Member Info for LorenzoLynch

Badflaw,

If everyone could see what was in front of them, the stock market would be highly efficient, but it’s not, it’s highly inefficient; which is fortunate for some, and ruinous for others. Thank you for the concern and your ‘sell’ recommendation, but why have you chosen to enlighten CF investors in particular? Are you going to send out another thousand or so warnings on LSE, or is there reason why you’ve chosen the CARD B.B? What have we done to deserve such kindness? Please explain to us why CF will be unable to reduce debt in the coming years?

Wiscos,

I bought back in this week (averaging at just under 50p). So far, management have had one mammoth task to complete (reducing debt, significantly) and that’s been achieved. They’re setting aside a large chunk of money for ERP developments in FY23, so it’ll be interesting to see if there’s as effective at generating growth as they are at reducing debt. If they prove capable, we’re in safe hands. If not, I think we’ll still walk away with a tidy-enough profit

Hi all,

Do any of you have a good grasp on how much we can expect profit margins to increase as NWOR increase their digital revenue? I’m trying to put together some earnings forecasts

On reflection, I can’t really complain about the lack of development on the online front as survival has been the priority during the pandemic. The £23m earmarked capex spend should go a long way

Mdunsire,

According to the most recent webcast, freight cost inflation and labour cost inflation are their main concerns, so Euse is echoing the concerns of CF’s management team. I did some more digging last night, and I must say, I’m no longer concerned about print cost inflation. I can’t say I’m concerned about freight cost inflation either and energy costs are being hedged against. Whilst labour costs are being mitigated against, I think the increase in staff costs since pre-pandemic times will see us fall significantly short of the pre-pandemic net margin. That’s based on a ballpark assumption though, as I haven’t quantified this yet, but I’ll have a go tonight. Something else at the forefront of my mind is CF’s progress (or lack of progress) towards £600m revenue in FY26. Why have we not seen any progress in this regard? Why are the board unable to provide us with any sort of guidance in regards to a timeline? On the subject of progress, how have they still not resolved the issues on the digital front? The only development I’m seeing In regards to CF’s digital offering is the development of a terrible reputation. Consequently, my primary concern isn’t cost inflation (which can be absorbed in the long-term), it’s the competence management team. A quick look at TrustPilot rings alarm bells. I wouldn’t order from CF online after reading those reviews, even if I was still a shareholder!

RH,

The masses generally just follow what they’re told by the mainstream media (which always has poorly hidden agendas) and mainstream economist, who aren’t worth their weight in fiat currency, so naturally, most of what they think is incorrect. For example, all I keep hearing lately is ‘invest in property, it only ever goes up’, because the masses don’t understand the recent devaluation of the £. I do however, think they are right about a recession, but only because it is such a highly likely scenario. I think CARD’s revenue would remain strong during a recession though. The risk would be if their debt becomes unserviceable, which I think is a possibility, especially if they fail to achieve a strong net profit margin. I’d consider buying in at 40p, because I think that is roughly when the reward justifies the risk. It’s all well and good assuming that CARD should be worth, say, 15x pre-Covid earnings, but the balance sheet remains poor and we have no idea what post-Covid earnings are going to look like. Consequently, I’m demanding a large margin of safety. As CARD’s valuation isn’t underpinned by book value, I expect the share price to remain highly volatile until either consistent earnings are produced and the balance is significantly improved. Calls for £1 a share (a market cap of, say, £400m) is unjustifiable at the moment imo

Roxbury,

Personally, I think a recession is nailed in, albeit measures are being put in place to soften the fall, e.g. helicopter money is being handed out the poorest in society again. Liquidity is falling, the cost of borrowing is increasing and inflation is still out of hand, so interest rates can be expected to increase further. The jubilee bank holiday might have actually postponed the recession though, for now, as in relation, the next financial quarter will appear to be stronger. My primary concern here remains to be the lack of clear planning and tangible objectives from CARD’s management team. This evening I’m going to look at how I expect interest rate increases to impact on CARD’s cost of borrowing in the coming months/years. At 40p, I’ll be buying back in I think

It is quite remarkable that the GBP is expected to fall against a dying USD. Don’t get me started on modern economics! Many housebuilders are bargains on pre-Covid profits (or even slightly lower). The residential developer tax and corporation tax increase needs to be factored in to any forecasts and valuations though. As you’ve highlighted, the real concern for us over the next few years is the cost of living crises. I’m staying well away from companies that sell consumer discretionary items. Such difficulties are great tailwinds for CARD though. A great resource for you to watch on YouTube: search for ‘housing market update 2022’. The top link should be from ‘Move IQ’. It explains how mortgages should remain affordable for the foreseeable future due to the means testing measures that have been in place in recent years. Consumer price inflation wasn’t factored in, but rapidly rising interest rates were, so there shouldn’t be a complete bloodbath. I think your initial fears are somewhat justified, but I think we’re probably 5-8 years away from a housing market crash, albeit I could be wrong. Much of the future of the housing market and economy, is in the hands of our govt

Mdunsire,

Lastly, remember asset price inflation. The recent surge in house prices has a lot to do with devaluation of the £ via aggressive quantitative easing. The last time I checked, the B of E had increased the money supply/stock (total number of pounds in circulation) from around £2.4tn at the start of the pandemic to £3tn at the end of 2021... a 25% increase in less than 2 years. Consumer price inflation doesn’t even scratch the surface, yet it’s the only form of inflation they ever seem to talk about... one can only wonder why. The house price vs the average wage data is concerning, nonetheless, at 7x, but this metric was increasing well before pandemic. 5x would be much more reasonable

Mdunsire,

A great post from yourself. No, they can’t, and I don’t think they want to avoid crashing the property market in the short-term, as that creates a buying opportunity for them and their pals. In the longer term though, house and land prices are only going to go one way, and when the outlook looks positive, the opportunity to buy shares in housebuilders at stupidly low prices will be lost. If it wasn’t for the current headwinds, several housebuilders would be priced twice as high as what they currently are, and that’s being conservative. I agree that there isn’t a shortage of housing, but there is a shortage of affordable, available housing. According to the sources I’ve looked at, there are roughly 200,000-250,000 empty homes in the U.K, but look at where they are. Proportionately, London’s financial centre tops the list, with a third of homes being empty. That’s followed by Kensington, where 1 in 8 homes are empty. The average Joe couldn’t afford a weekend in a hotel in those areas, let alone a house! Yes, the housing market is in a huge bubble atm and yes, cheap credit is the primary driver, but I think you’re over-estimating the impact that a correction will have. I think a 15%-20% is a realistic worst case scenario. I’ve adjusted my valuations of housebuilders, and more importantly, their assets, accordingly. I’ve actually advised all of my family and friends to refrain from buying property (and advised some to sell) in the current market, but nobody has listened so far. On the other hand, Boris announced yesterday that the govt will be introducing a new ‘help to buy’ scheme in the near future and there is talk of 95% mortgages being made available, along with the insurance policies that cover mortgage payments in the event of a default (yes, I can see where this could lead to a few years down the line, but I’ll make sure that I’m not holding any shares at the end of the next short-term debt cycle). ‘If interest rates were normalised’... but they won’t be as that would be absolutely catastrophic for the economy. Personally, I think the property market is a mugs game full stop and I work in construction! It amazes me how the masses have been convinced that land has such a high value, when you can park up a campervan or a canal boat all over the country for free, but nonetheless, the masses will remain fools, as evidenced by the recent crypto rally and EV bubble etc. I expect a turbulent 24 months for the housing market, but I think the market is being far too fearful and/or shortsighted. That said, I wouldn’t invest in a housebuilder atm that doesn’t offer 100%+ upside on current earnings... fortunately, at least 2 stocks meet that criteria at present. I’m happy to top up on any dips. 3-5 years is my time horizon. Anyway, let’s not hijack this board any further. Do your own research, and if you want to avoid housebuilders for now, do just that

Mdunsire,

I’m not going to reply yes or no to those stocks, but keep looking. Neither the government, nor the banks, nor the corporations can afford for the U.K. housing market to collapse. Any difficult times will be short-lived, and are more than priced in already with several housebuilders imo (by a country mile, may I add). Not all housebuilders are equal either. From memory, I think Crest Nicholson’s average house sells for about £700,000. I can’t see many of their customers breaking a sweat over spending a few extra quid filling up their Range Rovers. We need more homes in the U.K, and if they aren’t built, prices will continue to rise over the medium-term and long-term; basic supply and demand economics. Housebuilders will consequently benefit from either higher sales volume or higher margins. Cost inflation of materials and labour should subside over the coming years as well, as supply increases (due to there being more attractive profit margins in supplying building materials), albeit fuel costs remain a concern, because OPEC are having a field-day holding the global economy to ransom. All imo of course, but the property market is firmly within my circle of competence. I’ll continue to add to my positions while housebuilders are cheap, and when everything is rosy again, I’ll be selling for a very healthy profit. Da Matser has kindly provided you with one of the best housebuilders stocks (imo)

Simes: you’re talking nonsense, yet again, with no evidence to support anything you say.

Roxbury: I agree. Those opportunities seem to be long gone, for now, although I am seeing better opportunities by the day. CARD is one of them, if the management team perform even reasonably well. Have you seen a clear strategy from them explaining how they will return to pre-Covid earnings? If so, can you please highlight where as I’d love to invest here again

Mdunsire,

I’ll be honest with you mate. I’d love to do that, but as I’m a working man, it’s imperative that I continue cost averaging on the cheap. I will give you some clues to each of my holdings though. They should be sufficient for you to find most of them, if not, all. They’re all U.K. companies.

1) Pawnbroking, Forex etc (At least 2 are very undervalued)
2) A media company (2, to my knowledge, are very undervalued)
3) Beauty products
4) A housebuilder (several are stupidly undervalued. It comes down to preference)
5) Furniture (Cyclical industry, so exercise caution)
6) Predator Oil and Gas (PRD) is my lottery ticket. I won’t be adding to my holding anytime soon. Genuine 100x potential, but as it’s an E & D company, you have to be prepared to lose 100% of your investment

All the best

Wiscos,

I agree. It’s still very undervalued, based on what the company is likely to earn this year, let alone in the future. I only have 5 stocks in my portfolio (6 if you count my modest gas/oil E & D lottery ticket, namely PRD). If I had to add a 6th, it would be Card Factory. I’ll be watching closely. If anybody on here has seen a clear strategy and/or some ballpark earnings forecasts from CARD’s management team, please provide me with a link to that resource, as I’d love to buy back in again. I need something though, as I can’t invest in a company that I can’t value with a reasonable degree of accuracy. My current valuation is just slightly shy of yours btw, but I do factor in a very sizeable margin of safety with all of my valuations

Sold my entire holding here last week. It’s been wild, and very profitable ride for me, but after evaluating all of my holdings in the past fortnight, I arrived at the conclusion that CARD offered the least upside of my holdings, albeit marginally, and the most downside. At the right price, or if I find myself sitting on too much cash in the future, I’ll likely reopen a position here. Reasons why I sold:
• After watching the last presentation, I lost confidence in the management team. They lacked clarity on almost every question they were asked. The FY26 targets are great, but where’s the clear pathway to get there? They don’t even know how much headroom they have in pricing.
• With cost inflation, I think they’ll be very fortunate to achieve £40m net profit this year. If I felt that £50m was a realistic possibility, I’d still be in.
• There’s no real book value to limit my downside.

Good luck all, there’s still plenty of runway here

Also, I didn’t expect us to pay down debt during these quieter months. We were likely using the RCF to make the final payment instalments of the £70m, so making those payments would have had no impact on net debt. I’m looking forward to what our net debt will look like after Xmas/NYE this year

‘The Board expects that the combined impact of unmitigated headwinds; predominantly the increasing cost of freight but also the impact of inflation on staff costs and utilities; plus investment in headcount, IT and development of the online platform to support the delivery of the strategic plan, will add approximately £30m to the pre-Covid FY20 cost base net of mitigation. Looking further out, the Board expects a number of these cost headwinds to subside, and the Company to be able to further mitigate certain cost pressures. In addition, the Company should realise the benefits of the growth investments. Further details will be provided at the time of results’.

Investment, temporary inflationary headwinds and a quiet trading period for us due to the cyclicality of CARD. Nothing to worry about imo as we have pricing power (this was demonstrated in a previous report or presentation, hence the decision to increase prices). Such inflationary headwinds will impact our competitors to the same extent, at the very least. As consumers see their disposable income fall this year, I expect us to benefit from higher sales.

Remember when Roxbury House kept pleading with everybody on the board to revisit previous reports? All the answers were there imo, albeit very discreetly:

• The instalments required at certain deadlines to avoid the £5m fine were almost certainly being paid out of the undrawn RCF (robbing Peter to pay Paul), so a raise was never a realistic possibility. Took me a while to establish this as it was only mentioned in a sentence or two in one annual report. Darcy clearly saw a buying opportunity when this was overlooked by the market.
• Refinancing (in the form of deadline extensions) was already agreed, providing that those instalments were met.
• ‘Permitted to raise funds’, doesn’t mean ‘will have to raise equity’. Permitted = allowed to raise equity, if they wanted to, which is actually a good thing.

Moving forward, if trading is uninterrupted in FY23, I expect:
• Higher revenues from higher footfall on the high street and a shift towards budget retailers as consumers feel the pinch.
• Less debt should result in lower interest payments = better margins.
• Reinstatement of dividend?
• Upward momentum in share price due to a change in sentiment and no threat of an equity raise according to the management team.

I think today will mark the start of the turnaround. If it doesn’t; I’ll start topping again. DYOR and don’t listen to anybody on this BB (myself included)

Cheers both. Mine came in today (Trading 212)

Has anybody received their dividend yet?

NOISEY,

I’m still heavily invested in CARD and my conviction has never been higher. I’m staying quiet on LSE in general, as I want to continue buying shares in my holdings at basement prices. If I’m honest, I can’t believe my luck; being able to bulk buy shares of CF in the 40’s, because Mrs Market (yes, Mrs) misunderstood the wording of an RNS, due to focusing on the tone of the update. There’s a real elephant in the room where CARD’s liquidity is concerned imo, but so far, most people have missed it, because it was only referred to very briefly in one of the recent updates. I missed it myself during my first couple of reads. I think RH highlighted it a few months ago when he was encouraging everyone to re-read the recent CF updates/reports. I’m glad I did; I’ve slept much better since :D