The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Cheers Chilting - that was the one aspect of your recent posts that threw me - it simply didn't seem to be rational and in character.
I happen to think that M&S taking over the retail business would work on a number of levels - not least giving a single clear branding linked to a major in the market and removing OCDO from the potential conflict of interest in being both a supplier and a competitor to retailers. Also, the strains between the two are obvious and counterproductive.
Absolutely Chilting - and that will indeed be an essential part of the deal.
But can you please clarify one point - previously you seemed to be agreeing to the notion that OCDO and/or M&S were spreading misinformation in order to mask possible buyout negotiations - was that actually your view, or did I misunderstand?
Fair point graking but do they seem likely to get even 50% of their original ‘due’ from M&S ? And, isn’t OCDO’s retail division - their 50% of the JV - already a well defined entity that can be readily sold off?
M&S will feel that they’ve already stashed away £190m towards purchasing it because of OCDO’s performance failure, which has also lowered the perceived value of it. Back at the outset, M&S was reportedly due to pay Ocado £750m for its 50% stake. At the time ‘M&S shares fell by 12% as investors and analysts raised concerns that the 134-year-old high street retailer had overpaid for access to Ocado’s technology and delivery network.’ That source (Guardian 27/2/2019) went on to say: The plunge in M&S’s share price – the biggest one-day fall since 2016 – wiped more than £550m off the retailer’s market value. Ocado’s shares rose by 3%.’
Since then, the £750m payment has been reduced, possibly to £560m. If you were M&S what is the maximum you’d now offer for a buyout of the remainder? £600m tops? Total paid would then be £1160m - a saving of £340m on the original deal valuation of £1500m, around 22%. Nice work by M&S - somewhat reflected in the respective sp performance of the two outfits over the period since: https://invst.ly/13xddi .
495 would be significant - holding 480 would be a step upward. https://invst.ly/13xa5x
Yes - promising start to the week.
https://invst.ly/13x9m6
Giovianno: I understand the ‘locked-in’ feeling you’ve expressed. OCDO is a volatile sp and it has previously recovered sharply - so selling at a loss represents as much of a risk as continuing to hold. My view this morning is that msuk is likely to be correct about 430 being retested, however the price has been levelling out and I’m no longer convinced that I’ll get an opportunity to buy much cheaper. It could be that all the bad news is now out there. TS’s statement of a legal challenge to M&S rather clumsily completed the task of gradually lowering investor expectations about that final payment IMV, so the total write off of the original £190m should now be baked into the sp and the scene is set for a potential recovery with the retail trading results in a fortnight. ATB.
Hi Neil: No, I’m not Valueplay. However I guess my saying so won’t matter much because you’ll believe what you want to believe. Speaking of conspiracies and misinformation:
You recently discussed the possibility that OCDO and M&S are in negotiations regarding ownership of the Retail JV and said that: ‘OG maybe content with the realised 23m’ [from M&S]’. You and Chilting also seemed to imply that both parties are spreading misinformation to deflect attention from the ongoing negotiations. Is that a fair summary?
Whilst there was a provision for £28m in the FY figures it hasn’t actually been realised (there was a net £23m figure relating to other items). TS told reporters that the £28m estimated valuation of the payment from M&S was "ludicrously low" (source BBC). My understanding is that it represented a further £67m reduction on the previously quoted ‘fair value’ of £95m given in November, which was 50% of the original £190m 'final payment' which was performance dependent. In other words OG's declared expectations have been rapidly reduced by 85% which can now be easily written off without too much further embarrassment. Skilfully managed down, some would say.
I don’t think the misinformation scenario is plausible given the damage to sentiment that such comments can cause. I was quite surprised that Chilting seemed onboard with the idea. However, I think that an M&S buyout of OCDO’s 50% could be a good move for both parties as OCDO would then become a pure supplier to retailers rather than a competitor trying to sell them its technology.
No it isn't good Gioviano, but I'm trying to be less negative (it upsets some of the locals).
Are you still interested in OCDO? I assumed you'd have given up after the third 'February Disappointment' which. it seems, has now become an annual event.
I genuinely think OCDO has potential but it is a pure punt at present- I'm beginning to think that there could be a senior management problem holding it back. I bought back a small tranche at just over 450 this week , although that was actually more than I think it's currently worth . I should have checked the 8ema as per msuk's posts!
Not a bad week really for OCDO, given the fallout from the results and the M&S wrangle, levelling out fairly convincingly just 27p down from last Friday and near 450 https://invst.ly/13whwn (15’ trading view of the week). It’ll obviously have to overcome a longer negative trend in order to stay above 450 next week but hopefully the prospect of a good Retail Trading Statement just before Easter will stop it drifting further down
I’ve found msuk’s thoughts here interesting: particularly as they’ve reminded me that I don’t pay enough attention to the 8 ema - which is a very useful tool to use together with trends. It would certainly have guided me to a better buy back price than I achieved on the spur of the moment during the week.
The longer term view isn’t especially exciting at the moment: https://invst.ly/13wj1r but perhaps the worst is over.
Another jump in price https://invst.ly/13wcop at the same time as yesterday.
Volume data might be out of sync.
Yes - it would be useful to get other views on it.
For me, the 15' view looks fairly straightforward: The levelling out in the 430-450 range continued in the morning but was temporarily influenced by the US news, which indirectly affects OCDO and was positively interpreted by some. Normal play appears to have resumed this morning. However, it may now be less likely to drift below 430 than I previously thought.
https://invst.ly/13w51n . The retail trading update is only a couple of weeks away and that will be a focus of attention.
Here’s the Kroger price move, which was about 8.3%, rebased and overlaid onto OCDO https://invst.ly/13vys-
The fact that OCDO was pulling back from its morning’s rise just as Kroger’s results were being announced suggests that the morning move was unrelated - the sellers at 2pm apparently unaware that the sp was about to receive a positive push from news in the US.
Interesting msuk.
Unfortunately, although the sp nearly hit 472 during the afternoon, the closing price ultimately did fall short of your 8 ema line (blue):
https://invst.ly/13vqdw ,
As you observed, the sp had dropped below 432 initially this morning (as I expected) but then immediately recovered at pace, which seemed a bit odd. The price then fell back at around 2pm but the Kroger story then broke in the US which appears to have pushed the sp back up higher to 472 before it finally fell back - presumably due to profit taking.
It leaves some doubt in my mind about whether the upward push will continue tomorrow.
It is looking good for the close, msuk. There was a healthy kick in volume taking it to 462.
https://invst.ly/13vkmo
Two immediate red trends broken and a potential upward one being estabished.
It seems my sarcastic response to an unsubstantiated post about manipulation of OCDO’s sp might have been taken seriously so I’ll revert to being less daft with this one about the current 15’ trading view: https://invst.ly/13uwvo
The three red trends indicate downward pressure on the highs however the lows have levelled out at around 432 which may indicate a bottom has been reached, although I personally think that’s unlikely.
(Do I really need to spell this schoolboy stuff out?)
So what happens next?
Well, we’re looking for an upward recovery trend that breaks each of the reds in turn OR, alternatively, we see the reds prevail and force the price down through 432 to the next support level. The fact that today saw the highs being squeezed downwards is not encouraging. The daily chart doesn’t look too optimistic either: https://invst.ly/13uxc8 because the price closed lower than yesterday after attempting an upward move to 455 which failed. For those that follow it, the 9,26 EMA is also falling and diverging (indicating a continuing falling average) which isn’t good. I’d like to be more positive but it is what it is.
I did a very small buyback at 450 but wasn’t convinced that that support level would hold. I don’t advocate ‘averaging down’ - it’s a mug’s game as each tranche either makes an eventual profit or is sold at a loss - so I won’t be buying more at the current level.
In the absence of any significant news, my guess is a continued drift down, in which case the Retail Trading Statement on 26th March and the M&S results in May could be the next significant influences.
I think cureboy could be onto something, stupmy. After all, he sussed me out:
As he recently said: I’m always negative (Yep - when OCDO is on a downward slope I can’t bring myself to say it’s going up)
And he said I have an ‘agenda’ (which is absolutely true because I want to make a profit rather than a loss on my shares).
He’s a smart guy (There- I said something positive for once!)
He doesn’t just spout conspiracy stuff but thinks things through.
At first I thought that an immediate rise followed by a fall on results day was because the market initially saw the good news then, after digesting the detail, it spotted the flaws - but that's just too obvious isn’t it? I reckon cureboy could be spot on about this price manipulation.
Chilting:
By saying ‘the speculation about a disagreement is just misinformation.’ are you seriously suggesting that the recent press reports are based on deliberately sown misinformation and that TS’s statement regarding legal action was intended to lend credibility? I’d find that hard to believe - especially as his remarks would have been unnecessarily OTT given that they probably aggravated this week’s drop in sp.
And where does Neilhumpheys get ‘OG maybe content with the realised 23m’ from? There’s a provision for £28m in the FY figures but it hasn’t been realised. TS told reporters that the £28m estimated valuation of the payment from M&S was "ludicrously low" (source BBC). I believe that was a further £67m reduction on the previously released IFRS 13 fair value (the original amount due had been £190m)
The notion that M&S might acquire 100% of the JV may not be unrealistic and may well be a good move (I happen to think it would be) but I don’t think a 'misinformation to cover talks' scenario is credible. Have I misunderstood?