Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
...As a consequence of topping up today. As we’ve seen for the past 12 months or so, this stock loves round numbers e.g. 30p, 50p, 60p, so whenever we fall through support, I start preparing for a top up at just above the next round number. I won’t be topping up further until we see 41p (should we be so fortunate).
On another note, I can’t say I buy into this ‘x buys and x sells today’ data at all. The share price never seems to follow the direction of this data, so surely it’s inaccurate? Are you guys using Level 2 to gather this information?
Simes20,
I don't think you understand value investing. Nobody is expecting Card Factory to join FAANGM anytime soon. Most of us invested here have done so as the company is significantly undervalued based on probable future earnings. Read this and then do some further reading:
https://www.investopedia.com/terms/v/valueinvesting.asp
Simes,
This is the last time I’m going to respond to one of your ridiculous posts, because I haven’t got the time to educate you. Let’s keep this simple: you [pretend to] have the most negative outlook on CARD of anybody on this BB and you evidently lack imagination, yet your ‘best case’ scenario for CARD in the short-term is £40m net profit per annum. Do you think the company is going to go bust, but you also think the company could realistically earn £40m per annum, should there be no additional adverse events. I don’t know what your game plan is exactly, but what I do know is that you’re certainly not intelligent enough to execute it. Based on today’s market cap of £182m, that would give us a P/E of 4.5. Your perspective summarised: investing in a proven, highly profitable company with a sizeable dividend, sufficient moat and a realistic, yet attractive growth strategy, whilst it’s trading at a forward P/E of 4.5 is a terrible idea. What stocks are you invested in? I’d love to know, because judging by your disdain for CF, you must have a portfolio of fast-growing companies trading at P/E multiples of 2-3 weeks
Paperhands,
I posted that last message in error. No idea how to delete it.
Apologies for taking a while to reply, I haven't had much free time this week. My 3 largest positions at present are CARD, BWY and HAT. Each of them are weighted between 17%-20% of my portfolio. Other value stocks that I'm holding are RCH (this was one of my largest positions until recently, but I recently trimmed quite aggressively as there isn't too much value on offer anymore imo, although Reach has one of the most interesting growth strategies I've seen since I started investing), REDD (recently trimmed for the same reasons I trimmed RCH) and DISCK. In terms of spec plays, I'm holding some DGHI (I personally believe that BTC is worthless, but should BTC's value remain approximately where it is today for another year... well... I'll let you do the maths. Look at the hash rate they should have by next summer, convert that into approx No of Bitcoins mined per month and go from there) and some PRD (I despise gas and oil exploration stocks as much as I dislike the crypto market, but I see PRD as a lottery ticket where the odds are much more favourable than the Euromillions). What about yourself?
Paperhands,
Apologies for taking a while to reply, I haven't had much free time this week. My 3 largest positions at present, by a distance, are CARD, BWY and HAT. I
Simes20,
I'm a value investor, not a growth investor. If CF recovers to even 60% of pre-Covid earnings, I'll make a pretty penny (in fact, I already have done with CF since May 2020). The growth strategy is simply the icing on the cake for me, but I'm not concerned about that now as I don't think anybody has the ability to predict what's going to happen over the next 5 years. My focus is on recovery. How is the growth strategy 'already proving to be ridiculous'? I must have missed the RNS that said it would only take 3 months for the full benefit of the growth strategy to be reflected in the income statement and balance sheet. Whatever planet you're on, please stay there
Simes20,
You've set up an account on here today. Since doing so, all you've done is attempt to de-ramp Card Factory whilst contributing absolutely nothing of any substance to the BB. You remind me of a few faces we haven't seen on here for a while for some reason. Talk about 'obvious' :D. What name are you going to opt for when you next set up an account on here? TransparentClown would be quite fitting imo. Can you please show me (using numbers) how you've arrived at the conclusion that we 'could be looking at under 20p soon'? What stocks do you actually hold in your portfolio?
Noisey,
My hypothesis: the market expected the RNS to be slightly more positive than it was. Consequently, we saw a slight downward movement in the share price initially. Once it was apparent that the share price was likely going to head south or, at best, consolidate, I expect that CF traders starting selling out of their positions. I mean, why would such traders continue to hold CF when there is no obvious catalyst for a share price increase in the near term? They'll surely be back for the next round of results though
Dan,
Something I forgot to add: I completely agree with your statement regarding the importance of CF thriving in the future, as opposed to merely surviving, but being as highly leveraged as we are, in the current economic climate, I think we should focus on survival and improving our balance sheet for the next 12-24 months. Rome wasn’t built in a day and I believe that this company needs to be rebuilt on much stronger foundations that it has at present. I think there are amply opportunities for us to capitalise on in future, so for now at least, the growth strategy is not at the forefront of my mind. That said, I still expect CF to perform reasonably well over the coming months; should CF report a loss over the next 6 months without very good reason (a 4 month lockdown, for instance), it will indicate to me that the company could very well be on the decline, but that’s a story for another day
Dan,
In terms of cash generation, operating free cash flow was £36.1m over the most recent 6 month period... on the back of a lengthy lockdown, with the stores being closed for almost 3 months of that 6 month period, in the quiet half of the year for us (as you’ve mentioned umpteen times previously, and rightly so). I think that’s quite remarkable, given the circumstances. The high street was never going to recover overnight, but I expect footfall to return much closer to normal levels over the Xmas period as people buy their Xmas shopping; speaking of which, I expect our gifts to fly off the shelves in the run up to Jesus’ birthday
While we could split hairs over the numbers (the £8m grant, for instance), what we do know, is that these results are likely not an accurate reflection of how CF will perform in the next 5/6 months, let alone 5/6 years. The turnaround has already begun imo and it appears as though we have sufficient headroom, even if the realistic worst case scenario should occur, so I have no complaints at all and my only major concern is in relation to future lockdowns. When I’ve finished work tonight, I’ll look much deeper into the numbers and share my thoughts on here
Then why haven’t you sold your shares Pfen? You could have sold at 90p? I don’t know what irritates me more, your blatant de-ramping or the way you pretend to have a single-digit IQ
In terms of risk management, these paragraphs caught my attention most:
The Group has modelled a number of severe but plausible downside scenarios involving further closures of its stores, including scenarios where government imposed lockdowns require a three-month closure during the winter period including where the Group's stores are closed for the whole of the peak trading month of December 2021.
On the basis of implementing a number of mitigating actions, the sensitised forecast cash-flows indicate that, even on the basis of full closure for the three months, the Group would continue to be able to operate within the terms of its facility and to settle its liabilities as they fall due for a period of at least 12 months from date of approval of these financial statements. Based on these factors, the Board has a reasonable expectation that the Group has adequate resources and sufficient loan facility headroom and accordingly the accounts are prepared on a going concern basis.
Until the business has no outstanding amounts under the Term Loan and CLBILS facilities, there will be a prohibition of any payment to shareholders by way of dividend or share buy-back. The facilities are structured to incentivise an early reduction of overall debt, with fees of up to £5m payable if pre-payments are not made in line with specified dates by 30 November 2021 through until 30 July 2022. The Company is permitted to facilitate these repayments through the issue of new equity or by using funding from subordinated debt sources. The Company continues to evaluate the options available to the Group and will update further as appropriate.
I hope the above statements alleviate some of the market’s concerns regarding CARD
Jed,
Whilst I understand your reasoning and also believe that no investor should ever encourage another investor to purchase or dispose of shares, I think it’s highly unlikely that a placing will be announced in the interims, primarily for the below reasons:
- To the best of our knowledge, there is no immediate requirement for a placing at present
- A prudent, experienced and diligent CEO acting in the best interests of themselves and shareholders would not announce a placing whilst the share price is depressed (a P/E of 4 based on pre-Covid earnings), when the share price will almost certainly increase significantly in the event of positive interim results (and we have no reason to suspect that results will be poor imo)
Should the share price of CARD find itself around the £1 mark after the interim results, however, I think it’s possible that Darcy could then decide that a placing is justifiable, so I’ll be ensuring that have a sufficient amount of cash available for such an event. With the above said, none of us can predict what is going to happen, but we can, and should, ensure that we are fully prepared for either scenario
Danl90,
MoonPig may expect the market to shrink, but CF expect it to remain stable until 2024, giving us ample opportunity to expand the business in other ways (as we are currently doing). The U.K. greeting card market, according to CF, is valued at £1.3 billion, so I wouldn’t panic just yet, especially when you consider how much of our revenue comes from our gifts. Moreover, MoonPig’s statement evidences that there is demand for purchasing greetings cards online, which should have a positive impact on our future online sales. What moat does MoonPig have that we can’t compete with? We can produce cheaper cards and we have a large physical presence that we can use to advertise our website for pennies. As I’ve said on this BB several times before, if I was the CEO of CF, I’d focus a lot of my efforts on online expansion (whilst keeping the high street as the main earner), as I think the self-cannibalisation would be minimal
Firstly, to those of you who have shared your research and offered real value to this BB. Like many of you, I have a balanced view towards PRD, but I’m invested here as I believe that the risk vs reward on offer here is tremendous, especially after the recent capitulation in SP. I’ll refrain from giving my opinion on the company at present, as I’m no expert in this field, albeit I am learning more by the week.
Secondly, I’d like to thank the derampers of this BB for never failing to make me laugh. It inspires me with confidence seeing how clueless they are. The post earlier that referred to a 300% loss was the tip of the iceberg. Get this man on stage at the Apollo!... if he’s not too busy down the circus, that is :D
Tovers,
Speak for yourself mate! Some of us are thoroughly enjoying frequently topping up our holdings on the cheap! Myself and my bank account are eternally grateful to the derampers (who have interestingly disappeared recently... mission accomplished, perhaps?)
0109,
I'm equally impressed with the results, albeit I've only scanned over the RNS as I've been busy today. Imo we have a strong management team, lockdown-proof earnings, inflation-proof (price inelastic) goods, a healthy balance sheet and we're growing in a sustainable manner (as you've said, acquisitions should play a key role here). I also like Creighton's products and how affordable they are. My current valuation for CRL is slightly north of £1 per share, but I expect revenue, profit, and consequently my valuation of the company, to increase during the next 12 months
Roxbury,
From these lowly levels, I expect a 2x (at least) once we've adequately strengthened the balance and earnings have recovered to pre-Covid levels. The only question for me is how we're going to get there e.g. will a placing be used to get us there as quickly as possible. A quick glance as Saga's financials tells me that you'll probably live by the sword with CARD, prior to dying by the sword with Saga, so I can see where you're coming from :D
Rox,
I topped up yesterday. I’m incredibly confident, but CARD still only makes up 18% of my portfolio (I don’t like having more than 10% of my money in one stock). If I had 60% of my portfolio in one stock I wouldn’t be able to sleep at night! You’ve got some serious bottle. I take it you’ll be trimming on the way up to fair value?
Dan,
If I was trying to ascertain what our cash position will be in Nov, then yes, averaging would be a stupid thing to do, but it has a use in establishing a shortfall over a 12 month period. Does it tell us everything we need to know? No, but neither do your calculations. If I wanted to estimate how much cash we'll likely have in November, I'd do my own cash flow forecasts based on different scenarios and I'd use bracketing to give a lower end estimate (for a realistic worse case scenario) and a higher end estimate (for a realistic best case scenario). It's not a difficult thing to do, but it would be time consuming and pretty useless in this circumstance as the brackets would be so far apart. I imagine the bracket would be something like £10m-£70m. What use is that to anybody? Hence why I'm prepared for any situation to unfold. I'm not just going to make an educated guess. Imagine if we have a 4 month lockdown covering Oct, Nov, Dec and Jan 22. What use would your calculations be then?
I assumed that the business had been putting cash aside from May, yes. Obviously it isn't as simple as accumulating the same amount of cash per month. I should have made it more clear that that's not what I meant. I understand the confusion now. I can't recall my original post now, but I was basically looking at the company over a 12-month period (say June 2021 to June 2022), which of course, would eradicate any seasonal fluctuations. The question I asked myself was 'do we absolutely need to raise £70m via an RI?' The short answer was probably not, because as you've said, we should be in a strong cash position in January. The 3 most likely things to make a £70m RI occur imo: 1) As you've pointed out, we may need to raise a significant amount of capital for the production & sale of Xmas stock (I haven't attempted to calculate this yet), 2) A black swan event, such as another lockdown and 3) Darcy may decide that reducing gearing should be prioritised as it would open the door for institutional investors and reduce risk. However, I do think that Darcy would have announced a raise at 90p+ if #1 or #3 were his main concerns.
On your point regarding liquidity, as I've said countless times now, it's really not a concern for me. Having to raise £70m due to a short-term liquidity issue is completely different to having to raise £70m to prevent a business from going bust or from paying a £5m fine that the business can't realistically afford, because in the former situation, the £70m would be reflected in the balance sheet after the stock had been purchased and sold to customers. The market would then correct itself, and as shareholders, we'd likely be no worse off. In fact, we'd likely be better off as a stronger balance sheet should theoretically command a higher P/E.
I shouldn't have been so lazy in my initial explanation, but it was a very rushed post with a limited purpose