Member Info for Hexam

Share price is obviously influenced by a lot more than just book value. For example it is influenced far more by expected levels of future profits (or the lack of them). Then throw in the economy, sentiment, rumours, big buyers, short interest and maybe a hundred or so other things...

That's why saying a share is under- or overvalued is so subjective with no certainty which is right. Personally I think BOO is undervalued at the moment - but not by much. It attracts plenty of short interest and it's path back to profitability is uncertain but it has a strong balance sheet, at least the potential for decent growth (and profits) and in the meantime MA, and possibly others, are sniffing around. So on balance I think it is worth more than book value - and it could be worth considerably more - but there are plenty of risks too.

Wolf - I agree it was all too easy for a few posters to get a rise out of him but to be fair T4G lashed out at just about every post that was negative or simply said something contrary to his way of thinking. He also routinely made things up (especially about MMs), was frequently abusive and could never accept when he was wrong (instead either deflecting or twisting what he and/or others had said to try and get out of a hole).

In short he was guilty of just the sort of behaviour that he regularly accused others of.

So personally I’m not sorry he’s finally been banned for his antics (or left of his own accord) and with two of the most prolific posters now off the board perhaps the focus will be more on BOO and less on each other. Unfortunately though I don’t think there is going to be much to get excited about until at least the next trading update unless they give a positive bulletin on the USDC or something more actually develops with MA or anybody else.

“You will never make easier money than this. Never.”

Come on. Seriously? I despair of this board sometimes. Some people really shouldn’t be investing.

“Who knows I’ve never seen a share as manipulated as this one.”

That’s funny as I’ve also seen that claimed on many other boards when the share price doesn’t go up like they think it ought to. You can’t all be right. If you’ve got any actual evidence then it would be great to see it but in the absence of that don’t you think the lethargic share price has much more to do with the falling revenues, widening losses, reduced guidance and an admission from the company that they don’t really know when things will turnaround?

If they can get back to profitable growth (or even look like they will) then the sp will go up and go up very nicely. Until then I think we’re pretty much stuck here unless there is some serious takeover talk (or similar).

“Looking for an argument with Hexam and Daytradenovice?”

Is he? He’s wasting his breath (or rather his fingers and time) with me as I filtered him a while ago.

Was just fed up with his endless MM conspiracy theories, other make believe, constant arguments, nit-picking and abuse towards any poster not sharing his ramptastic views of BOO and general all round boorishness.

Has made the board a much better place with loads of green boxes instead of the same old whining on repeat. Would suggest others do the same with whoever they find irritating - it works!

SCB - Really don’t think you are in any position to dredge up other people’s embarrassing posts from ages ago (the ‘systems broken’ one from DTN for what must be at least a very tiresome twentieth time) when you have equally as embarrassing ones that are much more recent. Most notably the ones where you said 100% BOO won’t reduce guidance, that anybody was stupid who thinks they will reduce guidance after Umar invested and shouted ALL IN CAPITALS that they won’t reduce guidance.

What happened? They reduced guidance.

Maybe your time might be better spent, and of more use to others on this board, if you can explain how you think BOO will turnaround the current position of falling sales, despite reducing prices versus the market, and continuing losses?

I think there are ways they could but none that I can see that are very convincing but happy to hear your theories?

"Usually this can be verified by the size of the UT at the end of the trading day."

I agree Broke with what you are saying except for that bit - how does the size of the UT verify anything about the relative buys and sales during the day? You may well be right but I'm struggling to see the logic - or perhaps I've misunderstood your point?

Unfortunately they've since downgraded it to a 'hold'. Don't know why they changed their view so quickly as they did certainly seem positive before.

"Nb have you seen the Canacorred report mentioned on other posts today?"

No Oke - it seems to be behind a paywall. I know I posted some ratings earlier to illustrate the mood out there but tbh I take them with a big pinch of salt, especially as they tend to vary so much in targets and ones that I have read before haven't always been based on the soundest of reasoning in my view. All that happens here is that the derampers will focus on the bad ones and dismiss the good ones and the rampers will focus on the good ones and dismiss the bad ones.

It would be interesting to know though why this broker has gone so low compared to others (and why other brokers maintaining a higher target do so).

Oke - Inventory wasn't squeezed that much in H1 (most of the impact was in H2 last year). Inventories fell less than £3m in the last six months so it was disingenuous of them to keep banging on about it yesterday. So as long as they keep control of it we shouldn't see an adverse impact from this in H2 compared to H1.

I can't see why they need to refinance head office - their net debt isn't bad at all comparatively (and there are some really scary ones out there) and their liquidity is still high.

"Why don’t they sell their London office? Shore up the balance sheets a bit."

But they don't need to shore up the balance sheet - that's not the problem, it's the decline in sales and lack of profit. Even now after such a poor six months they only lost just over £40m of cash in total and that included purchases of EBT shares and some one-offs. So whilst losses will eventually lead to problems on the balance sheet it won't happen that quickly unless things get a lot worse.

'All' they need to is get back to profitable growth but at the moment their strategy doesn't seem to be working as they've got neither after putting so much of their cost savings into price and proposition. Maybe it will come good in time, especially if the economy picks up, but they are like a football club on a losing streak with the manager(s) still confident their approach is the right one. It is just a case of how long can fans' or investors' patience can last in each case before something needs to change (usually the manager(s) and a new direction, that's if there's not a takeover first).

“So EBITDA is not real?”

It’s more a measure of operating cash flow as you rightly say (before capex and changes in working capital) and as a profit measure it misses off capex too (in the form of depreciation) as well as lease payments, interest and other things.

So no it’s not real profit but just a particular measure of part of the business.

Personally I prefer to look at total profit and total cash flow and drill down from there rather than look at intermediate and sometimes fairly arbitrary and inconsistent measures (for example BOO unusually don’t include lease payments in FCF and included £10m of non-cash benefits in EBITDA). But we all have different approaches and mine just reflects my own training and work experience and what I feel makes sense to me.

I agree if they can grow sales then I think they will make real profits - and earnings multiplies become more meaningful and that’s how I have looked at it and applied it to BOO’s estimates of future EBITDA - and in my case converted it to PBT.

There is absolute right or wrong way and sorry for being abrupt but I do genuinely believe applying a standard earnings multiple to current EBITDA is meaningless in BOO’s present position.

"I think this is fabulous value and I have been right so many times over the last few years that I have confidence to put my money where my mouth is!"

Good for you and I hope you are right as we all want to see the price rise (well those of us invested anyway) and you can brag even more about how wonderfully good you are at all this. As to understanding earnings multiples the fact you are bringing up Next as an example to compare with and as justification for your 10x says it all.

Just to point out though that NEXT makes a healthy profit whereas BOO is currently loss-making and if you assume no sales growth then will be forever loss-making so any earnings multiple should really be zero let alone close to that of NEXT.

However, there should hopefully be future sales growth and also as a consequence real profit (not just EBITDA) but guessing what that might be, and how likely, is very tricky and so using a bog standard multiple against current EBITDA is just meaningless in view. But clearly you (think you) know better so have at it :-)

Must admit Oke I can't quite follow what you are saying but ultimately yes, it looks like they heading for around £70m net debt at the end of the year give or take based on their forecasts but a lot can happen to change that either way as mentioned yesterday.

"But this assumes sales stabilise at much lower level and there is no sales growth for years."

A multiple of 10 (of EBITDA rather than earnings) is questionable as it is but a multiple of 10 on the assumption of no sales growth for years is ridiculous. Thanks for responding but I think you are using earnings multiples without understanding what they really mean, what they represent and how they should be applied for different companies with differing financials (including adjustments), risks and outlooks for growth.

Well, looks like the analysts have given their verdict:

"Deutsche Bank cuts boohoo price target to 25 (43) pence - 'hold'

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Barclays cuts boohoo price target to 26 (30) pence - 'underweight'

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Goldman Sachs cuts boohoo price target to 37 (43) pence - 'neutral'

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SocGen cuts boohoo price target to 32 (41) pence - 'hold'"

"At least 100% undervalued without any further news of sales growth"

How do you work that out? What method have you used to say so confidently that the fair value on this share is at least 57p? Would be interesting to see any workings or logic.

Hi Oke, I really don't know what the odds are on a capital event or whether one is needed (though if anybody offered 60p+ per share I'd bite their hand off).

I think they just need to demonstrate they can get back to profitable growth and the sp will follow but at the moment they seem to be lowering their price against competitors and not only not growing but not even stemming the decline at all and instead just maintaining market share in what has been a falling market recently. A race to the bottom on price is a race that I'm pretty sure they won't end up winners in so hopefully it will be one of Broke's options or something else.

"I read through the full presentation last night as I didn’t have a chance during the day yesterday, also glimpsed at the core financials, and personally I would of preferred some honesty rather than boundless optimism from them."

I agree Broke and also some humiity in their presentation would have been welcome. Instead we had two of them being enthusiastic but evasive at times, one who didn't really need to be there and another who really didn't seem to want to be there (and who appeared to treat the whole thing and the people in the room and those listening in with contempt as if it was all quite beneath him).

As to your proposals they can hopefully leverage what they already have without needing to do anything drastic - which is I suppose your first option - which makes sense to me.

*Secondly the IMPACT OF investment in lead times etc. is probably delayed...