Member Info for LorenzoLynch

TomBeef,

This could really motor on next week, starting with the full announcement tomorrow.

Looks like ‘liberation day’ was solely a negotiation tactic, and an opportunity for Trump and his friends to top up their holdings on the cheap.

I expect a lot of positive news flow in the coming weeks with deals being made with Japan, the SE countries, India etc.

PJ,

From memory, they are required to pay of 16% of the debt for each of the next 5 years, and a 20% balloon payment at the end of that period. I'd expect them to refinance along the way though on better terms (assuming interest rates decline in the coming quarters/years).

I agree that dividends would attract investors, but I think we'd receive a greater total return as shareholders if dividends are kept on the back-burner for the foreseeable future.

According to Stockopedia, FCF was 6.35p per share (at today's exchange rate). P/FCF is less than 3... a pretty insane valuation if you ask me.

Nonsense,

I also disregard price predictions (that includes my own), so I almost always tend to hedge my bets somewhat (although I'm incredibly heavy on JD Sports atm).

CARD often seems to rally when the market least expects it to and vice versa. I certainly can't time it.

Also, in a rising tide, all (or at least most) boats rise alike. Could be the start of a U.K small and mid cap bull market here.

Wiscos,

I personally think it’s worth much, much more than the current SP, let alone 80p, but the market usually seems to behave irrationally with CARD, so I wouldn’t be surprised if it falls to those levels again. Sentiment on this board appears to be lower than it was when it was floating around in the 80’s recently (albeit this isn’t a an exact reflection of market of course).

I’m sitting on my hands for now; I’ll benefit nicely regardless of which direction the SP moves in.

A merger is an interesting concept. I imagine the synergies would unlock some serious value.

Wiscos,

There seems to be a broad consensus now that the share price of CARD will continue on a spiral downward for the time-being.

I think many holders share your view of selling up or trimming, before loading up when it finds a bottom.

I think we’ll see 80p or so before we catch a real bounce; possibly lower.

Burgese,

I really don't understand your calculations. For transparency, I'm a shareholder, but...

Current liabilities are £213.7m vs only £124.4m in current assets. That's a huge shortfall according to my calculator with around £90m to find within the next 12 months. Cash is obviously included in those current assets.

Also, the company can't spend its last £1 on clearing these liabilities.

The company seriously needs to refinance... if it does, I think the SP will re-rate overnight and I think there will be a short-squeeze.

I don't see any reason why refinancing won't be possible, but it certainly appears to be necessary to me.

I'm in for the long haul though, and I expect earnings to grow rapidly in the next few years, alongside some metric expansion. I'm not going gung-ho for now though.

Contrary to my original strategy of keeping this between 5%-7.5% of my portfolio, I increased my weighting to 8% prior to the results.

Personally, I'm here for the deleveraging. I think it would be foolish and short-sighted to pay a dividend within the next 2 years, when the company is forking out so much on interest payments per annum. Also remember, as part of the financing agreement, GMS is obliged to pay off 16% of the borrowings per annum.

At present, we're paying out $17m / £12.8m per annum in interest payments, I understand. It would be a much more efficient use of capital to pay that down imo, and it would reduce business risk whilst also attracting more investor and/or institutional interest imv. The company could then also pay a much larger dividend, if desired.

FWIW, I'd also greatly favour a buyback over dividends at this valuation.

Nascan,

I wouldn’t say my post was overly negative; I was simply highlighting the risks (of which there were many). A quote from my post: ‘I think this could multi-bag in the longer-term (3-5 years)’.

The last RNS showed huge signs of the business turning a new corner. I still can’t believe the contrast with the prior one.

On reflection, I should have invested after the last RNS, as it put many of my concerns to bed, but I was on holiday with the misses, so I didn’t have a good 3/4 hours to sit down and form an informed conclusion.

I can’t make investing decisions without a few hours of silence, personally.

You’ve done well, and deservedly so!

In my opinion, we’re still a little unclear on what benefits will be experienced from the acquisitions, so it’s too soon to say that the capex has been spent unwisely.

At 80p, a buyback was an absolute no brainer imo, but capital had already been deployed elsewhere.

Was the capex worth sacrificing balance sheet strength for and foregoing a buyback? It doesn’t look like it so far, but Darcy’s no idiot, so I’d expect him to learn quickly if these side quests fail to create shareholder wealth.

I’m very disappointed certain parts of today’s RNS, but I’m not going to echo what others have said.

That said, the online performance has been pretty dismal imv, and I think we could have muscled away a lot of market share from MoonPig and FP, had more Darcy’s focus been on that side of the business. Huge missed opportunity so far.

Fortunately, I reduced my holding significantly yesterday (due to being far too over-exposed). I haven’t topped up, but will do if a) growth ramps up or b) we see this fall back into the 80’s.

Darien,

It’s cheap at a glance, but there are two key risks here imo (aside from the balance sheet, which isn’t too strong imo):

• customer concentration risk is sky high. If one of the main customers goes into bankruptcy, CTA will get hammered. This has just happened to IGR, in an industry facing far less headwinds than this one.

• a global recession, or even a U.S recession could see demand dry up quickly.

The RNS mentions these risks, but they were fairly buried in the report. I’ll be keeping my exposure low for these reasons.

Unlike many of the new generation, I can see the impact of tomorrow’s RNS on this being completely binary.

Wouldn’t be surprised to see it rise 30% or fall 30%.

I actually hope the tariff impact within the outlook is poor, so I can start a proper position here in the event of a decline.

It looks to me as though the main issues have largely subsided now, with a c.£20m hit to the company looking likely. While this is ‘evolving’, I don’t see the sum being much higher than say, £22m if costs run a bit higher than expected.

Underlying net income should be very respectable for FY25, with a statutory net loss according to my calculator (the latter isn’t something which deters me at all).

FY26 looks like it’s going to be a poor year. I broadly agree with analysts in that I also expect net income to be around £11m for FY26.

FY27 seems as if it could be the real turning point for SFR, assuming no further black swan events.

As I’ve said before, this isn’t my type of company, but if I was holding, I’d feel pretty relaxed about the long-term prospects now.

FWIW, I think underlying net income in FY27 could be £15m+. I personally wouldn’t assign a high p/e to a contracts business or a construction company, but if the SP remains as is, at £15m net income, this would be a on a p/e of just over 5 (obviously too cheap imv).

Good luck all; it’s not a bad place to park some of your money imo. I think this will comfortably outperform the market over the next 2 years.

Not sure why there are so many posts on here asking why this is so cheap… it looks fairly high risk to me.

A quick glance over the balance sheet and a moment of thought regarding concentration risk and contract risk should be suffice.

The current liabilities are huge here imv. As for the buyback talk… where’s the surplus cash to commence a buyback?

Looks dirt cheap on a p/e basis, but that only tells a small part of the story imo. For speculation, this could really perform… I personally wouldn’t regard it as investible, however.

I think it is prudent to focus less on what is said by the U.S and China, and to focus more on their interests as nations.

As the two leading economic players on the planet, they will both want to consolidate their positions and expand wherever possible.

Regardless of what Xi and the pregnant orange fella say, neither of them have any interest in a race to the bottom… nor will the ruling classes in either country tolerate such a kamikaze trade war.

Whichever clothing manufacturers thrive on the back on this situation will find themselves on the shelves of JD Sports, I believe. If there’s any safe haven in the fashion industry in the western world, it’s here imo.

I sleep very soundly being invested here.

Imo, there’s too much short-term debt here with net current liabilities of just under £90m.

Can anybody please explain to me how the company is going to find £90m in the next 12 months to account for this?

Looks like there’s going to be a shortfall of £50m-£60m to me. Another placing?

A placing at £2.50 for £60m equates to roughly an additional 24,000,000 shares I believe, excluding placing costs.

Bear in mind that this would leave the company with next to no cash and tens of millions to find in the following 12 months to pay down more debt.

Looks over-leveraged to me with borrowings at over 5x forecast net income.

All imho, happy to be corrected.

Nascan,

With 60% of their market being U.S. and with 50% of those sales (as you say, 30% of total revenue) relying on Chinese imports, I’d say that’s pretty significant.

I think selling off DG Americas would be the right move personally, but I agree, a knee-jerk sale isn’t required. There must be a company out there who can drive some synergistic benefits out of DG Americas.

If I was still invested here, I wouldn’t be panicking, but I can’t say today’s update filled me with much positivity.

Something IGR might benefit from is the scrapping of the de minimis rule (should help protect the company against the likes of Temu etc).

I won’t be buying back in as I’ve restructured my investing strategy, but I do think holders will eventually see a nice profit from this (from these levels).

Lastly, I expected it to tank when I read the trading update… so what do I know? 😅

Nascan,

‘Across the Group c60% of revenue is derived from the US market, with over half of purchases made by DG Americas being sourced from China.’

Not sure where you got your information from, but the company obviously disagree with you. I hope nobody invested based on your incorrect speculative information; I’m glad I disregarded it.

Beo,

Thank you. You summarised my thoughts in a more clear and concise way that I could have done.

Excellent performance imo, especially given the headwinds.

A real coiled spring imo; ready to bounce when some tailwinds.

It baffles me how it’s cheap (imv) on cyclically low earnings. I’m looking forward to seeing what numbers they achieve upon a housing market recovery (much like yourself). Nice dividend while we wait as well.

What’s impressed me most is the ability to hold onto margins in this environment. Excellent management imv and evidently some moat.

Https://www.msn.com/en-us/money/other/trump-floats-substantial-china-tariff-cuts-in-trade-deal/ar-AA1Dq7yn

Looks like negotiations between the U.S and China will soon be underway.

Note how the higher tariffs will be on goods which ‘threaten U.S national security’… I don’t see cheap clothing from China being a key concern moving forward as the U.S can’t (and won’t want to) compete in the manufacturing of clothing imv.

My stance remains: tariffs = a negotiation tactic and a means of wrestling some trade in key industries away from China. I do, however, expect tariffs to make China less competitive for U.S. exports in most industries vs their competitors.

All in my honest opinion, do your own research.