Member Info for LorenzoLynch

…We can probably expect some buying volume from the yanks later today

Pokerchips,

Agreed on the Chinese dumping of bonds, but the Chinese economy is incredibly reliant on the U.S, so I think their hands are somewhat tied, personally.

They’re not yet in a position of desperation, but one thing is for sure: these huge tariffs on China cannot remain in place for too long without it causing a severe Chinese recession…. It’s going to be very interesting moving forward.

The Chinese will be eager to resolve this situation quickly and amicably, but they will have to accept U.S dominance if they want to strike a deal imo. The U.S doesn’t want any true competitors.

As for investors panicking, I can see why they did during Covid and 2008, but not now if they were/are holding deeply undervalued companies with solid balance sheets. As you know even better than me, emotions have to be put to one side.

Run1,

With all due respect, I think you have absolutely no idea what you’re talking about.

Tariffs are an effective tool against China, and they’re an effective tool for the U.S to use in the negotiation of.. erm… TRADE DEALS (both official and otherwise).

Trump’s negotiations should actually result in LESS tariffs imposed on the U.S in the long-run. As countries now have a choice of striking a trade deal and lowering their own tariffs, or having tariffs imposed on them. The U.S has the upper hand in these negotiations by a long shot.

It is in the U.S’s interest to strike deals with all of the other cheap manufacturing nations, because if they don’t, they’ll have an incredibly deep recession… in other words, they have no choice.

Imo the trend of garment production moving to south East Asia and out of China will continue. It’s not hard for JD to find new suppliers, or for Nike etc to ramp up production in the likes of Vietnam.

The 90 window gives companies the time to pivot out of China without having their earnings impacted.

At the end of the 90 day period, I expect an announcement of ‘x, y and z countries didn’t play ball, but Vietnam, the U.K etc have all agreed to do this, so we are removing all tariffs from these nations’

Carrot,

I agree completely. A lot of people will be kicking themselves in the not-so-distant future imo. Especially those who sold near the bottom.

Judging by the comments on this board and the familiar faces, there are some very wise investors here; none of whom have panicked for even a minute about JD’s prospects.

Nonsense,

I agree. In desperation, they might just invade Taiwan in the coming years, but that could genuinely be the start of WW3 imo.

The U.S needs to weaken China, but to attempt to destroy it.. well, I can see why Musk wants to colonise Mars now 😅.

Highly recommend Dalio’s Changing World Order btw if you haven’t read it. I think it’s essential reading for the end of long-term debt cycles and building an all-weather portfolio.

My final point (on JD for once): I hope the market zooms out and remembers that the 52 week high for this was £1.62 (and it was still cheap imo). If the momentum investors get on board, we could be in for a rally and a half here.

Nonsense,

China invading Taiwan is the major escalation that needs to be avoided at all costs.

I won’t elaborate as we’ll end up digressing too much, but let’s just say I’ll be buying gold and silver in such a situation… and moving to a remote island.

Nonsense,

I respect your views.

My reference to Machiavelli wasn’t a reflection of all of my views. I just think he regarded as the founding father of modern politics for a very good reason.

With regards to the current situation, I think Ray Ralio’s Changing World Order breaks it down exceptionally well, and he also compared the current period to that of the period prior to The Great Depression.

During the early 1900’s, the U.K. was the leading power, and there were two rising powers (the U.S and Germany)…. This was of course followed by two world wars and a change in the world order.

The rising power now is obviously China. If the U.S doesn’t maintain its position of global dominance, it could end in disaster.

How do you widen the economic gap? By isolating China and making it univestible.

How do you do that? Tariffs.

This will weaken China and strengthen the nations which surround them. Note how this is taking place during the Russia-Ukraine conflict and more importantly, whilst China is in economic distress.

As for Asia not wanting to be dependant on the U.S, they have no choice. Lots of conversations will have been happening behind closed doors. As I said earlier, the south East Asian leaders were in U.S.A today allegedly… odd coincidence.

Lastly, FWIW, I think that presidents and prime ministers are only figureheads. Trump is just the face for this phase of America’s plan imo.

True power doesn’t change hands.

Nonsense,

Official trade deals aren’t necessary.

A gentleman’s agreement to simply not impose tariffs on one another and an adherence to the WTO regs takes us back to where the world was a few weeks ago.

I wasn’t referring to official trade deals, but I do expect those to follow suit eventually. A regional deal with the South East Asian countries could be one singular deal for example (and imo, the most important and most imminent).

Pokerchips,

When a politician or governor of a central bank tells you something, the reality is often the complete opposite.

I explained this to my family when we were told that the Covid inflation would be a flash in the pan.

I looked at the quantitative easing numbers (increase in the money supply) and explained the situation to my family. The numbers actually exceeded the level of inflation that we witnessed (as a lot of the money went into financial markets etc).

The only person who listened was my Nan, who downsized her house in anticipation while the U.K housing market was at its peak…. She’d have been in some serious financial distress had she stayed where she was, as she was already using savings to stay afloat. Bloody scumbags they are, but fortunately I’d unlearned most of what I learned at politics and economics at university and during my A-levels.

Tbh, when I read that statement my initial thought was ‘oh sh*t… Trump’s going to back down’, but I wasn’t expecting it to happen so quickly. I thought he was going to let things fall a bit further into capitulation beforehand.

Carrot,

I’ll be amazed if this stays under 80p tomorrow.

Also, top comedy from yourself and others today 🤣.

My theory of this mostly being an attack on China as well as a negotiation tactic appears to be correct. China own a serious amount of U.S bonds though, so that trade war could get very messy.

The sensible play here, in my view, is to limit exposure to the U.S and China, and simply pick up the value elsewhere. Most U.S stocks still aren’t cheap imo. It’s just gone from a huge bubble, to a moderate bubble… whilst allowing Trump’s pals to make a quick buck.

I expect lots of trade deals to be executed in the next 90 days.

The main play here: it’s going to drive manufacturing out of China and into other nations.

As I said on here a few days ago, it’s well worth reading some Machiavelli (The Prince is arguably the best book I’ve ever read) for a grasp on real politics, as opposed to party politics which is the circus used to preoccupy the masses while real political moves are undertaken.

Controversial to say, but Trump has played a blinder (as far as his own short-term and American’s long-term interests are concerned).

That many investors won’t have read today’s RNS’ yet due to other commitments with it landing at noon.

A lovely gift to holders imo. I topped up within a couple of minutes of the RNS’ landing.

Could be my biggest position by the end of play today if it rises slightly further from here.

1) Reeves’ budget looks like a non-event (albeit swallowing the growth benefit we’d have had.

2) Several south East Asian leaders have flown into Washington today… one can only assume to create trade deals.

3) £100m buyback announced.

4) A relaxing on the capex front to distribute returns to shareholders etc.

The list goes on, but I’m busy at work.

Congratulations to those of you who used your brains and had the nuts to hold through the mayhem.

Condolences to the 50p crowd and single digit IQ fella who mentioned 3p… we could pay a dividend of twice that comfortably ffs 🤣

Sm66,

According to my research:

JD’s own brand clothing accounts for around 4% of revenue. China is our biggest supplier, followed by Vietnam. I think a pivot out of China would be easy enough though.

Nike’s production is very diversified, but Vietnam is their supply line for footwear.

Same applies to adidas.

Puma and Under Armour are less diversified (across around 5 nations instead of 10), but they’ve been reducing their reliance on China.

New balance make around 25% of their shoes in the U.S.

Vietnam are the number 1 producer for footwear globally, followed by a declining China.

Indonesia, Cambodia, Bangladesh and India are the next largest.

For clothing, it’s Vietnam, Cambodia and Bangladesh leading the way.

Quality plays a big role though, with Sri Lanka and Vietnam supplying higher quality goods (very relevant to JD).

There’s been a big shift away from China anyway, because other counties either supply better quality goods or cheaper goods… I fully expect this shift to ramp up rapidly in the coming months.

If we do take some hit from the huge tariffs on China, I expect it to be short-lived.

This company, and the SP, should bounce on trade deal news with certain nations imo.

Stockis,

There’s no need for maths and rationality here. ‘It’s going into the 50’s’ is all we need to know, according to some.

I broadly agree with your calculations.

Nonsense,

There is always an intelligent reason behind the decisions of the world elite.

I think most people overlook this: they are not acting in our interest, they solely act in their own self-interest.

At the very least, he's created an opportunity for himself and his friends to invest at much lower prices than before... Nancy Pelosi 101.

At this stage, nothing has back-fired on Trump directly. It's important to make the distinction between him as an individual and him as a president.

My (new) local B & M is rife with shoplifters according to the security guard.

He said it’s absolutely relentless… and I’m in a relatively crime free part of England in a middle class area.

I went in to buy a large foot peddle bin, but couldn’t, because all of the lids had been stolen (hence our discussion with him). I’m talking about 10-12 bins… all unsellable. C.£150 of revenue gone?

I was buying a new bin, because the lid had broken on mine, so yeah, a poor quality bin and a shoplifting issue.

I don’t have a strong opinion on the business on the whole. I have mixed views, but don’t own any.

If the tariffs remain in place, production can be moved to:

Nigeria 14%

Philippines 18%

Colombia 10%

Brazil 10%

India 27%

Or another other country with the ability to produce goods cheaply, following a trade deal with said nation imo. I will be amazed if a deal isn’t struck with Vietnam, personally.

I think this all is effectively an attack on China and a negotiation tactic with other nations. Going for China directly, would have been too brazen of a move. Isn’t it funny how China was included initially with Mexico and Canada, with fent being the alleged reason? Yet the fent was evidently not the motivating factor, as evidenced by ‘liberation day’.

Hoppan,

No worries. It’s just my thoughts.

I’ll give the management credit for one thing: they’ve been very transparent in their reporting. I really respect that.

As for the research notes, I never give much value to them, but brokers often have behind-closed-doors conversations with management (that obviously doesn’t guarantee that management are completely open with them though). Also, management don’t have a crystal ball either, and the absence of any director buying or selling tells me that they’re probably on the fence about SFR’s prospects.

I think you have to form your own conclusions on the probability of certain things occurring. Calculate realistic and absolute downside vs upside.

I think this could fall to 10p momentarily if certain risks present themselves, but I can also see a clear, albeit long, pathway back to 60p. I think the smart move here would be to either avoid it, or to have a fairly small position until there is more clarity. At 10p or something silly like that, I think I’d have to invest myself with a 5%-7.5% weighting.

Good point on the govt infrastructure spending… but SFR still needs to win those tenders.

I’m sure there are various ways of… lets say.. incentivising the award of tenders. Such things are common place in this sector, according to some.

Randerson,

Forgive me if I've made a mistake her, but it at appears to me as though earnings are broadly flat year on year, and the p/e is currently 15, the U.K is facing macroeconomic headwinds, and NLW & NI have just increased... How is this dirt cheap now, let alone at 700p+?

I'm obviously missing something here.

My dad was a shareholder of SFR for several years until just before the share price collapsed (more luck than judgement, I think)

Anyway, he was always trying to convince me that SFR was bargain, but I never saw it. I didn't rate the balance sheet and I saw it as a risky industry that could always experience a black swan event AND it's a contracts business (something I always avoid).

At 50p, it didn't tempt me, but at 20p, it did... briefly.

I think this could multi-bag in the longer-term (3-5 years), but I think it's very high risk, even at this much lower valuation, for the below reasons:

- Net debt (pre-IFRS 16) has rocketed from around £9m to c.£55m in a matter of months.

- The c.£22m bridge remediation cost DOES NOT include an additional 4 bridges (of which they aren't able to estimate a remedial cost at present, to my knowledge).

- No director buying, aside from options.

- Industry headwinds and margin decline.

- Profit warning on underlying earnings, let alone statutory.

- £4.4m employment tax liability out of nowhere.

- CEO has jumped ship.

- Project cancellations and delays.

- Declining order book.

- c.£2m hit en-route from rising NLW and NI costs.

- Reputation damage. Will this reduce their ability to tender for some contracts? Personally, if I was awarding a high risk contract (e.g. nuclear or a huge suspension bridge), I wouldn't allow SFR to tender... no way in hell would I want that on my head.

- In the interims, they mentioned that there hadn't been any '3rd party recoveries' in relation to the bridge remediation costs... they've flagged the risk, but not quantified it.

- Rising finance costs will surely cause margin deterioration.

Now consider that with all the above risks, they will only have c.£25m-30m headroom at the end of this financial year FY25). The cost of the remaining bridge remediation could eat into that. There could also be 3rd party recoveries. Furthermore, there could be some additional headwinds and/or another black swan, then before long, they may need to raise funds.

To summarise, it's in an absolute mess imo and while many of you will think that my opinion is disingenuous, I wouldn't be surprised if this falls significantly from here. That said, huge upside potential obviously remains, if they are able to weather this storm. Personally, I think the company will... eventually, but it's far too risky for me at present.

If they do come through the other side and return to £20m-£25m net profit per annum, and gradually pay down the debt, I think it could return to 80p, so I suppose the 60p question is, are these issues temporary?

All just my opinions, so please do your own research, and I genuinely wish all holders the best of luck.