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Golden - that's how greed and fear work in the markets. If you are up on a stock you would tend to do less research, if you're down on a stock you try to dig out every thing about the company you can find.
Do you think those margin numbers are constant I.e. Can they be improved by tons of optimization around commodity prices, scale etc.? Surely 6% ebitda margin of a growing business is better than a 17% margin of a shrinking or flat business?
Does bellring have huge ebitda numbers I.e. Would 6% of a bigger number be better than 17% of a smaller number? Margins when you growing and margins when you are flat would be different right given less capex etc ?
Golden - balance is always good but your posts are always balanced with more negative slant than being positive at all. What is your view of sum of the parts valuation for thg?
Do you know that the current macro environment is supposed to be terrible for any e-commerce related business? General market outlook for retail/ e-commerce is worse than during depths of covid uncertainty. Your questions about cash and margin should have been asked when thg was above 200p - and at 50p how much of your cash and margin concerns have been priced in do you think? You need to remember that the current macro environment is not base case, but a stress scenario the industry is living through.
And beauty and nutrition are much more resilient than shirt and shoe sellers as we've seen and we know why now.
IMO its safe to discount the analysis and questions of someone who might have bought in above 150p - as their questions have been flawed and way behind market pricing.
"Analysts offered mixed views on Tuesday. Sherri Malek at RBC said in a note that THG requires “strong acceleration” in earnings to meet its full-year guidance, while Jefferies’ James Grzinic and colleagues said “access to another £156m of funding will be welcome as we head into peak trading season and an uncertain 2023.”
https://www.bloomberg.com/news/articles/2022-10-25/thg-signs-banking-facility-as-online-retailer-pledges-growth#xj4y7vzkg
Goldenyears- is your data seasonally adjusted? What was the like for like comparison for same month or week last year?
Given the high YOY inflation the last few months - as we move into 2023, the year on year change in inflation is going to start to drop off and inflation next year in first or second half would be down to 4-5% given the high base this year. That's what markets and the fed are looking at, saying the high inflation this year will make the year on year change look miniscule next year so maybe why they been discussing pausing rate rises. What would that mean - rates would still be high so higher cash flow generation and lower capex would be key. Thg has a repeat business model with Beauty and Nutrition. And Beauty and Nutrition will obviously be more resilient, even in a downturn or slowdown in the economy, compared to say clothing tops (boo, asos). Expansion to other geographies and more focus on free cash flow generation would help weather the storm but the brand value is immense.
Listen to MM on the half year results webcast - the valuation that each of the beauty and nutrition businesses have, on a standalone basis when compared to peers shows why the CEO and Qia loaded up and have big stake in the company. The legal advisors who advice the Board when a take over offer appears - all suggested that the peer valuation for similar businesses to THG being much higher - MM explained this at the webcast and the reason why 170p offer was deemed too low- have a listen.
https://stream.brrmedia.co.uk/broadcast/62fa5b12b629a70556525263
2nd half of 2022 the FCF is going to be lower towards $500-600mn as the CFO mentioned at the call.
Although interestingly the FCF of $1.4bn for first half was at the back of
"Realised, post-hedging, oil and UK gas prices of $82/bbl and 69p/therm"
The volatility in share price doesn't make sense given the deleveraging since beginning of the year and the fact that YTD share price gains have been wiped out. Harbour share price didn't really have much priced in terms of the high gas prices - strangely its following it down. With the amount of deleveraging we would have thought the downside sp volatility would be lesser. Strange price action still acting like Tlw enq when there is no comparison between the older premier entity and todays hbr.
Ggg - agree, Sqz would be a good match for takeover especially if HBR can allocate more capex for some developments given the windfall tax offsetting mechanism. I would rather prefer HBR go after the oil assets that Shell and Exxon are offloading in North Sea for a sum of around $2bn.
That would be a good move instead of just increasing more exposure to gas. Gas prices can just as well turn very south if there is any de escalation of the war. Would not be surprised if gas prices go negative if Russian gas comes back in such a weak gas market. While for oil, we have opec to set a floor. Might be good to go after some other PE backed assets in UK north sea or in a more stable jurisdiction like Gulf of Mexico.
Hard to imagine how North Sea has turned into a dumpster jurisdiction because of this windfall tax.
From the amount they have allocated for buyback(£108mn) vs the maximum amount of shares that could be purchased using the amount(85mn) - it does look like share price around or under 127p means the buyback would work well in removing at least 10% of shares outstanding.
Who are comparing with boo and asos don't understand that thg has no comparison with their business and sales model. Boo and asos are clothing specific. Thg has Beauty and Nutrition - different type of retail. But comes down to inflation resilience - clothing (asos, boo) don't have a repeatable model like beauty and nutrition.
Thg can rally hard if MM and the brash boys step aside and focus is shifted towards generating cash flow , fcf and reducing capex and debt. And of course passing on inflation related rises little by little - but do pass it on.
Or try selling individual parts of the company. Breaking up might unlock a lot of value. Then there is weak GBP that is attracting foreign investors attention to bargains in UK. All imo
Fort - Can BHP and NCM jointly offer shares in their respective companies to acquire Solgold or Cascabel in full, and then create a joint venture between the two of the majors to share capex and risk and take it to production?
If I heard it correctly they are keen on placing the cornerstone shares with outside parties and potentially at premium to current share price? Which means no dilution for fund raise? Funding news should remove the near-term overhang.
Cheers viable. Their new ConocoPhillips acquisition gives more unhedged upside and from next year hedging rolls over more. A US listing is also in plans it seems, somewhat similar to souc.
Not sure if you have seen this Emeth Value recent note on DEC. Seems like the fund manager is an E&P guy and has worked with Dec. Might be of interest to you.
https://www.emethvaluecapital.com/_files/ugd/b2ee4c_3fd6189e2a71450f962f24f91188aa47.pdf
Viable - have you also looked at DEC, who own conventional wells onshore US and have a sizable natgas production although mostly hedged, and provides 10% plus dividend yield at current share price? Curious to hear your thoughts on DEC natgas value proposition , given your knowledge of onshore US acreages/ wells? Cheers
Buyback is usually preferred by big institutional investors because its a lot more tax effective vs getting paid in dividends as divi taxes are lot higher. For retail PIs, dividends are preferred depending on whether held in ISA or not. So its all relative but at the end of the day its value returned in one form or another.
Trek, etc - Not sure if posters on this bb have seen this interview from last month, which seems to lay out the bull case for DEC by a local US based HF investor who seems like a very savvy E&P investor. You might realise how undervalued DEC is according to this investor. Also, i think one of the reasons for the recent surge to 144p might be this interview which brings the spotlight on DEC and its bull case.
Andrew Carreon from Emeth Value on Diversified Energy $DEC
https://www.youtube.com/watch?v=-NfRXZ-OZ3o
Bbrink - where are you reading that 10% buyback increases dividend by 20%?
The 20% is total shareholder return. Will dumb it down more from you - 120mn gbp (dividends) and 108mn gbp (buybacks) equal 228mn gbp. 228mn gbp as a percentage of 1100mn gbp market cap is 20%. That's the 20% shareholder return. One you get cash in hand(divi), the other you can get in hand by selling portion of your shares to keep your share of company constant(buyback).
Jim - Shell needs management like at Dec I.e. Shareholders focused. If Shell increases dividends back to its old level then it should be able to catch up with ExxonMobil and Chevron.
Buybacks are considered as a shareholder return. Because if you think about it - each day there is a buyback happening - shares outstanding is reduced and your existing share of the company and ownership goes up a tiny amount. Each share bought back and canceled means that share doesn't need dividend being paid to. So the same amount of dividend will have higher value as there is lower number of shares with claim on dividend.
Dec is looking to purchase 85mn or roughly 10% of outstanding shares on top of the 10% dividend. So in essence Dec actual yield is closer to 20% - 10% dividend yield and 10% buyback yield. And given that prices are hedged for another two years means you are more or less guaranteed to get that much dividend income for the next two years.
HI- that's exactly what Dan Loeb of Third Point argues that Shell's individual parts are a lot more valuable than what Shell gets valued at by the market. Hence the call to break Shell up. Which is exactly the way to go imo.
Well said. The whole point of having a trading division is to take advantage of the volatility. And these chumps are blaming it instead. Absolute job factory shell is - hard to not make money in these lng price environment as the biggest LNG trader. Should have been ExxonMobil - totally agree. Better yet if ExxonMobil can come and take over shell and put its inefficient management layers out of its misery will be great. Like Carl Icahn said - he fired two floors or buildings full of staff in one of the companies he became activist in and the company was still working fine and nothing broke. We need usa style activism in uk big caps. Not eu style relaxed attitudes towards profitability and no pressure to perform. Worse, you do a crap job as a big oil major CEO, like cutting the cornerstone dividend, and you yet get to keep the job. Only happens in Europe.