Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
N1shares,
I find it quite remarkable how you’ve referred to Yorkshireman’s comments as ‘rubbish’, when what he’s said is evidently correct. Are the govt discouraging small investors? Yes. Are the govt penalising poorer investors for no good reason? Yes. Are the govt attempting to reallocate wealth at a time when doing so is absolutely critical for the long-term future of the United Kingdom? No. Could the govt increase revenue by targeting wealthier investors? Yes. Are they doing that? No. Labour and the Tories are two sides of the same coin imo. No matter who wins our elections, the same people will own all of the important assets in this country. That’s all that really matters to our politicians; that and the opportunities that are presented to them as a reward for protecting and enriching the British establishment. All we can do is emulate their legal ‘tax avoidance’ tactics. Unfortunately, an ISA is still sufficient for me… for now
Mdunsire,
What makes you think that? Btw, the pawnbroker that I was invested in previously was HAT. I sold my entire holding a while back at around £4.45. No value left in it from here imo. The time for counter-cyclicals has come and gone imo
Badflaw,
I asked you when he shorted it. That’s a question, not a declarative statement. How can I be wrong about that? You have proven my point with that post. Do you honestly think that such a post offers a sufficient level of analysis? In my experience, the devil is often in the detail with stocks. I’m not going to share everything I’ve learned, because it’s all written in the reports and presentations, but I’m going to respond to some of the points Robbie made.
1) The share price rose, because the market didn’t realise that CF were able to use their RCF to make payments on their liabilities which were due sooner than the expiration of the RCF. They also paid down some of the debt with cash flow. This was done with the business being closed for several months of the financial year and at a time when high street footfall was low.
2) Continual decline: mostly because we’ve just had this thing called a pandemic. We haven’t had a full year of trading since Covid-19 first landed in the U.K.
3) The ‘guff’ about FY26 doesn’t interest me. I haven’t factored it in to my valuation at all. No management team can foresee that far into the future, so I think it’s a ridiculous target tbh.
4) Net debt excluding lease liabilities (which should be excluded, as lease payments are paid from revenue, not cash, providing that a company remains profitable) looks expensive vs last years net profit, yes, but is that the most accurate reflection of CF’s earning power moving forward? You think we’re going to have lockdowns every year?
5) Nobody buys cards anymore, yet over £1bn is spent on them every year in the U.K?
6) The CFO is leaving… isn’t that a good thing, considering the dire state of the company’s finances, according to yourself and Robbie?
I cba to respond to your comments at the bottom of your post, because they don’t make a lot of sense to me and a response wouldn’t contribute to the B.B. I’m not trying to belittle you, I just think you’ve got this very wrong. I don’t think CF is perfect btw, I just think it’s very undervalued and I expect the business to perform well during the next 2-3 years. I don’t forecast beyond that
Badflaw,
When did Robbie open a short in CF? I can't see a CF short position on his website. Ok, so you've never posted on here before, but you're now posting entirely one-sided negative posts about CF, even though you don't hold a long or short position in the stock... and you're doing this at a time when you want the share price to go up? What are you smoking?
Badflaw,
You seem like a very genuine, well-informed trader. Your comment 'Might be ok if it was an online business but no-one really shops much for cards anymore and the youth of today have given up on Xmas cards' is the sort of statement I'd expect from Warren Buffett or Charlie Munger. Are you sure that your CARD short isn't still open? I'm just trying to ascertain why a transparent, upstanding person like yourself would attempt to de-ramp a stock PRIOR to opening a new short position. Why not just open a short, then watch the share price capitulate as the company goes bankrupt? I mean, CF doesn't get even one customer during peak hours, according to you. All things considered, I'm left wondering if you're clinically insane? I'm not sure what your game is, but I can see that you're not very good at it. I'd like to buy more shares at 30p-40p, so please continue to de-ramp. I strongly recommend looking at the 'going concern' section of CF's last annual report, BBC News and the Mayan calendar for some ammo.
Badflaw,
I’ve read the most recent edition of The Naked Trader, and with all due respect, it’s an incredibly simplistic book. It was one of the first investing books I read, and all things considered, it was the least informative, by a distance. It doesn’t even scratch the surface. If you’re shorting companies based on what you’ve learned from that book and his seminars, I hope you’ve got deep pockets. Don’t you think CARD would be heavily shorted by numerous institutions if it was in a situation half as dire as you believe? I couldn’t care less if you keep your short open, but here’s something to consider: wouldn’t it make more sense to short companies who have high debt, have consistently made losses (and are likely to continue to do so) and, ideally, have quite lofty valuations? USA was riddled with such companies during the recent rally, and they’re now dropping like stones
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