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Comparing Card Factory and The Works pre-Covid trading. Assumption is both return to pre-Covid levels in terms of profitability in 2022. Not factoring in any growth in revenues.

The Works: 2019 dividend was 3.6p, share price is 51p. 7% dividend yield.

Card paid ordinary dividend of 9.3p and special 5p in 2019, versus stock price of 59p. Implied 15.7%-24% yield depending on whether you include the special.

Assuming Xmas trading has been strong for Card, that should eliminate the fear of a capital raise.

Pricing Card to an implied 7% dividend yield puts the share price at 132p-204p with the top end including the special dividend.

Very hard to find investment opportunities where there is such a disconnect between the underlying value of the business and what the market is valuing it at.

Great post RoxburyHouse. I have enjoyed following your comments on this board over the last few months. It’s great to have genuine and thoughtful investors sharing their views.

I read somewhere that Card tried to market a subordinated loan to investors in November which has stuck in my head. Perhaps they are trying to accelerate dividend payments though I’m guessing the subordinated loan may have restrictions on dividend payments too.

Not sure I fully understand why the Board tried to market that loan unless of course they were testing the market to see if they could secure great terms like Premier Foods did in the summer (refinancing from 6.25% to 3.5%).

In any case, I think the key risk on Card was a lockdown over Xmas which didn’t happen. I think £1 in the New Year seems like a logical outcome here with Lombard chasing the market higher.

Reporting on two site visits.

Loughton: Steady stream of customers in the shop (weekend before Xmas)
Ilford: Visited on 24th Dec at 1600 and still busy. Looked like shop has been stripped bare in a few places, clearly business has been brisk.

I will be keen to see if management try to raise a subordinated loan, post Xmas trading they may be able to achieve a better interest rate than what they were probably being offered. If they do try to raise debt financing, it does tell us the banks would like to de-risk themselves. If that is the case, perhaps management could explore a convertible bond. The coupon will be lower than a subordinated loan (private credit funds will likely look for high single digit yield at least) and reduce dilution. The business clearly generates at least £50m in FCF per annum and repaying debt organically is both feasible and the best option for shareholders as long as there no further lockdowns during key trading periods.

Assuming no dilution, a return to £50m FCF, even at a 10% yield excluding leases and post repayment of debt, Card Factory should be worth £500m market cap or 2.5x the current value.

Mr Market is too pessimistic on Card Factory.

Carlyle has essentially extended a £125m loan and can convert it into 29.99% of Southend Airport. This mean they have valued the airport at £416m. Esken shareholders still own 70% of the airport hence £291m in value. The current market cap is £145m. If we add in the Energy business and the non-core assets, it's seems the market is pricing a dollar bill at less than 50c. Would think there is a path to 30p at least here based on the sum of the parts.

I would argue they don't even have to get to 70MM repayment by next summer. As long as they have made sufficient progress on debt repayment, i.e. north of £40m in my mind, I think they will be able to negotiate with the banks to extend the runway. I think dividend resumption will likely be in 2023 but with the business deleveraging the share price will rise in due course. At these levels, it's a bit like buying a bond for 30c whose face value is 100c. Patience is the key.

Visited two Card Factory shops. Bingley on Friday and Kirkstall on Saturday. Spent about 20 minutes watching both and there was a steady stream of customers coming in and out. Looking at the average spend per customer, I think the £200 per day profit that RoxburyHouse highlights, is very possible. There is still a decent chance of avoiding a rights issue.

So I managed to get in contact with Card to ask about the Q&A. Turns out they didn't receive any investor questions. I asked a few of my own. Key points: (i) next trading update will be at the end of September, (ii) no update on financing and (iii) taking normal action to mitigate inflation

Just bought shares in BIDS at 2.18 after reading Michael Taylor's summary, copied below.

2. Bidstack (BIDS)

If you’ve been around a few years you’re probably aware of Bidstack.

But if you’re not: I’ll sum it up.

Bidstack is a technology company that puts native advertising into video games.

It’s pretty cool - although the company has promised far too much and delivered too little.

This didn’t stop it from multibagging though - eventually hitting £100 million market cap which was bubble territory.

Back in 2019, the market was hyped about Google Stadia and the stock rallied hard for several days, only to gap up on the announcement.

I warned about this in my group and it turns out this was the absolute blowoff top.

Since then, the stock has been nowhere near 40p.

Here is the chart from the recent year.

For some reason, the company decided to not raise money when the stock was above double digits (or maybe it couldn’t?) but it has raised over £10 million at 2p.

It was obvious the company needed money at 12p, so I should've shorted the stock and covered going net long in the recent placing.

Last year, the stock multibagged from the placing I took at 4p, and the company has just raised again at 2p.

I believe there’s a good chance the stock sees material upside from these levels, because right now we’re in peak fear.

Bidstack has just raised over £10 million at a pre-money EV of less than £6 million.

Nothing is priced in.

But the company has actually made progress with partners and proof of concept trials, and is now starting to commercialise.

Institutions have come on board the register, and the cash leaves enough money for at least 12 months.

Everybody hates Bidstack.

Everybody has written it off.

Maybe they’re right to do so - but the risk/reward here is great.

The company is well funded which protects my downside, and any positive developments may start to change the narrative.

With a change of narrative, the sentiment increases and powers it higher.

We see stocks move because of a change in sentiment all the time.

However, let’s acknowledge that Bidstack still has plenty of risk.

It still hasn’t achieved anything.

History would suggest that the company will disappoint the market and there will almost certainly be another placing in the future.

But with the price trading around 2p, you’re getting a similar entry to me at the 2p placing and are buying closer to the danger zone - the point where you cut the trade.

It's no Vodafone though, that's for sure.

Positives
The refinancing everyone knew the company needed is now complete
Company now at the start of its commercialisation journey
Negatives
Bidstack has a history of overpromising and underdelivering
Not profitable and cash burn may increase further

I think it's important to attack the problem and not the people. We are all investors trying to achieve the same goal which is to grow our hard earned savings and a difference of opinion is important in trying to assess the investment opportunity as well as the risks.

I'm an avid read of Investor's Chronicle and first spotted LoopUp in one of Simon Thompson's pieces. Taking a step back, the world was essentially working remotely last year and LoopUp missed their opportunity. This should have been a company worth billions instead management is de-emphasising video calling and promoting Cloud Telephony.

For those that are long and wanted to hold ask yourself this, what can this business realistically generate in revenue in the next 3-5 years and what does that translate into in terms of share price. The rest is irrelevant.

If I were long here, I would book my losses and move the cash to a business like Dignity Plc. If you haven't already, take a look at their presentation, especially the last slide: https://www.dignityplc.co.uk/media/4584/dignity-investor-presentation-june-2021.pdf

Dignity will take time to recover but will give you a chance of making back your losses and more. Think that will be difficult with LoopUp. Full disclosure, I am long Dignity but posting as I know the pain of losing money on LoopUp and would rather others didn't throw good money after bad.

I originally bought into LoopUp on the day of the last profit warning, thinking 85p was a great price and the business would recover to 120p+ shortly. I then did some further work into the business and took a critical look at the accounts and decided to sell at a loss at 75p. If you look at the balance sheet, the cash roughly equates to the debt. The current market cap is £28m for a business that really doesn't generate any cash after capex excluding 2020. 2020 should have been LoopUp's year instead Zoom and Teams have taken the market and I can't see corporates switching. The new Cloud telephony business is encouraging but the margins are unclear and likely to be small. Bottom line, hard to see any positive catalysts on the horizon for some time. Is there a price I would buy back in? I guess I ask myself what value do I put on a breakeven business that is moving away from higher margin video calls to lower margin Teams integration? Honestly, not much and considerably lower than the current market price. LoopUp isn't going bust, it will continue to offer employment to its employees but as a shareholder I struggle to see any financial return.

AGM is scheduled for 28 July. We should receive a Trading Update then. Will be interesting to see if all the anecdotal evidence of busy shops (I too have seen several) percolates into the numbers.

Listened to the call. My thoughts:

1. Management will likely explore a convertible bond which would limit dilution for shares before an equity raise
2. Rent renegotiation should help with free cash flow generation
3. Ultimately remains a "show me" story with delivery the best way to show the strength of the underlying business

Will be interesting to see if CEO / CFO buy shares today / tomorrow.

There are potential changing consumer trends but Card should remain cash generative and makes sense to park this and revisit at the interims in September now.

Just listened to Proactive video and it seems Kromek will be updating the market in the next few days with results of their Covid air detection pilots. He seemed pretty confident about meeting (and even exceeding) guidance this year with market expecting sales to rise 50%. Bodes well I think for the share price.

Something is amiss. Card was supposed to report on 19 April. Areas the auditor could be focused on:

1. Goodwill write down
2. Rent deferrals
3. Inventory write off

Anything I am missing?

Took a quick look at Amigo. Management tells us the secured creditors rank prior to compensation claims. Will be interesting to see whether this is borne out in reality especially if the underlying loans backing the bonds are in effect fraudulent loans. Think this a bargepole stock / bond investment.

Store in Bradford (Broadway), Uxbridge and Putney all busy too.

The key to investing is to decipher the difference between reality and perception and then take advantage of the opportunity. In the case of Card, the trading update actually paints a fairly rosy picture of current trading which is the reality versus the perception amongst many investors than card sales will now irreversibly move online. Not long to wait now with full year numbers out on the 8th June.

My sense too in terms of sequencing of the raise. They haven't raised on purpose. I would expect to see management buying post results on the 8th June as they are likely to be in receipt of private information at the moment. Like yourself, a bit of a red flag if we don't see it.

Banks will be receiving monthly data from Card and had they felt their loan was in trouble they would have made refinancing contingent on a successful equity raise. Reality is they haven't which gives you an indication on current trading i.e. they are generating cash.

From the new CEO's perspective, the easy option would have been to raise but I suspect the largest shareholders were not supportive as they feel the business can delever itself given time. The CEO clearly sees a potential path for the business to organically delever so hasn't pulled the trigger on a raise which to me reads well. Don't forget the there is additional upside from lease renegotiations as they come due with those cost savings providing additional capital to invest in online.

All in all, a capital raise remains a possibility but the structure of the press release suggests the company believes it doesn't need one. Actions speak louder than words.