Member Info for LorenzoLynch

SG,

That was incredibly insightful, thank you.. many companies seem to be under the threat of disruption from AI

For me personally, JD isn’t a hold forever stock. I’m waiting for that catalysts to occur, and then I’m off… and tbh, I doubt I’ll ever invest in retail again, after taking some right since Labour took the hotseat

I don’t see a bright long-term future for anything on the high street, but I expect the likes of Card Factory, Greggs and JD to be the last companies standing

I’ve opened a sizeable position (for me) here today, after many years of shunning it whilst my dad held shares (he sold up just before it tanked)

It’s simply too cheap imo.

I plan to sit back for 3 years or so, wait for a recovery to around 9p EPS, and then sell up at around 90p for a 200% gain

Easy money imo, and it offers some much needed diversification for me

Reinstatement of dividends, construction of data centres etc, falling interest rates, lower interest payments as debts are reduced… plenty of catalysts here imo

'The intelligent investor buys from the pessimist and sells to the optimist'..

When there are no more negative comments about JD being finished, that is when I'll start to worry

Alessandro,

JD is a cyclical stock... so it's earnings are, erm.. cyclical

Moroever, in the past few years, they've been hit with:

- Rising interest rates

- High inflation

- Poor macro (especially in the U.K and Germany)

- Rising NI costs

- Nike's failed attempt at displacing JD through DTC, which led to...

- Nike having to sell off huge inventories on the cheap

- Rising labour costs in the U.K, especially for younger workers and minimum wage staff

- Increased competition from China (soon to be pegged back with the de minimis changes in the UK and US)

- Trump's tariff wars

- Nike's poor performance - pivoting out of Nike and into other brands takes time

Now, moving forward (with a bit of luck):

- Falling interest rates

- Declining/stabilising inflation

- Nike's acceptance that they need JD

- Adidas' earnings recovering

- US trade deals

- Taxes to be imposed on cheap chinese goods

- No national insurance cost increases in the year ahead (to my knowledge)

- FIFA world cup

- Opportunity to spin off onto the US market

- Share buybacks to reward shareholders while the SP is incredibly low, based on past performance

- A p/e of around 7 on CYCLICALLY LOW earnings

Unless we all start walking around naked, I only see a recovery on the horizon here

John,

ALSA stagnating would be a worry for me, but surely more opportunities will arise for the company to increase earnings e.g in the Middle East

I do think increased competition is a concern, as always, which is why I’d sell WeDriveU when the time is right to reduce interest payments and shore-up the balance sheet

Only deleveraging can unlock the value here imv… the sooner that happens, the better (for me at least)

Rob,

That was a great post, thank you

With regards to WeDriveU, it’s one part of the business that I’ve never really followed. For me, I’d like to see the overall business simplified and less exposed to sharp swings in profitability. I think it has a negative impact on the valuation as it makes earnings unpredictable

I can’t see any special dividends being paid personally (as much as I’d love one)

The key here imo is focusing on the long-term.

German compensation would have be great, but the outcome is simple: it’s lower risk moving forward and the loss-making lines (which could/should improve moving forward) will be cancelled in 2030. Revenue for the profitable lines is now secured moving forward.

Obviously, we’d all love this to rally to £3 tomorrow, but I think the real opportunity here lies in being patient and taking a long-term outlook.

In that 5 year period to 2030, I expect:

• Alsa to grow

• UK operations to improve

• Germany to improve and for the loss-making line to be eventually discarded, as per the RNS

• WeDriveU to be sold

• Some serious deleveraging, which will massively improve net profit and net margins whilst strengthening the balance sheet and drastically reducing risk

My vision would be simple: keep everything ticking along nicely, until the deleveraging has allowed Mobico to unlock the value of Alsa

The shift to a capital lite model where possible, whilst reducing costs should really aid with this transition

I expect the market to be presently surprised by the improvement in the balance sheet when the results are released - that’s the near term catalyst to start the SP turnaround imo, but I’m here for the potential 10-bagger

DYOR.. the above is just how I view the company

The most undervalued company on the entire U.K market, in my opinion.

Imv, fair value for CTA, excluding any future cyclical upside is currently at least around 75p (trailing p/e of around 10). With cyclical upside, it's anybody's guess, but I see a clear route to £1.50 in the medium-term, comfortably. Many arguments can be made for why this should be trading on a premium multiple, but I'll refrain from listing those.

I think that this company is incredibly misunderstood. It's priced as if it has no moat, is loaded with debt and is on the brink of bankruptcy, but in reality, i think it has a wide reputational and skill-based moat and strong balance sheet, which should continue to improve.

The real opportunity here imo is the operational gearing... not many companies can ramp up production without increasing their cost base (beyond COGS).

Moreover, CTA don't just manufacture products, they design them, and they charge a nice sum for doing so.

If you were a client of CTA, and you were producing billions of £'s worth of cars per annum, would you stay with a trusted supplier, or would you jump ship to save a quid and risk spending a fortune on recalls, whilst your reputation takes a battering and you lose market share?

I could write a book on this stock and my conviction, but DYOR... the Otus overhang will clear eventually imo.

My highest conviction holding, by a mile. Glad I topped up when the CFO was given the chop. Obviously we don't know the reason for this, but I get the impression that the CEO takes no prisoners. He seems highly motivated and I imagine he holds others to the same standards.

Will this remain under the radar forever? I doubt it.

Does anybody know how much the business rates increase will hit Eurocell this year?

AI seems to think that they’ll be absolutely hammered (can’t recall the exact estimates, but it’s comfortably in the millions)

After writing that, I trimmed a position elsewhere and topped up. It’s too damn cheap imo.

Hopefully the resignation wasn’t due to any skeletons in the closet - but is this not already more than priced in?

JG,

An even bigger elephant in the room is the cash pile, which is being significantly overlooked imo.

Yes, there’s a lot of debt, but the devil is in the detail - we have years, not months, to make those repayments, and once reduced debt to respectable levels, refinancing (at hopefully lower interest rates) becomes an option.

In 12-18 months, I think the debt profile and trading outlook will look much more positive than it does currently. I believe that we’re in the early stages of a monumental turnaround.

The shift to a more capital lite model, German Rail resolution, ALSA taking more control over U.K operations and the expansion into the Middle East all offer some nice upside imo… oh, and a WeDriveU sale would be the icing on the cake.

Some very valid points being made on here today

Imo, the major problem here has been the NLW and NI increases. Without them, I think PBT would be have significantly higher and there wouldn’t be such a high level of pessimism.

When the next full update lands, I think it’s imperative that Darcy steadies the ship and provides some detail on how the company is going to return to growth, and quickly. Also, I’d like to a shift back to what was working - enhancing the bottom line by reducing debt and interest payments. It’s a sure bet, whereas these acquisitions are not.

Funky pigeon offers significant potential, but I think we need a robust, clear strategy; exactly how we will gain market share from MoonPig (undercutting on price and making this known to the consumer, would be my strategy).

I also think that some CF gifts are far too expensive. Saving a few quid on cards is great, but knowing that you can also buy cheap gifts would offer a much greater pull - and that pull is essential on a dying high street.

I don’t think there’s any reason to panic, and I think that this is far too cheap. Even a p/e 8 sees this trade around the £1 mark. It shouldn’t be difficult to achieve that level of optimism from the market imv.

If I had the spare cash, I’d be topping up.

Imo, this is an exceptionally strong company which is priced as if it will be bankrupt in 3 years (or less).

Market hates uncertainty, as you know, so i understand the argument for holding fire until a new CFO comes in or until some light is shed on the reasoning for the immediate resignation.

I’m not aware of a better opportunity on the entire market.

Dwam,

JD is a publicly listed business, not a second hand handbag or a ‘crypto’ coin.

Is it ’worth what people are willing to pay for it’, or is worth the free cash flow that it will generate during its lifetime for shareholders, discounted back to the net present value?

The sheer idiocy in markets of late is very much a consequence of too many ‘investors’ behaving like yourself and assuming that ‘JD is worth whatever we feel that it’s worth’ imo.

For example, if JD announced a special dividend of 20p per share to be paid in 72 hours, but the share price was only 0.5p, would you believe that the company is only worth 0.5p?

Honestly, I’ve never been as frustrated or perplexed as investor as I am at the moment. I cannot believe how irrational and short-sighted the market has become.

These days, it seems like value has no importance to me, and all that matters is a ‘ahead of expectations’ update or a sexy news story about the company or its industry. I doubt we’ll have any good companies left on the U.K market in a decade at this rate.

Rhinocol,

Several people who I know have left their Xmas shopping later than usual this year and the weather’s been dreadful, so I wouldn’t be surprised if we get a nice Xmas rush.

This contributes to my thinking that we’ll do around £60m PBT. I think we need to hit the top end of the new forecasts to shift sentiment.

JKR investing released a YouTube video on CF today. He said that we needed to offset £14m of cost inflation this year (rings a bell tbh). Had the board set the bar low and said ‘we expect earnings to be flat this year as we offset this cost inflation’, sentiment would be different now imo.

I think there are several issues (some self-inflicted + the budget impact) which need resolving. I don’t think they are major problems though, and I don’t think they’re difficult to overcome.

What long-term investors really need now is absolute clarity on the issues and how they will be resolved.

Forward p/e is around 5.5 according to Stockopedia now… ridiculous imo.

Going off the new analyst expectations, it looks like CF have offset around £10m of the £14m.

Social media* not website campaign

GulfHarbour,

You’re probably right there!

Last Christmas I enquired in store about price rises, and the staff confirmed that prices had increased and they gave me several examples. I didn’t ask this time, mostly due to my own complacence.

I agree that those costs should have been easy to pass on; we’ve never had an issue doing this before.

We definitely need more information to make a truly informed judgments: number of customers through the door, basket values, margin suppression, declining gift sales, loss of market share etc.

Something I’ve often been perplexed about is how many consumers are unaware of what CF offers in terms of value and quality.

The company needs to be marketed properly, and I think that this would have been a better use of capital than some of the acquisitions.

When consumers think ‘cheap, good quality cards and affordable gifts’, Card Factory should be the first business that springs to mind. A simple ‘want to save money this Xmas?’ TV, radio and website campaign would have been sufficient imo.

I like the FP purchase, but the others have been a questionable use/misuse of capital.

Really not understanding the reasons for the panic here. Was CARD really priced as if it was going to hit £70m+ PBT and 15.6p EPS? I don’t think it was.

Personally, I think the board underestimated the impact of last year’s budget and tbh, I was shocked by the earnings forecast (but I thought that the board and broker knew better than me).

The key thing: I don’t believe that the business is in structural decline. I just think that CF has taken a battering from the NLW and NI cost increases, and was unable to offset them.

Lessons will have be learned, for sure, and with Darcy having egg on his, I expect the latest forecast of £55m-£60m PBT to be very conservative, with him probably expecting £60m-£65m PBT.

Long-term (on and off, in most cases) holders have been here before. Look at the other times that the SP has tanked and how it has then responded:

• c.28p to 93p

• c.45p to 120p

Will we see £1.50 in Jan, as many of us were expecting? Probably not, but I wouldn’t be surprised to see it hit £1+ in coming months. It would still likely be on a single digit p/e at anything under £1.20, with a well-covered high dividend imo.

“On the assumption that current trading trends persist over the remaining seven weeks of our financial year, we now expect to deliver adjusted Profit Before Tax for the full financial year between £55m and £60m”.

Following my prior post, note the ‘on the assumption’… Moreover, the other parts of the business appear to be performing well.

I think Darcy has the ability to identify the issues and find the best solutions in the new year. The man is no clown imo.

FWIW, I think Darcy has kitchen-sinked the update today.

There are still 13 trading days remaining, so if shoppers are leaving it later than usual, there could be a little surprise to the upside.

It would make sense for me to do it this way around and then in Jan say ‘we ended the year above expectations with PBT of £62m’, than say ‘we missed PBT expectations by c.£4m’.

There’s obviously an element of wishful thinking in the above, but I wouldn’t be surprised. I think (and hope) our PBT will start with a 6…. Just about.