Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
This business wont go bust. Very low probability of that happening. However, to balance the thread a little...the risk reward has changed for CARD with a potential £70m cap raise + £40m in rent deferrals. I am not telling people to buy or sell - but this is no longer a slam dunk. You have to believe the LFLs wont decline aggressively. Its a real tough one. Its so hard to tell whether significant change in behaviour has occurred. My gut says it has. I like CARD as a business but it has no feelings on whether i own the stock lol. If parents entering their 40s and grandparents in their 60s are now able to shop online.....there is a strong argument to say this behaviour wont revert.
Investors have lost a tonne of money since time began looking at the chart and previous earnings thinking "well it well get back to earnings of the past". Yeah i get thats what people are arguing to satisdy themselves that this is statisticaly cheap but life doesnt work like that. Things change. Look, i am not saying this is a definite sell. But its not a definite buy either. Its just no longer that obvious. So tough to predict how fast retail is going is going to decline and online is just a different animal - you have way more competition on gifting, balloons etc.
Dude this is not the money markets. They have just told you they may do a £70m cap raise and the market cap of the company is £230m. This is not going anywhere until 1) it becomes obvious free cash flow is enough to settle the debt prepayments or 2) management rectify that shambles of an announcement and come clean with investors what their actual intentions are regarding cap raise and rent arrears - why £70m, when, what is the money being spent on, any store closures etc
this is not investible atm...........
"The secured facilities provide Card Factory with the necessary financial resources to focus on its future growth strategy. This includes strengthening Card Factory's online customer proposition and the capability and capacity to fulfil sales demand. "
Its in the announcement. Why would a new CEO just want to sit there and try to de-lever while the whole industry develops their online offering. He won't want to risk playing it safe and simply letting debt pay down without a raise. He wants the money and he wants it soon so he can do both. This idea that the company is just bluffing is ridiculous. They are telling you what the reality of the situation is.
cta - why would the lenders need lip service. If they arent repaid in November, the literally start putting the muscle on the company. They dont care. They have set the repayment schedule and thats it.
i think its the latter im afraid to say. New CEO, has previous experience of bricks & mortar retail going down the crap-pan under his watch and has decided to try and be the hero and switch to online and wants the financial backing to do so. Why would he want to sit there business as usual and be the guy that de-levers the business in a LBO type fashion? There may be so many outlets that just dont have the same footfall as pre-covid and could be permanently impaired if that doesnt come back. He may see the writing is on the wall for online.
I retain my original thesis and the core of the question is - are you willing to underwrite the CEO nailing this online move which require significant marketing and IT spend. The company is caught between a rock and a hard place. If they sit there thumb sucking and this ice cube melts faster than they thought and online grows way quicker - all while they need time to de-lever. The business literally goes bust. I think they are right to invest for the online strategy (no - its not cheap and straightforward - sorry) but it will cost money and equity holders have been scalped as a result.,
Cta, they have £150m of debt on a market cap of under £250m and sliding. The banks are clearly saying they want to derisk, particularly given the risk of a seismic change in strategy to online.
Why have they made the announcement and let the share price front run the capital raise? Downward spiral and more dilution. Had their been collusion with larger shareholders to allow this to happen so they can scoop up rights for cheap? The announcement was very very confusing. I can not explain why they just dropped in a £70m capital raise in a casual and blasé fashion. It makes no sense
Your take is that you don’t believe what they are saying. I mean that just feels like a really strange call
cta - you can not simply just cover your ears and ignore the equity raise. I mean the company have told you they will be doing it in order to pay down the debt and also free up capital to make a big bet on online. I am all for not panicking but equally you can not just refuse to absorb what the company is saying. They need investment for the online startegy and that means they can not have £150m in debt (including rent arrears) also.
To say they they dont need to do a raise is not only pure speculation but its also just the opposite of the what the announcement said. Contrarian is one thing but failing to accept reality is another.
The question here is, do you believe the online strategy will work? Because i tell you what...the CEO will be underwriting big money into that strategy so as a shareholder you better believe it can work.
there are investors on the other side of the trade literally stealing your shares. Do you really want to sell after 5 days of 20% down. Sit tight and do not give them your shares because of panic
The RI worry is overdone and growing stale imo. If the £70m is used to pay off debt, EV stay the same. Equity increases and debt decreases. Yes there are more shares but equally, there is lower interest cost and less risk of defaults and covenant breaches. The enterprise value will be stay unchanged assuming the post-rights price is sensible.
What i did think was sneaky was the £40m rent arrears. This is the first time they have mentioned. I wonder if they will try and renegotiate with landlords or threaten CVA for part of the estate. Retailers that have survived have some serious bargaining power these days with landlords.
Times have just put out a buy on CARD today.
https://www.thetimes.co.uk/article/the-partys-not-over-for-card-factory-qbkb3stf7
sorry what are you talking about? Private equity? Source?
"Also customer shopping numbers were down but buying more. We are all buying more as we are happy to "relief" spend but long term that will normalise. "
Danl. Not really. They have cited the lower high street footfall trend for the last two years and hence focus on P rather than Q. This is already priced in.
I would rather see them make the debt repayments with FCF obviously but i do not think the raise is a bad thing either. It provides certainty, they won't get themselves levered again and when leases are up for renewal they have the bargaining power. Its a deleveraging story and I think the market will see it as a cleaner outfit once the repayments are made.
Folk are citing the general spending pattern shifts as if they are making some profound statement. This company was never going to grow sales at 20% per year. Its a gradually declining business but price matters. The melting of the ice cube can be slowed with increasing online sales. That needs to be focused on. While the ice cube is melting, the business can probably chuck off multiples of its MCAP in cash.
In summary......retail investors are sitting on large profits, they have panicked this morning and sold without asking themselves the question "are things getting better or worse". The answer is yes, sales are stabilising, shops are opening and the business is delevering through operating cash flows and maybe an equity raise (that will provide certainty and switch debt to equity leaving enterprise value the same i.e. certainty offsetting dilution). If you can not deal with 10% drawdowns in one day and you panic and sell because of fear, you really should not be investing in stocks. Buy the index
Pfen, good to see your back trolling. Oh no no whats going on you say.....I think i should sell based on your trolling and profound analysis of daily prices movements hahahah......or maybe i will just wait for the refinancing announcement and confirmation these last few weeks since reopening have been a bonanza.....Are you actually short this stock?! If so you are genuinely an idiot.
Pfen what makes sense is your post history - constantly trolling boards with negative comments without any reasoning or substance. It wouldn’t surprise me if you were Paddy’s 6th account. Few people on here are asking for a live running commentary of the share price movements on a daily basis. Nobody cares. What we care about is card factory’s prospects as a business. At 5x normalised p/e, refinancing nearly complete and a big economic boom upon us….I can’t speak for everyone, but many are comfortable. If you want to analyse the share price wiggling around every hour, go for it. Good luck with your strategy.
It should come out tomorrow with the default assumption is the banks will roll the waiver to May. Its a blackbox atm and something will be cooking. Discussions are probably live and lets hope the cash flows pouring in on a daily basis just mean the banks can accept a slightly higher debt load with a quicker paydown. Most rational shareholders do not want news atm from any retail company or leisure business. Time is the healer and reporting in June, will bring way more meaningful commentary. People can sell of course and try and get cute with the timing but if the company drops an RNS and this thing pings 30% higher over 3 days.....you have an omelette on your suit
Why does the price of this share do the same pattern everyday. It suspiciously gets driven down when it moves above 80 and then towards the end of the day moves back to 80 as if someone or a party wants the share price at 80. I have no knowledge whatsoever what is going on but i would be furious at a buyout at this offer. Its a classic private equity play - very cash generative, cheap as chips and a solid business. I am probably overthinking, i hope
In the digital age I imagine institutional investors able to track high street footfall on a daily basis. General media reporting its very very strong since reopening. Over the next few weeks this is going higher imo and it won't be arbitrary. Retail footfall and spend on the high st.....the data is increasingly more granular and open.