Member Info for Registerme

With a profit margin of 14.7% and cost inflation at say 10%, house prices down say 5% that’s the margin wiped out. As costs continue to increase, and house prices continue to come down then we get into loss territory.

From a HB perspective this is worse than 2008 because not only have you got house prices sliding for the reasons you mention, but building costs have soared as well, so the margin is being squeezed at both ends. It’s a dead cert that HB’s will make a loss this year, and possibly the next. PSN will suffer the worst because it is trading at a premium compared to other housebuilders because of the divi, but no profit will equal no divi.

Who wants to live in a camper? You can’t get anything decent for less than £40k. Where would you park it? Where would you empty your own sh*t out? You’d have no fixed address. Where does someone who can’t raise a house deposit find the money for a camper? Berkshire has performed well, plenty of other stocks haven’t. Watch what happens to the sentiment of Berkshire when buffet kicks the bucket. It won’t be long.

Paddy, what’s bizarre is that when I mention MARS you immediately say “quite a risky one due to large debt burden”. The debt burden is 50% higher here, and without all the property backing it at yet you “can’t understand what all the fuss it about” when nex debt is mentioned. I’m confused.

Anyway, I’m done here. It caught my eye as it was in the top gainers list on Friday, but having done a bit of research I won’t be investing. But best of luck to those that have.

I didn’t say all intangibles are worthless, I said goodwill is worthless. It’s nothing, hence why it can be written off so easily- it just sits on the balance sheet to show excess capex. Sure, other intangibles have value such as IP, software, contracts etc.

PC, this is why I’m specifically looking at underlying assets, which are the collateral to my investment. I don’t see any value in goodwill whatsoever. It all gets written off eventually, cash and property doesn’t.

Having done a bit of research I’m going to hold off all companies with high debt for now, and jump in when inflation starts coming down.

In the meantime, I’ll go mostly into housebuilders, which I think are massively oversold (specifically PSN) considering there’s been no house price crash as was feared. Should be “safe as houses” we shall see.

Hindy, I always write off goodwill. It can easily be massaged either way. It just represents how much a company has overpaid for something. MARS wrote all its goodwill off in the latest accounts. Nex wrote some off too.

PC, yes sorry I mean priced at 3x more when on the face of it, MARS is worth more in terms of book value and profitability.

The reason I compare with MARS is the SP has suffered for the same reason- debt. I thought it was great value at 50p. It’s now 30p but it will probably get cheaper still. So what’s cheap and what’s not? It’s really hard to tell these days.

Personally, I think both nex and Mars will rally at any hint of interest rate cuts, otherwise I can’t see any reason for them to stop falling.

Give me some numbers Hindy. I’m not sure what you mean.

The equity figures I’ve given are the bottom line on the balance sheet. I.e assets- debt. Nex goodwill is listed in the notes as being £1356m, the total equity being just over that at 1390m so about 34m book value exc goodwill. I just put the Mcap next to it to show how the market values it compared to the book value.

Marstons- 648m equity- no goodwill. £201m Mcap

Nex- £34.5m equity excl goodwill. £687 Mcap

The mind boggles. The chart suggests nex is cheap, the fundamentals suggest it’s overpriced.

PC, your comments regarding return on debt. Doesn’t that issue apply here?

Personally I am more interested in book value than profit. I see it as collateral, which also helps for capital raising. Most businesses will have a bad year at some point, so buying based on good income that turns bad will tank the investment, and the business will be more vulnerable to such events without assets backing it up.

Having had my fingers burnt in marstons for its debt, and nobody able to tell me why nex is worth 3x more, I think I’ll pass on this one. Thanks to whoever mentioned housebuilders though, will probably spread across a few of them.

I noticed the former CEO of nex (Dean Finch) when it was doing well is now the PSN CEO.

Paddy, are you invested in nex? Interesting that you say Mars debt burden is high when it’s around a billion less than nex, and is property backed.

Re the housebuilders, I can’t see them getting to those levels unless something bombs the whole market, they already look oversold with all the doom in the media, but time will tell I guess.

Paddy, interesting that you’re avoiding HB’s.

They look very attractive to me considering how much they’ve fallen compared to house prices which haven’t really fallen at all. Some have a NAV lower than the market which is crazy when you consider the NAV is made up of houses and cash.

House prices won’t come down, there’s too much demand and unemployment is very low. It will just curb the crazy 10% increases per year. Mortgages have only gone from about 3.5% last year to 4.5% now. It’s nowhere near as bad as the media would have you believe.

Anyway, we digress. What makes people think this is cheap at over 3x the price of marstons? I’m not recommending marstons btw, it appears to be in free fall having fallen another 10% since the director buy last week. Good opportunities eventually but where is the bottom?

Hi Paddy, yes growth companies like Tesla are highly valued because of hope value of what they can achieve in future. But Nex is an established bread and butter business. Not really sure what could turn the tide here other than interest rates going down, but I don’t think they’ll ever go sub 3% again. I think there’s already been a few contract wins recently but never affected the SP.

I’m really conflicted with this share. On the one hand it appears cheap when you look at the SP chart. On the other hand it is still valued at around £700m mcap while making a loss, and has a negligible book value (exc goodwill).

Compare that with marstons for example which has also been battered down due to debt and is now worth just over £200m mcap but on the face of it has better financials than nex both in terms of profitability and net assets.

So my question is what do people value the underlying business in nex at and why?

Jed, I bought in here at 19p in 2020 so it’s not at all time lows yet. Wetherspoons and fullers both went below covid. Can see it happening here as well unless interest rates come down quicker than forecasts suggest.

The chances of this stabilising in the 130’s are slim to none. It would either carry on rising, or more likely come back down as happened on results.