Member Info for ronnie2204

Hi - I assume this person is referring to tangible book value which excludes goodwill and intangibles. In this sense they do have negative tangible book value, but this has always been the case as they have acquired so many businesses over the years. Personally, this does not concern me as any write downs of this affect statutory profits but not cash which is my main focus here.

In terms of 'forward contracts', the latest results show that roughly 44% of the revenue for the first 6 months of this year are on a contract basis, the majority of which are US based.

Hi all - thought I would add some context to the numbers after yesterday's presentation. If we assume they meet the £200m operating profit and deduct the £75m interest charge for 2023, this gives us a PBT of £125m. The last time they made this was back in 2015 at a margin of 7%. However, this time we are looking at a margin of roughly 4% assuming they meet the expected revenue by the end of this year. The business will therefore trade at a lower multiple due to this, and the interest expense is expected to rise to £82m next year with an incremental impact of £7m. This is why it is essential that they reduce debt as much as possible.

The stock trades at a price to book of 0.39x currently which is lower than the GFC. This company is priced at super distressed levels even though they are generating decent FCF. I've added to my position this morning and I have held this since September 2020, having seen it rise enormously and drop back down. I genuinely think the risk/reward is favourable here but this will require lots of patience. With the dividend at 5p a share annually, this currently yields about 5.5% while we wait for a rebound.

@LouieThru - analysts have projected that they may start paying dividends sometime this year. However, NE's retained earnings currently sit at circa £10m which is the limit of what they could theoretically pay out. Hopefully, as profits start to increase this year this will improve considerably and allow them to reinstate it. My guess is that it is more likely to resume next year once the merger has gone through and travel patterns have become more normalised.

Thanks Banbury - hopefully they can increase their free cash flow considerably over time so that they can pay down debt and start distributing a dividend again

Hi everyone - I've been looking through the financial statements and I am wondering whether someone can shine any light on the capex cost Saga have incurred in 2020 and 2021 (£295m and £285m respectively)? This presumably is in relation to the cruise ships they have acquired? According to Morningstar, they haven't produced this much operating cash flow for the last ten years, meaning that if these Capex figures endure each year, they will continually produce negative free cash flow. This would mean that they would have to issue more debt each year to service their operations. Presumably, as one of their stated objectives is to reduce net debt, they expect this number to fall considerably over the next few years? If anyone has any information on this that would be much appreciated. Thanks

Added to my position this morning after the inevitable sell off. This now trades at an EV/Sales multiple of 0.74 based on their revenue update which seems very reasonable to me. Global supply chain issues are prevalent in almost all industries yet people always panic despite it being an obvious issue. They have stated they continue to make market share gains and had a successful cyber week event, so long term they should have a really good chance of doing well.

Not sure if anyone has mentioned this but Roger De Haan just bought 341,415 shares at £2.93

@CHRI55 - completely agree with valuations in general but personally I don't see this as an overvalued stock. My time horizon is 5 years also which gives more than enough time for temporary issues to subside. NE have stressed they intend on bringing net debt down below 3x EBITDA (I think maybe 2.5x) so this should reduce the risk around this stock. Management have been incredibly consistent over the last 5 years so there is little reason to doubt their execution. I always calculate an estimate of intrinsic value for stocks I hold and average in when prices hit favourable levels in my view. Having a consistent system and sticking to it helps avoid any decisions based on emotions. Personally, I see the risk/reward ratio at this price level as being very favourable but by no means guaranteed. The key with stocks is taking a long term view and ignoring short term noise. I consistently see stock chat boards filled with people trying to guess a price level at the end of the week, and selling when a stock hasn't shot up in a fortnight.

It is very unlikely to hit £4.60 next year as this would imply a market cap of circa £2.8b. Pre pandemic, NE was worth roughly £2.4b. My conservative DCF analysis based on the latest projections by management suggests a target price of £4.30 by 2026. This assumes 6% revenue growth from 2022 onwards where NE have targeted revenue being back to 2019 levels by the end of next year. Also, my analysis has factored in a 9% operating margin with a FCF conversion of 80% of OP, as per managements projections. I've used an exit multiple of 10x FCF as this is roughly what NE have traded at over the last 5 years or so.

For clarity, I have not factored the stagecoach merger into this projection. I see very limited downside risk here, although I never make any short term predictions as anything can happen over the next few months in light of Europe going back into lockdown in many places. For full disclosure I own NE at an average cost base of £1.74, and I am looking to add more during this recent sell off as I see the 5 year return as compelling.

@ShearClass - really interesting analysis here. I do think however that Home24 and Made aren't directly comparable due to their different target markets. Made's website looks very sleek and they have £1.5m followers on Instagram, whereas Home24's website looks very bland and have only 266k followers on IG.

Made are going after the affluent millenials who are very comfortable ordering online and their vertically integrated model including artists/designers should afford them the opportunity to keep their product lines fresh and relevant. I feel that the fact they have 3.3m social media followers in total could lead to a strong network effect.

I do think however, there is going to be a lot of downward pressure on the share price as the supply chain issues potentially get worse. A miss on their revenue target for this FY will almost certainly crush their market cap too.

Happy to discuss this further as I have recently opened a position with a view to adding more.