (likely about a 7-8% FCF yield)

- 4.5% ish div yield

- Buybacks at low valuations with excess cash

Now its not going to be a 20-30% a year CAGR long term, but a short term 20%+ for 2-3 years not out of questions, and a solid 10%+ for med/long term if they can maintain market share or add the odd new service.

If I was management and they get visibility that no major permanent downturn in cash generation then maintain/slowly increase dividend, with chucking everything else at a buyback sub 320-330p, certainly sub 300p.

Yep its hard to work out the exact sums but worst case I think minimum wage could add on maybe £15m to wage cost annually? And NI change maybe another £5-10m. So I wonder if realistically it is maybe £15m or so total after adjusting for some employees wont be minimum wage and whether actually there are staff reductions prior etc.

Hopefully all their investment in digital will both start to pay off more this year onwards, and perhaps less labour intensive?

Buyback tranche must be about done now, 8m shares since end of Nov with pps range 270-320p broadly so assuming a 300p avg maybe £1m ish left to go.

As they are confident on flat PBT and with the weak FCF in H1 it would suggest H2 would have decent cash generation, whilst dividend will eat a chunk, I hope they keep any dividend increase modest in favour of further buybacks at this level.

There is one, they post everyday at 7am, with details on the buyback from the previous working day. So this morning posted Thursdays. A broad estimate I expect we have another couple of weeks at this increased pace. As with an avg price of say £3 a share we would get down to around 468m shares, right now we are still over 470m buying back about 100-150k a day.

As I mentioned this morning before the results of placement, I though this is a real possibility and that I still think the CEO either tries to take private or sells off some/all the company, presumably to Atari potentially? Although they are not a massive company with endless cash to burn.

I agree Atari on paper is a good bit of news, but if the assets/IP are decent but struggling for cash and at depressed pps, when Atari owns what like 7% or something, and CEO stake may increase depending on takeup, they together could see 50%+ and could vote through a takeover deal at prices not ideal for many Tinybuild shreholders.

I am just making guesses.

Yep, I am neither but I follow the story of it as I did research into it but figured not for me due to cash burn, so my only question would be can management do anything meaningful with this $14m? Hope so for all involved but could be a plaster rather than a cure.

They say $14m no? Which is about £11m at 5p a share is 220m no? Sorry I may need some coffee

Am I right this will essentially add another 220m shares? or has my maths/RNS reading failed me this morning?

Great to see the pps still not far from the 300p level during these buybacks, long term these depressed levels are great for a buyback.

Anyone know what distates the volume with which they buyback each day? Some days of lower share price they seemingly bought back much less then others, I know there are maximum rules like x% of daily volume but those low days were well below the volume limits I expect.

In general this is good news, they are doubling down on the strongest and hopefully most profitable brands, and getting rid of some of the excess or less well performing ones. The key is these disposals will impact revenue, but if we get some cash for them and can deploy the cash in better places then great. Now it will be interesting to see when the cash hits the balance sheet where it might go, capex? other m&a? buyback? debt pay down?

Anyone watching as ROVR taken out by Blackstone, and now Musti by a group. They were also taken out at high valuations compared to Pets. Hope we dont get taken out for something measly like 400-450p...

Comment below about cash reducing significantly, this is true but keep in mind about £75m was paid to reduced the (fairly small) debt pile significantly. Seeing as it’s SONIA+1.5% I believe, this is smart. I would say they should still push on withbuyback as it’s ‘only’ £25m but their guidance suggested still will remain highly cash generative now hiccups largely over.