Member Info for bobbyaxelrod

Been a long wait...

On a side note, I ate there today. Menu has been expanded with some good new options (I tried one which was very nice). Food was tasty as per usual and service was very good. Staff generally always seem to be pleased to be working there. On the business, I have no idea whether this was a wise or unwise investment decision, only time will tell. Worth 6m with over 9m cash at last count - do we think cash has been burnt down? They are generally cash flow positive (most of losses during previous years seem to have new restaurant openings and set ups as a big factor, which are then adjusted out in the aEBITDA).

https://www.cityindex.co.uk/market-analysis/where-next-for-the-asos-share-price-ahead-of-h1-earnings/

www.retailgazette.co.uk/blog/2022/04/sofa-workshop-falls-into-administration-with-77-jobs-at-risk/

Did anyone attend the ShareSoc presentation yesterday? Any news from it?

Are we able to watch the presentation and questions still? I've had no luck finding a link

Promising noises from Tasty and Everyman too. Consumer spend in Feb shows a rise in eating out spend.

Can anyone explain the pace of "transaction in own shares" recently?

Am I right in saying that these are not buybacks (i.e. the shares are not being cancelled)? Are they for employee benefit/bonuses?

So the dividend still works out to about 7% (not taking into account the buyback) plus 10% for the buyback, not bad. Would mean return of all your money within 4 years - not bad for a continuing non-palliative business.

I would also add that the buyback DFS announced of 25m with a market cap >500m is less than half of that announced by SCS (7m with market cap <70m). The main concern is the net loss, but also the fact that SCS sales dropped 16% versus DFS drop of 2%, suggesting they are losing market share. Once I go through the results I will have a better idea of their strategy to grow/at least maintain market share but it is hard to see how they do this (I don't think online is the answer, perhaps making a "Sofology" equivalent, flooring is good especially with 20% off carpets with any sofa purchase). With weakening UK consumer spending/sentiment expected later this week, it is uncertain that the share price will rise significantly in the short term.

The fact remains that the cash not only reflects a healthy balance sheet but is indicative of future orders (of which only the deposit has been received). I haven't yet read through the results in detail. A £7m buyback with a market cap of less than £70m is positive (surely this equivalent to a 10% yield) alongside an increased dividend (hopefully suggesting the final dividend will also be increased). The recent big director buy was at a level higher than this.

Did anyone attend the management talk?

https://masterinvestor.co.uk/podcast-master-investors/?mc_cid=90ab45b2c7&mc_eid=edd8ee24e7

The most recent podcast on there is from Northcoders

I have added here and there, but I am also wary because the share has not performed. I think this is mainly due to poor liquidity (generally within small caps and specifically for this share due to small free float) and low volumes, as well as absent communication from the company. However, all noises appear to be positive, it just depends on how their trading financials look. I do wish there was a plan for the director to reduce his share holding without crashing the price or dilution.

The small free float works both ways. I think based on pre-covid financials this should be worth multiples of current levels.

Managed to pick more up at the recent lows a couple of days ago, been a good couple of days since with big rises. Crazy value here. The business is well run, with lots of positive characteristics.

Anecdotally, I went sofa shopping over the weekend and went to SCS. They have a good selection but I didn't find their showroom as nice as DFS or Sofology. The DFS sales assistant explained the existence of Sofology in terms DFS having to avoid being too much of a sofa monopoly.

One thing I found interesting was the SCS offer of "20% off carpets when you a buy a sofa". I think this is smart, given the amount of new homes being built (which often people don't want to pay extortionate amounts for "upgrades" by which they mean basic necessities). SCS also had longer waits for sofas (around 21 weeks for what seemed like most sofas, compared to DFS of 7 weeks), but SCS does have a high amount of UK based manufacturing. The sales assistant explained the reason for this wait being due to being consistently outbid for container shipping - suggesting SCS haven't been willing to pay high amounts (thus eroding their margins) and have instead opted for longer lead times. I don't know if these longer lead times create an inflated order book number (as these orders are remaining as "orders" and simply building up and not being fulfilled).

Buybacks and dividends are key here. But, even if no share price growth, the dividends are comparable to a tobacco stock without the perceived sector decline.

The worst thing would be an unwise acquisition.

https://travelweekly.co.uk/news/air/new-shops-bars-and-restaurants-to-open-at-stansted

Nice to see another Bobby Axelrod!

I think I may have talked myself into adding tomorrow now!
Good luck

Hi flyer2020,
I agree ASOS is stronger than airlines. I also think ASOS is a better position than most, and is currently my own largest position. I think that ASOS may have some struggle absorbing increased costs due to a combination of low margin and reverse supply chain logistics costs (I read somewhere the cost per refund is around £2.50). I am surprised there has not been more positive share price movement since the last update, but we are facing a general multiple contraction for most shares - so while ASOS appears undervalued historically, this is largely due to multiple contraction, and it is unclear whether multiple expansion will return, in which case we are looking for profit/earnings growth (set to be constrained by large CAPEX over next few years).

I think the long term view is still bullish: young demographic continues to progress as ever larger spending ASOS customers (although I think doubling down on being the "go to destination for twenty somethings" is focussed but eliminates many customers - for example, Next online saw largest sales growth in their youngest teens/20s and oldest >65s groups). However, these customers are likely to stay customers and expand their spending overtime. They also have their "prime" service which is great. ASOS revenues, cash position etc all strong. Move to main market positive. Awaiting announcement of CEO which could be well received.

Rather than bricks & motor (which would be good, as I like NEXT for their online and logistics set up - for example, they can have staff in stores start the "return process" reducing reverse logistics costs), I would rather see ASOS retain focus on its core ASOS offering, whilst building (not necessarily continue buying) brands, maybe investing by taking equity positions in 10-20 brands per year internally and using their platform to test for success. I like their move into 3rd part fulfillment, especially as a way of retaining brands (who may be disincentivised to strengthen their own direct to consumer offerings) which as a I understand it removes inventory risk and probably represents a better use of their operational leverage.

With AI (ASOS working with google and this is noticeable when searching the website and being given suggestions), automation in warehousing and deliver (e.g. drones), perhaps ASOS will benefit from many inflection points over time.

I was tempted to top up today, but holding off for now. Asos is completely undervalued, but there is some risk they mis-execute (lower profit than forecast, higher CAPEX etc). But that's not the main reason for holding off - I think the overriding narrative is the "cost of living squeeze" playing out at the minute due to inflation, energy prices and so on. Looking at other fashion retailers (and other consumer stocks generally) including inditex, zalando, nike, boohoo etc, it can be seen they've all had bad falls, with some holding up better than others. I think this share price action is due to the macro picture of consumer confidence and pockets.

The question is, what would it take for this narrative to change? A few suggestions:
(1) Inflation seen to be coming down
(2) Energy prices coming down
(3) Wages rises
(4) Employment improving further/remaining high

Could there be some selling due to people not wanting to deal with loss of inheritance tax relief caused by a move to the main market?

Hope the following is useful.

The IFRS accounting with the leases and right-of-use assets makes their balance sheet much worse, but yes they have implied their position when negotiating with landlords is strong, and said they have renegotiated a lot of leases onto lower rents/turnover based rents and exited other leases. I think when you excluded the lease related items their balance sheet is not in bad shape. Looking at their market cap of 6.75m: at the last interims 9.1m cash (with a 2.7m increase in payables) and 7.4m PPE against 3m in borrowings.

I would be interested in them expanding via franchises too, although we do not know the exact terms of these, I'd imagine the cost control side of things is more efficiently managed by an appropriately motivated franchisee. Comptoir Group already have a centralised facility from which to service their franchises. This solves the structural problem with the restaurant industry of costs rising (e.g. staffing) when times are good, then subsequently being too high when times are bad.

For the 5 years 2016-2020 they had an average adjusted EBITDA of £3m per year. I usually don't like seeing "aEBITDA", but I think their definition of it is somewhat fair, and closely matches their operating cash flows. Even a 10x multiple assuming no growth would give a market cap of £30m, or nearly 5x today.

For some perspective on the possible growth:
Nandos 450 restaurants in the UK, Toby Carvery 150, Miller & Carter >100, Bill’s 78, TGI Fridays 80, Wagamama 149, Slug and Lettuce 70, Harvester 220, Zizzi 130, Prezzo 207. Nandos makes a £40m loss on £1bn revenue. Wagamama bought for £560m; they have 6x the number of Comptoir Group restaurants, 560/6=£93m, then you can further discount the £93m to allow for stronger Wagamama brand and you still end up way north of £6.75m current market cap. There is around 160 total Lebanese restaurants in the UK at present.

Also, the Kaye family is behind Prezzo, Ask and Zizzi and invested £4.7m in the Comptoir Group IPO (around 10% of company). Jonathan Kaye was founder and CEO of Prezzo and listed in 2002 at a market cap of £9.1m, later selling to PG capital in 2015 for £304m. He grew Prezzo 13 year period to over 207 restaurants (also included Chimichanga 39 units).

So, I think much of the poor performance is related to the poor liquidity (the shares are very tightly held with a small free float). I think the directors hold too much. For example in the last week there have been 6 days with almost no trade as far as I can see. Hopefully the poor liquidity works both ways and this ends up flying. The other restaurants like Restaurant Group, Fulham Sore, etc, have not performed as badly as Comptoir Group.

Most importantly, the food, general offering, atmosphere and culture in Comptoir is excellent.