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I called the short here from above £10 as a few long termers will know.
This was a far better than expected set of results and even the FT suggesting value investors should have a look today. It’s in today’s lex column. Net cash and inventories equals the market cap. Hats off to the new ceo, she’s delivering
Good luck everyone
Cash position isn't a fixed asset when a company is making a growing net loss. It's only value is as a protection from bankruptcy. That's like selling a burning house at full price because all of the property is there when the fire starts - it's simply not worth the money.
From the FT:
Ted Baker: worth a rummage
A reset by retailer’s new chief executive should pique the interest of value hunters
UK clothing retailers have been fashionably late to the stock market rally. Ted Baker’s better than expected online performance is eye-catching, even if the latest quarter’s overall sales have more than halved compared with those of a year ago. The rise in ecommerce sales — up a third on last year — was good enough to send shares in Ted Baker up 13 per cent. Rival Superdry also gained a 9 per cent boost.
Neither retailer was thriving before the outbreak. The travails of bricks-and-mortar stores, along with leadership challenges at both, wiped more than 75 per cent from their share prices in the two years to the start of 2020. The pandemic pushed those declines to greater than 90 per cent. Shares in both now sit at the very bottom of the bargain bucket. A reset by new Ted Baker chief executive Rachel Osborne should pique the interest of value hunters.
The precipitous decline in Ted Baker’s share price reflects the scale of the turnround ahead. Following net losses of £70m last year, shoring up the balance sheet was the biggest job. An equity offer raised £100m at the start of June, the sale and leaseback of its King’s Cross headquarters, known as the Ugly Brown Building, raised another £72m. That gave Ted Baker a net cash position of £57m at the start of July. Excluding the new funds, net debt was £20m lower than the first quarter at £116m.
Improvements in stock management and working capital should avoid a repeat of last year when more than half of accounting losses came from inventory writedowns. Fewer suppliers and shifting from a three-year to two-year buying cycle should mean greater efficiency. Investors will have to wait until next year at the earliest for an end to losses, when the consensus analysts’ estimate suggests operating profits of £15m. But a market capitalisation of £150m — less than the combined value of net cash and inventories notes Liberum — is yet to price in recovery.
This is the way to think of it...
BOOHOO produced less than £70m free cash last year but is valued at £3Billion!! TED is going to produce a minimum of £30m ahead and is valued at £150m!!!!
TED has £1.2M followers on facebook, over 100,000 on twitter. This is now sorely undervalued at this market cap but that will change dramatically in future. It's why i've closed my shorts and gone long :) :)
come on ted. under 80p now ffs.
nickel
where do you see the bottom for ted?
Retail business with high debt is a not ideal at these times, however i do like contrarian views and very open to hearing your thought process on where you see the short term price movement.
Kpet - the business is in a net cash position now and exceeding expectations vs the base case. THere is not a chance that TED with a 20% free cash yield is going to stay down at these levels when the other names are trading at 2-3%. I closed the shorts as the risk reward has just flipped, there's a lot more upside vs downside now. Even the FT thinks value guys should start looking now.
My suggestion is to scale in...
74.2p on the bid, where the hell will this bottom out
56p
Remember net cash + Inventories equals the market cap.
56p assuming bankruptcy can be avoided. Which at this stage the business had not avoided. Would you fund your favourite local restaurant because it used to be good? This company is being priced for bankruptcy because that is where it is currently heading.
Ocean turned into a ramper now, 56p??! You mad? This is going down to at least 0p, probably lower, it does go below zero pence a share I'll consider scaling in as an absolute punt
73.3p fib level. if it gets there.
Oceanpassage - you have 80 posts, most of which are dedicated to TED. This business is trading less than 1x ebitda and has net cash (not net debt!!) and inventories which will be turned to cash. Bankcruptcy is absurd as you only too well know. I love to short but i don't state the ridiculous !!!!!!!
BIG push now ted get back to 80p do it!!
whats all the panic about?
Valuing earning in a business with growing and unmanageable debt isn't a good measure. Although understand there is nothing else to value in this company.
No panic from me. I took a very large profit on the short but have now gone long as a 20% free cash yield and 1x ebitda is just good down at these levels. Those that wanted to go short should have joined me when i called it at 1000p not here as they avoid wiping out their accounts.... :)
Ocean - as i said don't post ridiculous comments as you make yourself look very silly. I'm a natural bear but i don't call out the absurd. Borrowings are not increasing, they were £20m lower than the first quarter and overall the company is in a NET CASH position of almost £60m!! You are at risk of being removed by admin on here if you spout lies so re-consider your approach.
Saying a business forecast to make a growing net loss with already unmanageable debt levels and cash that will soon run out it not ridiculous. It is likely. The only thing that is ridiculous is saying this is not true. A business that is operating at a growing loss will enevitably have to raise more cashflow through debt or another rights issue.
Is it really ridiculous nickel? Or just an obvious truth you don't want to hear in a balanced discussion.
How is debt not manageable? They're in a net cash position? So they could pay all debts off tomorrow if they so pleased. New CEO will be laser focused on the online offering, has serious potential to grow from here IMO (Ocean reported for misrepresenting position)
Ocean - you're barking up the wrong tree, i would suggest going back to the drawing board. I can't take you seriously as you also just said debt was growing........... it is not. TED have just reduced by around £20m vs Q1!!! TED are not in a net debt positon but have a robust NET CASH position where inventories will also be turned into cash. They have already communicated how ungeared the balance sheet will also be in future .... Net debt/EBITDA of 1x or lower!! If you want some good short candidates i'll happily give you some. You have missed the short call in TED when it was much, much higher... not down at these levels lol lol
Ocean - one poster has already reported you and others will follow. You have already lied about the companies debt and that's not something to take lightly in the markets these days. You have barely 80 posts to your name, the agenda is very clear.
hes suffering from heatstroke after going overboard yesterday. search party too ages to find the poor lad.