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Some choc discounts would be nice. BrewDog give me 20% off of online orders, plus 10% off in the pub. Though I think those kind of perks are usually given pre IPO.
Nowhere does it say that we're liable for only 20% of the £5.8m. It says, the way I read it, that HC KK has loaned money from some Japanese leasing companies. What the total amount is we don't know (but £5.8m could actually be 20% of that). What the RNS says is that from all that money HOTC has guaranteed £5.8m. And if we are acting as a guarantor for that money, to me that means that if HC KK is no longer a going concern, then HOTC will need to pay those money to the Japanese leasing companies.
I'm no lawyer by any means, just the way I read this. As a layman I compare it to a rent guarantor, i.e. if a uni student can't pay their rent, their rent guarantor (the bank of mum and dad) will pay it for them.
What about the £5.8m loan guarantee?
"guarantee arrangements of up to £5.8m for loans made to HC KK by Japanese leasing companies"
To me it sounds like we're on the hook for another 6m quid.
On Yahoo Finance:
https://uk.finance.yahoo.com/quote/HOTC.L?p=HOTC.L
On the top right of the chart click Full Screen and there you'll be able to see volume bars above the x axis.
Same. Normally, it's quite hard to get any shares here due to the low float. Even £200 can be hard to come by on some days, at least with my broker. This week, however, I've had pretty much all my limit orders filled.
I've picked up a few this morning at 134
Sharebel, don't seem to remember you posting on here before yesterday. It seems to me you're a passing trader - for us long term holders it makes no difference whether we pay 120, 130 or 140 per share. We'll wait till it gets back to 5 quid and those 10p won't matter. So there's no need to create a sense of urgency, because there is no urgency to buy (or sell) here, especially if you haven't done your homework.
My order got filled at 123. Very happy with this price!
I can't predict how a recession will affect this share. Probably not a good thing, but might not be as bad as some expect.
On the other hand, I'm more concerned where future growth is going to come from. The UK market will be saturated sooner or later even with extra growth from the Velvetiser, etc.
I agree that going after the US market was probably a mistake (perhaps inspired by the common language?). It makes a lot more sense to go after markets that are culturally closer to the UK like Australia and New Zealand even though they are smaller. Also Europe is massive market where people love HOTC chocs, as I've shared on this board before. Sure, there's lots of competition there but there's also opportunity.
Not sure what to make of the Japan update. It seems to me that people love the chocolate and it's more problems with the local partner that are slowing things down. So it should be resolvable.
Still, they've grown 35% YoY and I have them growing at 23% over the next 5 years in my models. So things seem to be going better than I expected even with the concerns with international expansion. I've placed a buy limit order and hope to scoop up some shares today. These prices are quite low, so hope to make the most of it!
Krusty, we've discussed this here about 3 weeks ago. We're probably going to have a recession caused by inflation not a property crisis. People have recency bias, so they expect the next recession to look like the last but that's almost never the case. These days people pass strict affordability checks, including at much higher rates. For my mortgage I had to pass affordability check at 5-6% rates. We're nowhere near that and like you said unlikely to get there.
In addition, the majority of people have decent size deposits and fixed mortgages, many for 5 years or more. They won't feel the pain for another couple of years and by then the high inflation might be gone and rates might drop again. Gone are the days of interest only mortgages given to people with no means of ever repaying.
In the US and Europe things are even more stable, as they have 30 year fixed mortgages, and those are fixed at very low rates. So those two massive markets are unlikely to drag us down.
Basically, that's a lot of words to say that there will be very few forced sellers this time, except perhaps buy-to-let landlords in case tenants can't pay their rent. I think recently about 14% of properties sold were to buy-to-let landlords. That's the biggest risk IMO. But that only kicks in, if we have a severe recession with lots of unemployment and will affect a small part of the market.
On another note, inflation keeps going higher:
https://www.cnbc.com/2022/07/13/inflation-rose-9point1percent-in-june-even-more-than-expected-as-price-pressures-intensify.html
That would be illegal in the UK. Under UK law everyone has the absolute right to return an item purchased online:
https://www.gov.uk/accepting-returns-and-giving-refunds#:~:text=Online%2C%20mail%20and%20telephone%20order,that%20they%20want%20to%20cancel.
Charging a return fee is absolutely fine though
Paul, good point and I think that's the main reason why I prefer TW to Persommon. PSN has a dividend of 13% but a Payout ratio of 96%, i.e. it's unsustainable unless they borrow to pay it which will benefit shareholders only short term. If it get''s cut, let's say in half to make it sustainable the share price will tank more than 7%. Probably 10% at least. I've seen that many times, for example with Inmarsat. You lose half your divi and get a hit in the share price, double whammy!
TW's dividend is smaller but sustainable, you get what you pay for!
My guess is that there's a lag when it comes to the labour market and thus housing. 1 Economy starts to crack, 2 companies stop hiring, 3 proverbial hits the fan, 4 companies start firing, 5 unemployment goes up, 6 only then people stop buying houses or even start selling. My guess is that we're somewhere between step 2 and 3, as unemployment has been low. However, the stock market is forward looking and already prices in steps 4, 5 and 6 at least to some extent.
So I won't be surprised if Q2 numbers for house builders are good. It's probably guidance about next quarter that will move the share price and I expect that it might not be good. However, this might already be priced in. I'm never sure how the market will react on news!
Few TW houses were recently finished in my area in NW London, in the last 3-4 weeks and I'm already seeing people moving in. Literally there was one family in there before they had even put fresh asphalt on the street. Next to them is a TW block of flats that was finished a while back and that seems full now as well.
The question for me is how will things be when we enter in a recession which seems almost certain now. I think that's the worry today in the markets, this the big drop. I think there's still some downside but obviously good entry prices here and you get paid a nice divi to wait for the storm to pass.
From the 2021 annual report I conclude that we're safe for at least the next 2 years under almost any scenario:
"Assessment of viability
The assessment of the Group’s viability commenced with a review
of the headroom as at 31 August 2021, available through the
Group’s cash and cash equivalents and debt facilities, taking into
consideration a conservative view of the three-year plan approved
by the Board and based on the assumption that the Revolving
Credit Facility (RCF) would remain in place until maturity in 2024
and that the Convertible Bonds issued with a maturity date of
2026 would remain in place and unconverted. Under this base
scenario, we see a continuation of the strong sales growth seen
in FY21, with growing EBITDA and a year-on-year improvement in
our cash position.
Finally, we estimated the impact of severe but plausible scenarios
aligned to the Group’s principal risks and uncertainties, as set
out on pages 36 to 43, and identified the principal risks which
could have a significant impact on the viability of the Group and
stress-tested a combined scenario where the following risks
were modelled as materialising over the three-year period:
• Macroeconomic trends: Unfavourable macroeconomic
conditions and adverse movements in foreign exchange rates
leading to a persistent degradation in gross profit margin.
• Supply chain disruption: A major incident leading to the complete
operational loss of our largest warehouse.
• Cyber security incident and data breach: A cyber attack
exploiting vulnerabilities and leading to a temporary loss of sales
from the shutdown of our website and a consequent GDPR fine.
Conclusion
This scenario is hypothetical and severe for the purpose of
creating outcomes that have the ability to sufficiently threaten
the viability of the Group; however, ASOS has control measures
in place that in practice would prevent and mitigate this scenario
taking place.
The assessment demonstrates that, even under this severe
but plausible scenario, the Group would continue to have
sufficient liquidity headroom on its existing debt facilities and
would meet requirements under our RCF covenants, along with
existing mitigating options to reduce cash outgoings over the
period considered.
Based on the conservative assessment of the most critical
risks facing the Group, the Directors have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three-year period
to 31 August 2024."
and
"The Group has in place a £350m Revolving Credit Facility (RCF) available until July 2024. At 31 August 2021 the Group had drawn down
£nil (2020: £nil) of the RCF."
I understand the frustration with the shorters and the algos but let's try to see the glass half full. It's thanks to them we have the share price at these bargain-basement prices. Unless, you need your investment money right now this allows us to buy more shares on the cheap and increases our profits. IMO the biggest edge retail investors have is time arbitrage! With this on our side we can take advantage of the undervalued shares and just wait till price goes back to normal or indeed overshoots in the other direction thanks to algos and leverage as Poker said.
Taverham, I agree with a lot of what you said. I don't know if the recession will be mild or not but I think it won't be bad for the property market. People have recency bias, so they expect the next recession to look like the last but that's almost never the case. These days people pass strict affordability checks, including at much higher rates. For my mortgage I had to pass affordability check at 5-6% rates. We're nowhere near that and like you said unlikely to get there.
In addition, the majority of people have decent size deposits and fixed mortgages, many for 5 years or more. They won't feel the pain for another couple of years and by then the high inflation might be gone and rates might drop again. Gone are the days of interest only mortgages given to people with no means of ever repaying.
In the US and Europe things are even more stable, as they have 30 year fixed mortgages, and those are fixed at very low rates. So those two massive markets are unlikely to drag us down.
Basically, that's a lot of words to say that there will be very few forced sellers this time, except perhaps buy-to-let landlords in case tenants can't pay their rent. I think recently about 14% of properties sold were to buy-to-let landlords. That's the biggest risk IMO. But that only kicks in, if we have a severe recession with lots of unemployment and will affect a small part of the market.
G, as I've said previously on here I think they should cut costs first. No need to be set up for expansion in the middle of a bear market. TTM Capex is -182 while it was only -117 in 2020. Surely, they can cut those £60m easily?! That's half of the money they might need.
If they need more they can issue a bit more debt, the debt to equity ratio isn't too bad. Obviously would've been better, if they were entering the downturn with a big stack of cash and no debt but a lot of the debt is long term and the cash on hand should cover most expenses while the crisis is over.
Raising money by issuing stock at these share price levels is the worst possible idea! If anything they should be buying back stock at these prices!