Member Info for Boyobach

Who is your money on?

https://www.cityam.com/legal-trouble-brewing-between-ocado-and-mamps-what-might-this-tiff-deliver/

Regarding Wisdom’s opinion that ‘m & s is nothing without ocado’, this is from MKS first half results in November:

MKS: Profit before tax and adjusting items up 17.2% at £407.8m

MKS share of Ocado Retail JV adjusted loss £16.0m

The 2019 JV agreement included a specific binary target relating to the now disputed final payment. Given the binary nature of that target, it strikes me that OCDO senior management should not have agreed to a binary target without properly defined conditions/limitations. They should have kept their eyes firmly on the ball regarding any unexpected changes or technicalities that could lead to a failure to achieve the target and acted accordingly in a timely manner. MKS were smart - OCDO were not.

MKS sp v OCDO since March 2019: https://invst.ly/19kqcw

Is the C Odey story relevant to the OCDO sp? Interesting to note that shorts have increased since the FY results.

Fair point by Qantas, quoting the FY statement saying 'Strong FY24 results in line with guidance...' but it does rather back up my last observation that merely following guidance is not enough . OCDO needs to be doing better in terms of growth.

I don’t disagree, Valueplay.

Even as I was writing it in my last post, it occurred to me that it is rather naive to say that ‘Future performance - as per guidance - is baked into today's price’.

As we learned from the sharp dive after the FY results (which contained no surprises), OCDO’s sp contains baked-in market expectations. So merely following guidance is not enough if those market expectations are not met. Currently OCDO tech is stagnant - not showing signs of growth.

I agree, Chilting.

Unfortunately I have a feeling of deja-vu similar to my days with CWR! Are you still interested in that one?

Quite different industries but the prospects always remained elusive and the sp was based too much on anticipation rather than fundamentals. A fickle situation.

Swingman: I'm attempting to filter out the noise (of which there is a lot) and establish the new normalised range following the FY results or detect if it drifts. Over the last year OCDO has typically followed a flat path with peaks and troughs outside of range - as per the crazy swing down to 280 and immediately up to 450 in June/July last year, after which the price returned to the 'normal' flat range for that period. Over the last twelve months we've seen a distinct set of steps centred roughly on 350 then 310 and now, possibly, 240. It doesn't take a genius to see that they are getting steeper - especially in percentage terms. Future performance - as per guidance - is baked in to today's price. So with retail performance established, any recovery to last year's sp level utterly depends on some positive news on the technology side. OCDO remains a pure punt and its performance over the last year alone as a long investment has frankly been dire. https://invst.ly/19k7tk

This week’s return to the low of 226 has shown that the sharp fall and bounce after the FY statement was more than a brief overshoot. So, just a week into the process of trying to establish a fair estimate of OCDO’s trading range for the next three months, my anticipated baseline shifts down to 220, and the range top gets lowered to 260. This gives a spread of 40p which matches last year's Q4 and Q2-Q3 ranges (ignoring the short-lived departures) as shown here: https://invst.ly/19jn0s

Apart from further drift downwards, it’s not a huge challenge for the sp as it won’t come into contact with the main long-term negative trend until July but, of course, the MKS results in May could have an impact along with any other news during the period.

So 226 has potentially become more significant than a mere overshoot on the 4th March: https://invst.ly/19i3k7

Will it become the support level that withstands further downward drift as the FTSE continues to slide?

I broadly agree Sheltie. However, with OCDO, I generally prefer to buy when I can see suitable positive indicators - ie after the bottom. I'm not so sure we'll see last year's recovery patterns repeat this year and continuous downward drift seems a possibility, which is obviously not attractive.

240 was obviously an ‘interesting’ level yesterday as a potential ‘up or down’ decision point. Today we got the answer to that, with OCDO continuing down despite the FTSE250 recovering slightly: https://invst.ly/19h2n-

What will happen at 226?

Meanwhile, shorts have been increasing this month and are nearly back to January’s level of 5.84%: https://shorttracker.co.uk/company/GB00B3MBS747/

An interesting test of the 240 line today, given that the FTSE250mc is down around 1% since OCDO’s overshoot took the sp down to 226 post the FY statement: https://invst.ly/19gb8f . It has therefore not drifted down as far as might have been expected as trump’s choppy waters rock many boats globally. Interesting times.

Thanks Qantas & swingman: : I guess those are centre values for the range you're expecting. 350 was recently achievable but now seems quite optimistic to me unless there's some news to push the sp upwards. 836 is very precise too, Qantas - not just a random number? I'm not surprised that others didn't venture to put any actual numbers behind their expectations. Let's see how it plays out.

Ok guys and gals, here’s an entertaining 'just for fun' puzzle for all on this board - whether you are Qantas, Valueplay, Grim, Solid or a chart nerd.

This chart shows OCDO’s daily tick history since last April: https://invst.ly/19e5me

Orange lines mark out the main trading ranges. It’s been volatile but was mostly level centred near 365 for around six months till November before collapsing to a lower range centred near 310 for the last three months leading up to the FY results but then dropping to the lowest level for over seven years last week. That’s not a good look and would test the patience of any sane LT investor. The latest core range is yet to develop but I’ve suggested a very tight potential one of between 240 and 270 (shown with dashed lines). There may well be more volatility and further drift to come but today’s puzzle questions are simple:

Assuming no further CFC news, where would you put the centre and limits of the trading range for the next eight weeks between now and May BH weekend?

Vague answers like ‘doomed’, ‘more of the same to come’, ‘this will soon rocket to 400’ etc will be too boring: let’s get some hard thoughts with numbers for a change and see who get's it closest for the period to May BH weekend.

I'd love to know what is causing the sell off....

Unfortunately, Stupmy, the market appears to have decided that the jam for delivery tomorrow is no longer worth waiting for.

As far as any analysis is concerned you won't learn much from this board: just emotive noise and hype (in both directions) with zero rational discussion that adds anything new.

My advice: take a break from the utterly useless chatter here (I am), check out the FY statement and decide - on the basis of the numbers and guidance, whether OCDO's prospects seem better than they were a year ago. There are upcoming CFCs and Tech revenue is set to increase. However, the adoption of OCDO's technology has been slow: is that because of the product or the partners that OCDO has teamed up with? That article posted by Yearoftherobots in the Kroger CEO thread was interesting. GL & ATB.

Looking at the variety of comments on this board it’s pretty clear that many PIs invest on the basis of pure instinct and belief rather than the business fundamentals. It seems the market consensus is equally random, given its reaction to the unsurprising results, despite some fair analyst targets in this price region.

There is therefore no guarantee that the market reset since last week, possibly to a trading range based near 240, will be any more solid than previous ones. We know that some investors will take the Qantas approach with some probably catching the knife whilst it was falling. Some shorts may also take a breather and reload, so it could take a while before the sp finds a firm reset level, especially as the sp often drifts further down for a long period after results. Regaining a trading range above 270 anytime soon is therefore about the best I’d expect although anything is possible in the OCDO house of horrors. On the bright side, today’s low of 243p is only 35p (about 12%) below last year’s 278p: https://invst.ly/199w9x .

Just to clarify: Brittain Ladd is the fanboy, not me.

His views are interesting and Kroger have certainly not progressed as they originally indicated, which has stimied OCDO.

Ladd's notion of TS as CEO of Kroger frankly strikes me as daft . The JV management team and Mks seem to have a better grip on the retail side of the business and TS will sensibly be no longer directly involved following deconsolidation, allowing him to focus on his Tech strategy (although there's a history of OCDO investing in tech that went nowhere).

Before we get too carried away with this, it’s important to note that, according to this report, Kroger CEO Rodney McMullen has just stepped down from the role after a board investigation found that his personal conduct was inconsistent with their policy on business ethics. This was not related to the company's financial performance, operations or reporting. It also did not involve any Kroger associates (presumably including OCDO).

As a self declared OCDO fan, the Brittain Ladd article is interesting reading but it would be easy to make more of today’s Kroger CEO news than it merits.

The results were as expected, in line with guidance and contained no surprises.

The price fell because, as is often the case, many investors were over-anticipating and turning a blind eye to the projected timescale for reaching net profit. Morningstar’s unchanged fair value estimate of GBX 920 is not particularly helpful as it includes no indication of a timescale for reaching that target although, by implication, they are looking at a three year period and at least seven new CFCs. My advice would be to regard OCDO as high risk, pay no attention to hype and assess the reality. Oh - and don't fly with Qantas.

Just to wrap up my Hatfield query:

I can't find any indication within the statement of when the annual £33m income earned by Tech Solutions for the redundant Hatfield modules ends: I guess it is only 6% of the Tech segment’s total 496.5m revenue. However, given that Retail’s EBITDA is apparently only £44.6m from a revenue of £1.2bn (page 17), those unused modules are a significant drag on retail’s profitability - where the margins are not high in the first place. (dyor to verify). Of the total 123 'live' modules at the end of the period, 30 (24%) are non-OSP legacy modules, 14 of which are the unused ones at Hatfield (details given on page 20 of the statement).

Waiting and watching seems a good plan OnSGrnd.

Nothing much surprising for me in the statement, although it obviously surprised someone enough to sell in that intraday low of 229 around 9am today: https://invst.ly/197h5v

Quite funny really, given we know that Tech’s business is challenging and the deconsolidation will bring the ‘Continuing Operations’ (ie the core business) numbers more to the fore. I guess underlying cashflow and amortised development costs will continue to weigh on profitability and be of interest to investors.

One snippet interested me in the statement regarding the MKS contractual dispute:

‘The contractual arrangement with M&S expressly provides for the Target to be adjusted for certain decisions or actions taken by Ocado Retail management that differ from the assumptions used in the discounted cash flow model’ So that doesn’t seem to be going away anytime soon.

I couldn’t find the details regarding Hatfield redundant tech costs (around £33m pA ??) in my cursory scan through - but I did have better things to do today and must dig a bit deeper at some point. If anyone noticed it then a page ref would save me some time.

Thanks for the responses.

Kieran: you'll hopefully get the answers to your question in the statement tomorrow. If it still seems a mystery to you after that then you should not invest in OCDO.

GLA.