Member Info for SG2025

With current EBITDA/CF, it certainly can add more leverage in a private setting, but price competition will mean margins and CF will squeeze further.. and what's viable now, may not be viable then. There is a reason that even in public setting, markets accept less than 2x leverage for operators like bme, but far higher for essential/stable cash flows like utilities or even the likes of Tesco if need be, given food etc. In a downturn scenario, BME CF can be far worse off, although you can debate about phenomenon of people going to discounters instead in a squeeze environment... Its all about conviction on turn around that the PE or markets will have on B&M. If its strong enough, a PE takeover can be justified with a 30-40% premium implying 7-8x adj, EBITDA multiple.. otherwise, perhaps not. As I said valuation is only aspect for a takeover, there are several others too including exit routes etc and most importantly funds with a PE for investments. I forgot to mention previously, that (various press citings last year) CD&R has been struggling to monetise its investments to return cash to investors.. so I really doubt they would be looking for more significant investments at this stage, unless they raise new funds this year, which seems to be in pipeline but still several months / year away. Also, when was the last time pure UK retail investments have done well for PEs - Morrisons, Asda etc. have all been struggling. Even Primark, which used to be a crown jewel for its group, is now expected to be sold off...

Never said Morisons acquire BME. Even otherwise, its about sectoral exposure that a PE normally takes and acquiring two UK large retail businesses is indeed an overkill for a PE, even if from different funds. May be I am wrong, but my years of experience working in IB, including working on the BME IPO itself. In any case, if this were to transpire, it will bode well for us shareholders, so I am all in for it, but see very low likelihood of it happening.

Regarding leverage as a private company vs public company, indeed, but an asset light model usually doesn't has so much upside for higher leverage as would have been otherwise. The cost of incremental (below investment grade) debt would be too much risk to put on in current interest rate and poor economic environment. May be it does when interest rates are back to sub zero levels. I understand valuation are one aspect of the equation for a PE takeover, but so are many others, including exposure, competition, risk etc. When B&M listed, it did not have any real competition and its value proposition was much easier. But with emergence of Home Bargains, reemergence of Tesco/Aldi-Lidl on more competitive pricing and to a minor extent Chinese ecommerce like Temu etc., that uniqueness and value proposition has significantly diluted vs then. The way I see it, a strategic angle has much more merit than a pure value-driven acquisition.

Anyhow, we are broadly on the same boat, and its a good theoretical topic to debate on, but neither of us can base our investment thesis on. Hopefully something good transpires.

CD&R already owns Morrisons, so acquiring B&M would be an overkill, especially when Morrisons has been struggling since its acquisition. Action Group indeed is a PE owned business, but there will be enormous synergies to extract from B&M acquisition due to numerous complementarities (better operational execution, using best practices, supply chains, benefit from much larger scale of European business for B&M etc. etc.) vs vs any other PE without an existing European / UK discount retail business. Arora brothers quit the business and probably enjoying their wealth, but if they do come back, it will unlikely be through an outright acquisition and I can only see them come back into the fold using market purchases and then joining the board etc. They can also partner up with a PE to make an acquisition, but I put lower probability of that. Another far fetch idea could be a Chinese e-retail company to make a move to use this as a physical stores and build quicker presence, like one of the retailers which was eyeing Curry's etc, but tbh, its a bit far fetched and needs to be very very strategic and long term, and impossible to articulate unless they already make a move.

Does anyone know when to expect FCA to come back with their response or it’s all up in the air?

“ I wonder if Clayton Dubilier & Rice are looking at BME for the second time?”

@Senator1 , CD&R or any PE, may be, but why not a strategic like Action Group (largest non-fmcg European discount retailer, majority owned by 3i group)? I see so many reasons and synergies as opposed to a PE takeover. I really fail to understand why they haven’t made a move yet, but I very much expect it this year, much more so than a PE..

Good debate, but still not complete in my view. here is how I look at it.

> does the company need to refinance its debt in the next 18-24 months? If not, I think paying down debt is not ideal. We are looking at leverage focusing on the numerator, but equally if the denominator improves, the ratio will fall. But equally, with short term financials under pressure due to price investments, it may be sound too to pay down debt.

> I am wondering if the answer lies somewhere in the middle, i.e. reduce dividend and use left over proceeds for debt and some

> Separately, if the Heron Group is sold, that shoudl also throw up some cash, I reckon between 50-100m ?

@Borderstothemoon, I never gave a price prediction or replied to your post with , as I am not a trader and do not bet on a specific event like earnings. 250p you have picked up for me, was my specific comment regarding an analyst report and analyst target, which is usually 12 months target, not a 1 week target. Not that it mattered to me before, but quick thought to clear any misunderstanding. My post below, where you seem to have picked up 250p.

"Was reading through some recent equity reports on B&M, and one of the bullish analyst expects the company to trim its top range and not the bottom range. He had about 250p or something target price if I remember correctly. On LFL sales, he expects -2% in Q3. I thin markets will focus on both FY EBITDA guidance and Q3 LfLs, (and potentially margins) and more so on LFLs than EBITDA itself. FY25 in my view is already written down, as long as management can deliver some positive messages around LFLs and their new strategy showing early positive signs etc., the stock should go higher. Though EBITDA miss may cause initial algo/HF selling resulting in an initial negative reaction, but will go up thereafter led by long term institutional investors buying into the stock. Another catalyst may be redomicile and share buybacks. The stock can go down 5-10% or up 10-20% on the results day, depending on outcome on these 3 things.. There is too much pessimism on this script, and the bounce back will be violent if there is any early signs of recovery."

Positive and encouraging messages re Q3 LFL growth from CEO on the call ongoing right now. Firmly believe that the share will close in green today and inch up over coming days with more constructive reports from analysts.

These forecasts are an input from various teams and internal systems particularly from the financial department. A CEO doesn't produce them out of thin air or his own knowledge, and their quality is as good as the teams / systems responsible for them. I agree with Senator1 that with a new team backing him since last few months now, he will be an idioot to now miss his revised guideline...

Was reading through some recent equity reports on B&M, and one of the bullish analyst expects the company to trim its top range and not the bottom range. He had about 250p or something target price if I remember correctly. On LFL sales, he expects -2% in Q3. I thin markets will focus on both FY EBITDA guidance and Q3 LfLs, (and potentially margins) and more so on LFLs than EBITDA itself. FY25 in my view is already written down, as long as management can deliver some positive messages around LFLs and their new strategy showing early positive signs etc., the stock should go higher. Though EBITDA miss may cause initial algo/HF selling resulting in an initial negative reaction, but will go up thereafter led by long term institutional investors buying into the stock. Another catalyst may be redomicile and share buybacks. The stock can go down 5-10% or up 10-20% on the results day, depending on outcome on these 3 things.. There is too much pessimism on this script, and the bounce back will be violent if there is any early signs of recovery.

Good post Pike123 and TTsalaz, I am in the same boat as you on this script.

Separaetly, not sure if anyone noticed, B&M historically reported their update on 9th Jan (both 2025 & 2024), but this time its delayed by almost 2 weeks. I suspect they expect the change in domicile by then and announce buybacks along with the update - just my hunch. In which case, there should be a sharp move. I guess back to basics will indeed take time, but if the management can provide positive commentary on any progress and implementation and announce a buyback, it should change a lot of negative sentiment and bring in some big institutions & analysts to look at this script more seriously given how undervalued the stock would be on various metrics, if and when over next year or so, the company starts to get stable to positive LfLs...

What can I correct you with. You merely state reported numbers without any understanding of how management uses financial engineering to massage numbers within the confines of GAAP and non-GAAP measures. Or the headline figures that look good, but ignore the ones that do not suit your narrative. you talk about the positives but ignore the downside or potential risks that may/might jeopardies the upside. These one sided arguments are not sound for an investor but mere naivety or as I have been stating emotional bias / attachment, which is recipe for disaster. Its your money and you are entitled to make more or loose it all, just as I or anyone on this forum.. and I have little interest in doing a teach-in with someone as strong opinionated and rigid like you.

FYI, you keep saying, I said so etc.. I do not know you and do not know what you did or did not say... You post a lot (and I mean a lot), some useful at times and many a times not so much.. and I do not follow all of them and have zero interest now. Like I said good luck to you, and lets end this now.. I have no intention to get into further arguments and ignore I exist.

Take it as you may like, but you have lost all credibility I had for you. I will leave you with your mates to live in lala land or as it may be. You may have more knowledge about the industry itself, but I can bet you are inept in financial analysis or reading fine details in an annual report. And have been posting about Wizz for a long time with the same story, while the stock has consistently deliver negative returns, while smart money made some real gains on short term bets. That should have sufficed to shut up any sensible person. Anyhow your loss has been someone elses gains, but I still wish you the best.

Just one more thing, everyone is so focused on growth currently, but think what market and analysts are more worried about is for the company to stay float and their cash flows given leases/leverage.. if the company can stabilize cash flows (return them to positive) and rationalize expenses etc., think the shares will do much better in the medium term. Growth will far more useful handy to have when all the GTF dust is settled. They may get 50% growth in next quarter but if it comes with worse negative cash flows, I can bet shares will cater. Hopefully thats not the case, since mgmt has realised that lately....

Thanks johnbri4. 4x - who knows, may be it eventually does in 2-3-4-5 years. No one knows for certain in either direction. I know only one thing for certain, which is we have been in a very good macro / operating environment for airlines sector in general (since last 2-3 years) - which unfortunately Wizz has not been able to capitalize (for whatever reasons) and been worst performer in the sector understandably. And this cycles have historically not lasted more than 5-7 years generally...

So, I personally am not invested in Wizz for a very long period and have not not emotional attachment to the company or stock. Don't take it offensive, I am not happy with what's going on in Ukraine, and do hope that the war gets over today (not tomorrow), but wouldn't invest just on hope of a probable game of Russian Roulette, which is how I see game being played currently (hope I am wrong).

Whenever I see the cycle/trend reversing or any new factor emerging from Wizz for worse, I will quit the stock immediately.. To compare Wizz for its historical share price is quite novice thing to do and a fool's trap imho - its a much different company now with a far higher risk profile (high leases vs equity) to any other airline currently with the amount of lease it has now vs past. It is the most susceptible to bankruptcy in a downturn scenario and doesn't have any cushion of owned planes to lease and secure some capital in crisis situations like any other airline to my knowledge. Equally I see a much higher potential for returns if all goes well in few years (again no where close to 4-5x imo). So in nutshell, a high return but also high risk investment. Its a high leverage play... Anyone thinking or saying something different, I wish them good luck and have nothing else to offer..

Thanks BasherSmith for your response and well done with your returns - cant help but feel a bit jealous ;)...

Anyhow on your points, just playing devils advocate, as you may also know, markets value banking stocks on 3 key metrics - Div yield, PE and P/NTAV. I wouldn't debate on which one is better or worse, thats a bit of subjective and I will try to keep to facts or where I see them as trends historically speaking, and let others also opine on subjective elements from my perspective.

Div yield usually tends to be between 5-7% unless high growth or very high quality stable/solid earnings (I only see NWG in the solid bucket in UK financials). So, a 30p dividend gives roughly 450-600p target. Btw, looking at consensus numbers (on CBG's website), average DPS figures:

For FY26 - 2.9p (forecasts vary between 0-10p)

FY27 - 15.8p (0-30p)

FY28 - 26.2p (0-40p)

I personally think, market is underestimating earnings and potential capital returns (DPS and share buybacks), which may be a good thing as allows mgmt to beat street expectations and create more positive sentiments...

P/NTAV - very much dependent on RoEs and growth. CBG has the lowest multiple (0.5x) among all comparable small/mid-cap lenders (e.g. STB, S&U, Vanquis..) - around 0.7-0.8x, but its also most exposed to motor finance.. For CBG to get v close to or above 1x, CBG needs to get to above 10-12% RoE with some growth.

P/E - again average consensus adjusted EPS from continuing operations (not reported or net EPS) as per consensus:

FY26 - 38.9p (vary 16-50)

FY27 - 60p (56 - 74)

FY28 - 83p (74 - 105)

Taking a 10x multiple (just my hunch) for two year forward EPS (again more conservative adjusted EPS from continuing operations and not reported or net EPS), gets me to 600p.

The way I see it high level (my subjective opinion), is that the immediate play on CBG is how the motor finance plays out, and ride up with sentiments on back of positive messages from management and analyst upgrades.. which is not bad, but least this helps me to put a realistic/analytical target value to aim for. Not putting my number, as it can be polarizing and that may digress from a useful debate.

If my post doesn't excite you or you do not want to get into numbers, pls ignore this post and don't both to reply. Otherwise, happy with any constructive inputs, thoughts or criticism. Just trying to use this forum as a sounding board and no other motive to suggest buy or sell. Tx in advance...

Thanks. I think this forum has become too focused / obsessed on the motor finance case (not saying that's wrong). Putting this aside, has anyone done any analysis/thinking what should be the fair value of the stock if, say theoretically speaking, the FCA outcome means that current provisioning of £300m proves sufficient and CBG doesn't need to do anything beyond? I mean with current or market expected adjusted profits / adjusted RoEs / capital position, what multiple should be appropriate for the business. Clearly, business has become stagnant and mix has changed with the sell-down of two units.. and interest margins have and management expects them to shrink marginally next year. The broader sector (mid-cap banking stocks) don't trade vastly differently to where CBG, unless there is significant growth and good double digit RoEs, which CBG wouldn't get to before couple of years by their own admission in HY results?

Will be interested to hear any thoughts, as clearly motor finance will drive some value (30-40% upside), but beyond that any re-rating will come from basic / hard fundamentals which are earnings, growth and margins, which should get somewhat better, but management has come out of the dire situation since August SC ruling and are yet to demonstrate any such improvements in last update in November!!

Wow, what a load of cr**p - saying as an ex-b.. Mind it when you make such statements, you put doubts on your credibility. Anyhow, I am invested on the stock and lookout for such useful statements in this forum, but seeing a lot of wishful thinking lately.,, good to stay positive etc., but when you put your expectations / wishful thinking above facts / ground reality, I bet it never ends well, not that it bothers me.. anyhow, happy new year everyone..

Thanks knot, I agree with some of your analysis and disagree with some, but mostly agree to disagree.

With regards to FCA outcome, my hypothesis is quite different. Whether it ends up in court or not, is difficult for me to say, am no expert, but seems quite plausible and reasonable to assume that it will.

I have recently spent a good amount of time re-analysing all recent speeches from FCA.. and I think FCA will make some concessions for lenders and some for CMCs - for public optics that they were considerate and listened to both sides and they have come out with a more balanced outcome. Rightly or wrongly, they took a legal position against lenders and it would be extremely bad optics for them to change tacks significantly, unless it goes to court as you have also said.

In terms of lenders, it will likely be along the points that were mentioned in recent speech with MPs - no compensation where 0% interest rates, relief for captive financing units etc. But all of these will unlikely to yield much benefit to main street lenders like CBG. There may be some equivalent relief from CBG's and other lenders response, but I would have expected him to make some references in the recent speeches. If this turns out be the case, CBG will need to make further provisions, hitting its capital ratios further - by how much, no one knows...

I have pretty much stopped posting on the broader forum, given general lack of sound rationale arguments, baring few exceptions (e.g. @liberty, @knot etc. on CBG - from whom I have gained and enjoyed reading their posts and I do try to post here whenever I have something meaningful to contribute)... Most posts otherwise are emotional outbursts with share price moves (understandably so..), but less so on CBG still than other forums...

In particular, I find it a bit annoying regarding general lack of understanding / misnomers around most short positions (across forums). For example on CBG itself, disclosed shorts stand at around 2.2% or just around 3.5m shares or worth £15m spread across 3 large hedge funds. That's really not very significant in the broader context. All three disclosed short positions in CBG are held by fairly large multi-strat or quant funds. If you know their intricacies and workings / strategies, they do not take isolated naked short positions, particularly in small-midcap stock, and even if they do, they are generally market-neutral strategies, and are not so significant to loose their sleep over or cause significant looses to impact their broader portfolio returns. ActusRay Partners for example has < £5m short position with a $2bn AUM... Anyhow, I hope you get the gist.. , and it is futile to write anymore into the topic, but plenty of material I am sure is available online or chatgpt etc..

Do not take this wrong or offensive (not my intention).. I am posting after a long time, merely out of a bit of annoyance on the topic itself and hopefully to help clear some misunderstanding... I am in the same boat as others on this forum - have been and continue to be long CBG.., rightly or wrongly!!!

Anyhow, quite pleased with the CBG share price returns in 2025.. and hoping for another similar if not any better 2026 !!!