Member Info for Deepvalue85

I suspect the decline in revenue during 2021 was a combination of aftermath from covid and the mix of aged stock as part of the company's strategy to reduce aged inventory. If you look at inventory, this has declined from 2020 consistently to date. They have been selling portions of aged inventory whilst maintaining a fairly consistent gross margin. This arguably supports the reasoning why the revenue has declined. If you have aged inventory on your books that you want to get rid off, you offer it at a discount (lower margin) with the new lines of clothing closer to full pricing (higher margin). I could be wrong though, its just my interpretation of the movements in the financial statements.

Another way to think about it is 68% don't.

That is a very difficult question to answer. I suspect that, if the market had not reacted badly to the half results, it would have been status quo. It is all conjecture. It is interesting to compare to ted baker, when ted baker was sold, it sold for £211m and had a NAV of £120m. This equates to a p/nav of 1.76. If you apply that multiple to superdy it equals £181m. So, if you assume the quality of assets is on parity (that is a big assumption), and you cut the multiple in half (basically saying that ted bakers brand is twice as good as superdry), you still end up with a valuation for superdry of circa £90m. The only rational conclusion I can come to is the delta between the market cap and lowest ɓand of valuation is the probability of the deal not being done. It does seem a favourable risk/reward bet... I have tried to destroy my thesis and I can't come up with anything decent. Can anyone on here come up with reasons why else the delta exists?

This is intelligent thought. Put yourself in his shoes, why would you announce to the market that you are requesting to seek the potential to make an offer without considering the ramifications of not making an offer... its deductive reasoning. I suspect the reason for the spread between current market cap and sensible valuation is this precise dilemma... if, say, you have valuation models that run between £80m -£180m, why would the market cap sit at the lower bound of these argued models if there was possibility that the deal does not get done. You wouldn't set up a market stool to sell apples for £1 if they cost you a £1.

Has anyone on here produced any valuation models for the business? If so, given the IFRS16 accounting change, and that all lease liabilities and right of use assets are now accounted for on the balance sheet, how have these been worked into the models? Does anyone actually know what the net debt level is? I see wide ranges, from circa £20m net debt to circa £200m debt (I assume the £200m includes all debt including net lease liabilities).