Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Something definitely smells as this is a House Broker computations. How they can possibly miscalculate the debt level?
Oohaah, I pretty much agree with everything you have written. I’ve done the same and there is not too much in there that troubles me. So many companies reporting Q4 are feeling pain from inflationary / exchange rate issues, so I can forgive the EBITDA shortfall. After all we are still in the turbulence of a pandemic. The wider financial market is not quite so forgiving sadly. The reduction in % growth is not ideal, but the comparative number is still strong (inc organic growth). I’m also personally comforted by the Liberum research, as they took close contact with the company after the CMD. I don’t think there will be a fast return to the £2’s, but longer term, i feel it will push well past that. SoftBank, MM Taking it private, Private equity interest, Beauty Spin-off and further II buying will all be catalysts to watch for in the short / medium term. If they can sort the corporate governance issues in good time too, that will help things along.
When THG fell in October after their CMD, investment bank Liberum redid their calculations and reiterated the possibility of rapid scaling of revenues and a minimum £1.75bn valuation for Ingenuity. They stated that whilst the CMD did not allay all of the market's concerns, the share price collapse offered a "very attractive" entry point for a business they believed was still worth £10bn+ - Suggesting back then a target SP of £7.50. Then yesterday after Q4 trading update they revised that down to £7. That may well be ultra bullish, but it clearly shows a huge disconnect with the current SP. Throw in the possibility of MM taking this private again, the spinoff of beauty etc and a sharp rerate could be very possible, but not before the current sellers are done. Today’s inflationary / currency headwinds are still very much linked to the pandemic, but they will affect many companies including all the competitors in THG’s space, but if you’re buying this today as a long term hold then you should do very well. The sum of the parts is worth considerably more as many have suggested here this evening.
There is no evidence to suggest FCF is dire. Peak trading periods require the correct stock levels to meet THG’s high fulfilment standards. People need to listen to the call, to do their own research and to make their own investment case.
For anyone that doesn’t understand Ingenuity (which by the way, at today’s Market Cap is basically thrown in for free).
https://www.thegrocer.co.uk/online/the-hut-group-how-thg-cracked-dtc/654361.article
Surely this has to be a buy at these levels? - Market Cap of x1 year sales for an International growth business? Missing guidance by such a small amount due to currency fluctuations, isn’t ideal, but it’s not terminal, especIally during these times. Current inflationary headwinds have impacted everyone and nobody is immune to those (actually THG is better protected than most), plus we are still very much in the pandemic in economic terms. Sales growth of 38% YOY is impressive and the ability to improve margins via further investment (& with current headwinds subsiding) will only improve EBITDA. FCF looks good. I haven’t looked at any projections, but In 2-3 years EBITDA could be as much as £500m. With this potential, plus the fact they are going global rapidly, I can see private equity interest too. Just my thoughts for what they’re worth..
For anybody that hasn’t yet listened to the analyst called this morning, I strongly suggest they do. The increase in customer returns was very well explained (mostly the calendar / mix switch from lounge wear to dresses, in combination with omicron forcing lots of buyers to return the dresses). Not to mention that ladies now tend to buy three dresses and keep only one when you are able to return them at no cost to the buyer. This situation is very much transient and related to omicron. Shipping costs were very much increased in the period partly due to returns and partly due to UK inflated logistics costs, plus a lower number of commercial airlines flying during the period impacting foreign logistics costs. Finally, the point that Barclays mentions in their report: about the structural difficulties of the US and European markets - this is a real concern (magnified by the Pandemic) because those customers are not prepared to wait between four and nine days to receive an item. I see this one either being sold by their own investment in warehousing and logistics or what is equally possible is that they find a logistics partner. My summary, for what it is worth of this update is that it is symptomatic of the times we live in, So expect competitors to be experiencing similar issues. I heard nothing that could not be overcome when the pandemic finally passes and that a good management team cannot solve. There may never be a better opportunity to invest in a growth stock such as this. Just my opinion of course.
It wouldn’t surprise me in the slightest if they now partner with an established Logistics partner for the US & Europe. Their top line sales growth is staggering, especially considering the recently acquired brands haven’t even been fully scaled yet. Yes the Share Price may fluctuate in the coming weeks, but the mid to long term opportunity here at this price is one of the best around.
The hedge funds know that too, so they will unwind accordingly.
Just listened to the webcast and whilst the message is very much steady as she goes, I’m just not sure there’s too much in there to light up the market. Clearly the business is in stabilisation mode with lots of references to gaining trust etc. Reliability and operational excellence in Ghana very much the tune. Very little appetite towards exploration or developing Guyana. Sadly we are not benefiting from high oil prices too much due to the hedging program. Kenya looks to be the single catalyst that could reignite the share price in the short to medium term, but their search for a partner may well take some time. Pre-emption rights could still be on the table, but a muted response as you’d expect. The Ghana tax issue came up in questions, and Les confirmed it’s formed part of the latest local discussions. All in all, nothing that exciting which may explain why we are in this trading range, especially given the tail wind we ought to be getting from recent oil price movements.
Much appreciated Adie. Thanks for sharing.
No it’s also mentioned in section 3 - RISKS RELATED TO THE GROUP AND, FOLLOWING COMPLETION, THE RETAINED GROUP.
Likewise Tony.
I wonder if a write-down reversal is on the cards. I believe it is permitted under IFRS.
Slift I’m mildly curious; you refer below to $89 million proceeds as being not significant. Are you still of the opinion that a viable alternative would have been to have a placing to raise a similar amount?
Slift, give it up my friend!! You’ll give your self a hernia!! The deal is done. At the end of the day you either have faith in Rahul to deliver or not. From where I am standing, he’s doing a dam decent job of turning this company around in what has been one of the most challenging 12 months a highly leveraged mid-cap oiler can face.
OhhAhhCantona I could not agree more. Two spot-on posts!
LOL indeed! Needlessly selling all these assets, anyone would think we were in deep discussions with lenders and potentially in breach of covenants etc? Oh wait..........we were/ still are! And what on earth happened to Rahals crystal ball when just 6 months ago the world was predicting oil at $40 - $45 for 2021? Take it back Rahul, get yourself a new one..... PMSL!
Exactly seakingalpha. Spot on.
Put your glasses on Slift.....I said if “lenders” support Rahul’s strategy
Which is the only priority in town right now.