Member Info for Commonsense5

Thx

Sounds a few weeks away pre we hear anything ?

Can anyone help on this ? Did I see a deal is being proposed to members at a conference or something ? I may be wrong

Thx

Correct Hosai, apologies maybe I wasn’t clear enough. Previous bids have set the level that needs to be beaten / improved on for a deal to be approved by the new chair. (no new deal can be below those levels, obviously). The rns is informing us of the approaches probably to come out of an offer period - as defined by the Panel. He may have been told he has to include the fact there have been approaches possibly by the Panel. Who knows. Betaville has been right about approaches so far. Now Betaville says there is a new name in the frame, perhaps a type of broad brush deal that is acceptable by management - don’t forget there is ALOT more to any approach than just headline price but that need to be a minimum, a now know minimum to the board where a chair can give a Recomendation. The new name has a big tech fund AND does minority investing - even their ‘partners fund’ is massive. If I am right on current holders then they only need a minority investor BUT who probably has deep pockets to fund future m&a and investment. Of course I understand golden share - BUT if this new approach is the right new partner - a golden share won’t be needing to be used.

Mr Kando - 30 years stock market trenches - let’s see. I hope one of us is right - if we get 400p then great - that’s all that matters !

I should note - if management and holders really wanted to exit … it would be 1000p plus !! But they don’t

Mr Oooaahhcantona - I love the idea of 400p plus but reality is this company doesn’t want to be on the stock market - it early hasn’t worked for whatever reason - hence a price needs to be acceptable to those who vote or accept a bid - IF IF IF any offer is made available to all holders AND there is some real value creation deals on the other side - either a BIG disposal with cash distribution post (100-200p) OR straight Nasdaq listing - either will be much better than a U.K. stock market price - hence holders if they can will roll into private paper they will vote in favour or accept on the face of it a lower bid than we would all like. No certainty uk market will ever ever value THG correctly again. 70% say of holders can go private / hold private paper and will vote for that. Sadly no need to pay 400p. Any holder should be averaging down massively to ensure 200p / 250p / outside chance 300p works for them. They have had three months to accumulate stock to massively average down. To repeat sadly that is the reality of the easiest option. This company had invite only private market upward only valuations for ten years. And very very little negative journalistsic comment.

I only listened to analyst recording yesterday

Re FMCG point - now 5 of top 10 - BUT two are new names last quarter we were told …. !!

Serious news !!!

Only one strategy I reckon - to exit the market and allow the business to grow fast privately. Sorry to pour cold water. I suspect they are seeing holders this week post results to gauge interest. See earlier comments re shareholder base - a massive % can take private paper and roll in. Holders don’t like this SP up and down in their portfolios. Much better upwards only valuations on private arena where there are massive funds. Don’t rule out Softbank too. It helps all investors funds. Any disposals with big ingenuity contracts i think will all be on the other side. I hope all holders are allowed to roll in to see the massive upside. The jewel Ingenuity will re list in the US. In the meantime we mustn’t kid ourselves - 200p + will be enough to go private - 100% premium from probably a good 3 months average SP now. Hence worst case fill your boots down here. I will be going all in tomorrow. Take a 100% gain - max 6 weeks I would think. A brilliant business that the market will never see the upside on.

Re WPP - clearly ST and WPP have no idea what THG does !! April fools all over. WPP will fall on that comment.

To be fair to Betaville - he was right on the approaches he outlined way back when - he said it - the company did not make any confirmative statements - lots of posters said therefore it is NOT true - when it was. Credit where credit is due. He is clearly on something on the HUT. Carlyle (newly mentioned) is a good name and importantly has a tech fund and importantly does minority investing - that is all that will be needed to help THG go private and grow their great business in the private arena. I suspect not long to go now now the numbers are out there and now the company can finally have proper conversations with its big shareholders. Don’t forget a very high percentage of those holders can take private paper and roll in - Sofina, Balderton, Jupiter and many of the US funds. Either way well done Betaville.

£1.3bn mkt cap ? For one of the UKs best companies - rest of world must be laughing at us !! Ocado similar revenue - maybe a bit less - far better quality of earnings at the Hut - and Ocado is £8bn mkt cap. Forget up or down 10% - look at fundamental value equation !

Rock 8 - sorry not the case that if DD had started they inform the market. I would have thought the a lead or two PE house will be quite advanced now.

I think Thursday will be results only. As stated before I would have thought we will then be into the final furlong of a deal

To my last post - just seen this on the THG LinkedIn - THIS IS WHY THG is soo valuable - simply giving brands a better understanding of their customer. Yes obviously brands can do this themselves BUT are they as good as THG ? Why wouldnt almost every brand drop work with someone like THG and let them show them what they can do. Dropping off your product at Tesco or D2C ? This is why whether Nestle, Unilever, Coca Cola or all the big beauty will be interested in the parts of THG. LVMH via Sephora bought Feelunique less than a year ago. Don’t worry about THG ! Simple interesting read below.

https://www.thgingenuity.com/resources/blog/how-can-fmcg-brands-overcome-the-challenges-of-moving-to-a-direct-to-consumer-model?utm_source=Organic+Social&utm_medium=LinkedIn&utm_campaign=how-can-fmcg-brands-overcome-the-challenges-of-dtc

Agreed algo man - it is possible some of the private holders could buy more, and management also and hence I think in that scenario the price could be lower and much less needed from a 3rd party BUT I am talking 200p min. Without checking the chart it feels like the price has been average just below 100p so min 200p. There will be disappointment at that if it happened but it should be enough to convince the minority.

Agreed SP28

But high level points to add ..

1. Most fundamentally a business is worth what someone will pay for it - in THG there are many huge business worth 2.5-7x revenue last I looked who would love to own Myprotein or Beauty. We are on 0.5x sales. These are two of the three focus areas for Unilever for example - why ? Because they are both big growth areas, fundamentally. Add in Coca Cola, Nestle and all the big beauty companies all on those ratings … this is why no one should be worried. It is better than that - when those mega companies buy a niche business they supercharge it as they push product through their global network / pipeline. The other strategic reason is although many old fashioned companies have got better at e-commerce, they are still miles behind the best. Since buying my online Toblerone through Hut I am nicely directly inundated with decent promotions. Finally Toblerone know their customer. I don’t even like Tobelerone but bought it to see how Hut market it. So many of Unilever’s say products are dropped off at the distributor. Knowing your customer call me old fashioned is sacrosanct. Hence why big co will pay up.

Final one - we know many of Huts big holders will go private with them if that is the route that is taken. I don’t think the bookies are taking bets that it won’t. However, they don’t need old fashioned PE, they simply need probably a few hundred mill of global private money where there is massive pots around inc Soveriegn funds. Various exits on short term pay back will be very clear to see to that investor or investors. A very easy deal to execute. From its years and years of being one of the for runners of one of the best private tech growth companies IN THE WORLD - the private fund audience is massive - they all know the Hut.

As SP28 says, all for £1.3bn … don’t worry about this one. Big £ around the corner.

1. Year end end March 22 complete - has the company hit forecasts which where sales in the final quarter needed to be 25% higher than last year in final quarter to get to £900m full year ? With only £83m ebitda H1 and all the headwinds (listed below) has it even come close to last years ebitda of £225m ish ?
2. Is its medium term as last stated ebitda margin of 30% still in tact given H1 was 24%. That H1 achievement was before many other issues kicked in.
3. How will the above effect net debt ? Covenants ok ?
4. How much of the business is Russia ? 4 stores or through wholesale ? Loss of revenue going forward and any bad debts in that region.
5. Permeira’s 35% holding is in an 8 year fund and probably needs exiting given these funds are usually not much more than that until closure - the 90 day lock ins from the Jan sale at 395p are off as of a week ago
6. Are Chinese lock downs effecting the business ? Given big growth last year in that region
7. Is the company doing anything to lower the price point given Shein’s significant market share of the young market with boots at £25. Last I read in the Guardian it had to put prices up mid year this year to compensate for cost pressures.

A lot hangs with the independent Non execs and in particular the SID. The chairman has 8m shares so not independent.

My gut feels suggest this business is worth over £1bn but not worth £2bn. That is based on £900m of sales which it may not have. Valuation will better be judged when we get some latest financials - given not since Dec 6th interims have we had any guidance on profitability. Biggest issue is long term sustainability of its market versus competition.

If is SUCH a shame the THG / Stock market relationship didn’t work - in MM as has been said we have got what I have always said is the UK’s version Jeff Bezos - super successful, very clever BUT a true do gooder / philanthropist at the same time. These are the best people and the U.K. market will sadly be worse without THG. I believe in six weeks or so THG will be off the market which is sad. In the meantime well done MM for his charity endeavours.

Guys and gals

Anyone who knows anything about ‘value’ should know that this business is worth right here and now multiples of £1.1bn mkt cap. This is even more true when private capital is around is such vast quantities. Hope everyone saw the Shein deal metrics. My hunch is that the company goes private in the next 6 weeks and on the other side disposals will happen. Very very sadly the market relationship has gone too sour. The value as I have said before is driven partly by those massive companies who would give their right arm for some of the brands and platforms the Hut owns. Those companies as I have said before are on 2.5-7x sales multiples. We are on 0.5x. Anyone who know anything about the market and corporate finance knows that as night becomes day if companies of that size and valuation want something on a lowly value .. they typically get it. Yes golden shares etc but as I say I don’t think the market will ever see the true value of the HUT again. I just hope a sensible deal as per the press rumours some time ago can be delivered. In the meantime holders should relax. Shorters should be nervous and do yourselves a favour and close to avoid a painful end. Just me view.

The more I read (and I have now read quite a lot) the more I think that the board of Docs must be getting a bit sweaty. What drives me is I DO NOT want to see big PE finds generally abusing the stock market especially those with the track record of the likes of Permeira with AA and Saga under their belts. These are purely factual statements but in January this year (as I said before) 6th Jan Permiera sold a chunk of stock (69m shares) less than 12 months post ipo at 395p - this was AFTER the 9 month period end of December AND they have a person on the board - Tara. Exactly three weeks later Docs announced Q3 results to end December and the price falls further. Enough said, maybe there are robust chinese walls in place. Surely with a Permeira partner on the board they should wait to sell until AFTER the trading update ? My question is will the same thing happen again ? No mention in that Jan Q3 statement of ebitda guidance to the market. Guessing board members get detail of margins ? Retail investors in the dark, Permeira quite advised. C. 35% left…

Now, the next ‘quiet’ (as DOCS say) but very important period q4 and year end is over to end of March 2022. The board, including Tara, will probably know the rough results by now. With £88m of ebitda in H1 and material winds against in every single direction in H2 achieving even last years ebitda of £224m (let alone beating it) will be a stretch. No other retailer will have achieved such an ask.

The Permeira 90 day lock up is up as of last week. They can sell again. They still have Tara on the board. They will be very keen to sell again I would imagine - although the share price is below ipo, they bought in at c. £300m not £3bn that the market paid on ipo. The investment is c. 8 years old and the wider partners or Permeira will be chomping for next pay out.

The board of DOCS will be very aware that THE MOMENT they know they cannot hit guidance / consenus this year OR next, they need to tell the stock market. As directors they will know the extremely onerous penalties for not guiding the market in the correct way. THE KEY POINT here is DOCS need to learn that Permeira don’t get first go at selling before the rest of the market gets told about it. Please DOCS board DO NOT let that happens again.

H1 current year ebitda margin was only 24%. H1 last year was 27%. H2 last year was 30% to give a 29% average for last full year. Company guidance medium is ebitda margin returns to 30% … I say again in the current climate this feels an impossible task.

Headwinds below …

1. Shipping costs through the roof - much product produced in Vietnam
2. Factory heating costs through the roof
3. Oil costs indirectly into product (upvc chunky sole)
4. 4 Russian stores … no comments yet about this
5. Shanghai in lockdown - decent growth
6. Shein taking massive market share generally with a £25 boot
7. UK employment costs escalating
8. UK consumer in the process of being hit hard

Still mark

@cantona - they are all inside on a pending deal buddy - they can’t buy

Thanks @ooahhhcantona - like most of us I have decent wounds / losses in Hut and boo - i have done a few posts on DOCS chat room (Dr martens) highlighting the value in the pure e commerce plays versus Dr Martens £2.4bn mkt cap - for once I might claw some £ back from a short … !l having watched all the other bug gers / shorters make money out of me !! Fingers crossed a good week / month for THG