Member Info for Hexam

Knowbody - yes, both are aiming to return to growth but whether it will be enough to be able to be called a 'growth company' is debatable. A 'mature' company would still be expected to grow its revenue (at least by inflation). My point was simply that it's unrealistic to expect the mcap to trade at similar sorts of multiples (to revenue or profit) as they did pre-covid as they don't have the same growth prospects and restoring and maintaining profitability will be tough with the current model and price-driven competition.

Personally I think they need to find ways of improving margins that doesn't simply rely on cost cutting or other efficiencies. Whether that's appealing to a less price sensitive audience, developing a USP to make them less reliant on price, broadening their business more beyond clothing to higher margin products, or whatever, I don't know.

As it is though I think their scope to improve is limited and (as we've seen recently) their margin for error is small. In BOOs case it was particularly concerning that the recent fall in supplier costs etc. was nearly all passed on to the customer to reduce prices versus the competition and still volumes have fallen and are expected to continue to do so in the short term.

I completely agree that there is scope for decent increases in sp from here (rather than back to ATHs which appears unrealistic) but those chances I think would be greatly improved if they evolve into something more than what they are now rather than just banging the same drum louder or better.

Agreed Simon, and actually the argument that the problems are some how linked to the large initial outlay/costs associated with their rapid growth doesn't hold water. Either those costs would have hit previous years' results (not now) or, if such costs were capitalised, they would be spread gradually over time but they are clearly not an issue for ASOS or BOO as neither suffer a high depreciation charge - in fact quite the opposite. Also whilst the revenue growth of both companies is very impressive that's the case for most businesses (that survive) if you go back far enough to when they started from small beginnings.

Instead I think their deterioration in sp can be put down to at least three reasons (I'm sure others can think of more):

1) - Their period of really rapid growth has come to an abrupt end with this being more pronounced due to the rises during covid which, unsurprisingly, have now reversed somewhat. Of course both can get back to growth, and probably will, but even they aren't aiming for anything like the same sort of rises they experienced before. So the inflated SPs of covid are gone and so are the assumptions built into the SP of continued rapid growth going forward. Indeed it could be argued that neither are really 'growth companies' anymore but are much more like mature companies now and will be valued as such.

2) - They are low margin businesses and as such are vulnerable to sudden rises in costs especially operating in a price sensitive market where the competition (like Shein) are making it hard to simply pass such cost increases on to the customer. Also the fall in revenues has meant fixed costs are not spread so much and so eat into profits more. So both companies have been badly hit by the recent spike in costs and both were pushed into losses. Of course the cost pressures are now easing and both are also taking action to improve margins and restore profitability. So hopefully this impact on the sp can be reversed but there is obviously a risk they won't be completely successful.

3) I think both problems above have exaggerated by management failing to act quickly enough or as effectively as they could have - but it does take different skills to build a business compared to maintaining that business - especially when the storms hit.

Even the above thoughts are no doubt at best an oversimplification but my own conclusion is that there is a path back to growth and profitability which justifies an investment at these levels of SP but it is not without risk and, without the prospect of the rapid levels of growth seen before, it's very hard to anything close to ATHs being repeated.

"500p incoming today"

Oh well, maybe tomorrow eh greg?

Nothing delusional about buying at 33p and hoping to sell at 36p. Buying at 33p and hoping to sell at 360p is a bit more questionable perhaps? Still, nothing wrong with dreaming but to dress those dreams up as a more or less nailed on certainty (and practically begging others to invest) is I think pretty far into delusional territory (though admittedly not as much as PP1's claims of a 100-bagger at £3.50)!

Wolf - yes it sounds like our approach is similar which is probably not surprising. I wouldn't say I trade, I just try and sell at a profit with any investment and not be too greedy (another common trap) and so top-slice along the way (and buyback cheaper if it happens to fallback again). It works well normally but if the initial entry is too high you can end up averaging down too and digging a hole that it's becomes increasingly hard to climb out of. Hopefully BOO isn't turning out to be one of those for me (or you)!

SCB - Sorry to see you've taken me off your filter :-(

Wolf - For all shares I set a target for when I sell (and buy) and try to stick to that (though not always successfully). More immediately I have targets where I plan to top-slice (or sometimes even below my average but still higher than the last tranche I bought).

So for Boo for example I aim to start selling at 44p and be out completely at around 60p. However - if something changes fundamentally that means I have a lot more (or less) confidence then I may change targets or hang on longer.

So if the next update from BOO is also poor then I may cut my losses but if it is glowing then I may aim for higher than 60p.

The temptation though is to hang on too long or keep averaging down when things aren't changing (or looking worse) - especially if it means selling at a loss. I'm as guilty as the next person of doing that. But after CINE I hope I've learned my lesson (though at least I did sell some before the end although still far too little too late)!

"The share price is simply too low and does not reflect the value here."

That's just your view though. And mine as it happens. It doesn't mean it's a fact though and clearly the market as a whole thinks that £4 is about right - at the moment.

"100p by year end then the moon..."

Great! I'll be out within weeks then...and I'll leave the moon to you :-)

I'll be very upset though if you're not right...

Haha - fair point Knowbody. I'll settle for a multiple of 1 though for TS.

Always intrigued to understand what shareholders do exactly to 'earn' anything? We are all just gambling. Only thing I can think of is for diligent research but that can't really be said to have been successful yet, or 'patience' being rewarded. The stock is 92% down now from ATH rather than 93%, hardly cause for excessive celebration surely? I hope this is not the 'few minutes of fun' as it's a long way off the 60p I'm looking for to exit - and I'll only start celebrating when it starts getting much closer to that - or the company publishes actual numbers that give proper encouragement towards it. Sorry for not being quite so enthusiastic...yet.

Yes, a potential bidder always pays a premium. But the main reason for that is to get shareholders to sell (the other reasons you mention are why the bidder is happy to do so). The lower the sp then the lower the bid is likely to be (current sp plus premium). If they offered me £4 for ASOS shares today I'd say no. If they offered £5 I'd think very hard about it. If they offered me £6 I'd bite their hand off. If the SP was already £5 then all those numbers would need to be higher to tempt me.

As for TS it doesn't have a current sp, we only know what ASOS paid for it and hence what they thought it was worth at that time (which remember was more than anybody else did). So we don't have a current value to start with and so don't have a minimum price either. It may be more or less than they paid for it but multiples? Just can't see that at all.

"So what Asos is worth today is largely irrelevant."

That's just silly. The lower the sp the lower any bid needs to be to tempt shareholders. Also the share price is also meant to represent that potential value you are talking about (whether it does fully is the judgement we each make when we decide to invest or not). I agree companies can and do pay more if they can achieve synergies, gain entry or think they can simply run the business better. Equally though all these reasons are why just because TS numbers have been improving it doesn't mean it's value has gone up (if that was what was already seen in its potential anyway when it was bought).

"Neither is 500p today? Who said 500p today?"

gregpeck at 7.45

"Rampers please stop embarrassing yourselves."

Not going to happen I'm afraid. It's a right old rampfest at the moment and goodness knows what it would be like if the SP gets near 40p, let alone 50p. Best just ignoring else it's just like shouting at the wind.

Yes, Knowbody that would be a good result I think if they get close to £300m, especially as the brands themselves were only bought for £219m. To think of getting multiples is just crazy talk though, and certainly not what the market is thinking (the SP wouldn't be sat around £4 if this was felt even remotely possibly). Still, there's been plenty of crazy ramping talk today and I particularly look forward to the 500p that was promised by the end of it :-)

Can't wait for the manifesto. This BB is reaching new heights of crazy today. Priceless.

Do you know actually what a fact is? It would be good if any of your posts were backed up with facts or even a semblance of logic. As it is they all just sound like gibberish.

Even PDS’s post, which is at least coherent and plausible, is largely hypothesising - not factual.

“100% No doubt about it”

Come on CWWX - you’re suggesting a wild, fanciful and totally unsupported theory is fact.

Only Jeremy is allowed to do that.

"It's possible Argo could have won more Bitcoin if one of its competitors reduced its hashrate, so Argo won more Blocks without increasing its own hashrate."

Fleccy - that could be true but only if the overall hashrate had gone down but it hasn't. It was up around 9% on average in October compared to September. The improvement is simply (as they said) due to them switching off their machines for less time than they did in the previous month. They say they have also been focusing on operational excellence but although they have had, for them, a good month they are still mining a lot fewer BTC than they should be for their 2.8 EH (by around 20%).