Derek Hope
06 Jan 2017
Re: The experts I am rather glad I don't read many broker reports. I get the impression that they feel they have to write something but because/unless they have insider information the end result is confusing to say the least.
gamesinvestor
06 Jan 2017
The experts These are the forecasts of the experts (tongue in cheek) :-Citigroup Reiterates Sell 130.00p HSBC Reiterates Reduce 160.00p Deutsche Bank Reiterates Hold 210.00p Jefferies International Retains Hold 230.00p Barclays Capital Reiterates Underweight 190.00p Credit Suisse Reiterates Neutral 200.00p Exane BNP Paribas Reiterates Neutral 190.00p- So Citigroup gives a clear recommendation- The guy at HSBC is confused -- he wants to reduce because he doesn't know if it's one or the other.- The guy at Deutsche is an eejit because he thinks you should hold and lose 26p in the coming weeks- Jefferies thinks it's a hold at about the current level - OK fair enough- Barclays want you to lose weight and also give advice that the share price might fall to 190 so that's coded analysts speak for "sell"- Credit Suisse is equally confused - they also advise clients to hold and make a loss down to 190.Exane -- also advises it's clients to be neutral or perhaps apathetic in failing to sell before it leaves them 46p poorer.Excellent set of -- I haven't a clue -- perhaps they could turn it into a game show?Games
gamesinvestor
03 Jan 2017
800 cuts [link]
gamesinvestor
03 Jan 2017
reduced my holding by a third and popped the money into BritvicGames -- nothing like mixing things up a bit (OK sorry that was sad)!!
gamesinvestor
30 Dec 2016
Re: Cashflow - it's not there "The final "if" concerns the current valuation picture. How much of this is already in the price?"Bill I would say substantially yes -- the earnings potential has diminished across the whole sector. Assuming product volumes are substantially flat, a whole core of the product basket has been slashed offering reduced margins -- historically down from 5-6% at the top end of Tesco's haydays to now of the order of 1-3% driven and dictated by the precedent set by Aldi - Lidl and several other challenging discount houses (B&M; Poundland and derivatives; Home Bargains etc et - there is a whole plethora of them). It doesn't matter what happens to all these competitors, what's pretty much guaranteed is that even if they only modestly take more market share, the new price/margin reality will not just go away.On that basis, irrespective of the cut back in capex, this just ensures that the big 4 can do nothing other than lose market share -- losing this on a constant low margin basis ensures that the 15% conversion rate on cash/profits is just going to get worse in my view, as there is no way that the big 4 will likely stop spending on store refits and maintenance to stay relevant.The other madness is home delivery -- as Tesco was ultimately found out after the figures were, "unhidden from Clarke's maze", Home delivery is a further negative drag on margins in my view and the more of it that takes place in the dog fight to keep customers on side, the more it will hurt the bottom line. Games
Bill1703
30 Dec 2016
Re: Cashflow - it's not there "... the date of the article doesn't matter that much given a year or two window, since the analysis goes back over many years... the article is stark staringly clear, these companies don't convert much of their notional profits to cash - i.e. they don't make much money."Games - the analysis and conclusions are indisputable, of course. The lack of free cash flow over many years was, in retrospect, a warning signal of collapse to come. But it is exposed to the risk that all such backward-looking analyses inevitably are - the risk of paradigm shift. And in this sense, I think it perhaps does matter that the article is a year and half old... with the emphasis on "perhaps", I hasten to add!The grocers should have offered the investment qualities of a mature, defensive sector - low growth, relatively low ROCE compressed by consistently heavy competition - but low WACC and strong cash generation. A 'cash cow' dividend machine. But they indulged in a multi-year space-race which meant that free cash flow was consistently meagre (at best)... and which ultimately served no-one. Perhaps Tesco for a while, as they emerged as the winner as they spent their way to a 30% market share - but even they kept on spending for some years after it was clear that the point of saturation (and for them, cannibalisation) had been reached.But the recent signs of secular shift are intriguing. You can argue whether the discounters' rise was cause or mere catalyst, but all the majors have cut back quite drastically on core capex, with the suggestion at least that this is now more the norm rather than a cyclical downturn in spend. Hence the recent FCF data looks pretty appealing - FCF yields of 10%, 8% and 6.5% for MRW, SBRY and TSCO respectively (most recent historic) - even on profitability significantly curtailed from peak levels.So this 18-month time-lapse could prove to be critical, and may render the original analysis obsolete... IMHO. I say could, as a few big 'ifs' remain to be proved... if the sector can maintain capital discipline and thus strong FCF generation... if profitability is now indeed at least stabilising, if not on the way back up. But it could be the sector is heading back into investible territory, which it wasn't really for quite some time before - in retrospect. If only we'd heeded the warning... many investors (myself included) chose to ignore it, and paid the price.The final "if" concerns the current valuation picture. How much of this is already in the price? I won't dwell on the comparative analysis I detailed on here a few months back, but my conclusions remain essentially the same - SBRY is too cheap (though less so now after a decent run), TSCO still over-priced, with the SP anticipating a significant rebound in returns which could prove hard to achieve, let alone sustain, and MRW somewhere around 'fair value' after a decent 2016. PS. on your point about ROCE... preferring as I do to look at ROIC (not sure historic-cost balance sheet values are comparable, and who knows how realistic they are - positive or negative), the respective (again, most recent historic) figures are 8.7%, 5.6% and 3.8% for SBRY, MRW, TSCO. Which to me, broadly backs up the above valuation conclusions - and relative order of appeal.
gamesinvestor
29 Dec 2016
Re: Cashflow - it's not there Herald, Not disputing your good points, however, the date of the article doesn't matter that much given a year or two window, since the analysis goes back over many years.I agree that MRW has better assets than all the other baggage, but the article is stark staringly clear, these companies don't convert much of their notional profits to cash - i.e. they don't make much money.I'm a holder of MRW, having sold at the peak and bought back too early at 232 and 252, and yes MRW is in a recovery mode and who knows what their new top price is, but they will be out of my portfolio at some juncture, because they can not compete for one's investment £ with companies that have high profit margins (MRW is 2%) and high ROCE (MRW is close to zero).Games - PS : I hold no other supermarkets
Herald
29 Dec 2016
Re: Cashflow - it's not there That article is dated 11th June 2015 if you check out his library here [link] recently (Sep 30, 2016) Oakley presented an impressive analysis of supermarkets which was published in the Investor's Chronicle.[link] came out of it quite well despite a general warning about the difficulties of the supermarket sector."The UK supermarket sector looks like a classic case study of too many shops chasing too few shoppers. The country is oversupplied with supermarkets and this can only continue to put downward pressure on profits and returns.""Morrisons did fewer sale and leasebacks and looks to have much strongerfinances than its larger peers.""Morrisons also has the lowest debt to net operating cash flow (OPCF) ratio. Put simply, its after-tax trading cash flow could repay its debts in just over two years. It also has the lowest total borrowings and hidden debts.""Morrisons may be the share for investors to look at if they are feeling brave. no means cheap on a forecast PE ratio of over 20, it looks better value on a cash flow basis. Its financial position is strong and improving..."
gamesinvestor
25 Dec 2016
Cashflow - it's not there Interesting article - MRW seems the best of a worst situation as far as free cash flow is concerned. On valuation, not so though :-[link]
gamesinvestor
13 Dec 2016
Rankings - Mkt Share [link] a smaller store estate, Morrisons’ overall sales declined by 1.4%, but the retailer grew its market share to 10.8% from 10.5% as it enjoyed a particularly strong performance online – recording its highest ever sales in that channel."""Games
gamesinvestor
22 Nov 2016
Re: Shares should be under 140 ? "Mystified why Morrisons shares not at their lowest level. "I guess another way to look at Morrison's valuation, is to perhaps stress a little less about the market share figures (which presented by Kantar are pretty bogus).Morrison was burning billions a couple of years ago on asset right downs and closure costs.That period has largely ended and the figure whilst historically still low are heading positive.What do I mean?1. Morrison's revenue has stabilised at between £16.1 to £16.8Bn a year over the last 3 years, but the after tax profit has gone from two years at (-ve £761M and -ve £216M) to a positive after tax profit of £222M in January 2016.2. Assets -- Morrison's assets have been remarkably stable over 5 years, falling from £10Bn 5 years ago to about £9Bn this last year. This is despite surviving an eejit of a CEO that spent money faster than Father Christmas.3. Assets 2 -- Morrisons "owns" these assets -- far greater % than other supermarket chains.4. Borrowings -- they are coming down -- £2Bn last year compared an average of £2.5Bn in the previous 4 years.5. Cash Flow -- in 2013 Morrisons had a massive -ve cash out on investing (or wasting, whichever word you prefer to choose) and last year Morrisons cash out on investing was a mere £33M. The net effect of this is that Morrisons added £247M to it's cash balance at the end of the year. Not too many companies are doing that. This compares to a decrease in c6. Forecasts -- always a black art, but the current management seem to have made a better fist of it in the last 2 years. This years pre-tax profit projection is £331M compared to £217M last year and (-ve £716M year before that). Next year the suggestion is £361M.7. Share price -- OK great forecasts, but what about the valuation? A P/E (only one measure of valuation) is 19 going forward, so seemingly not cheap. But - given that the profits grew 36% this last year, it's not unreasonable.Well that's it really -- I don't think Morrisons should be less than 140, but I could be wrong of course.Games -- the real difficult thing here is the pitifully low margins all supermarkets are now experiencing. But then there is the alliance with Amazon, the better control over online delivery and management's realisation that running shops at a loss is a waste of time and money.
Spain Fund
06 Nov 2016
Re: Shares should be under 140 ? I bought in before that as I indicated on that post and I took my profit after that to move on. My 140 came from near their bottom. Someone said their dividends were good but at around 2.3% I don't agree.The big four including Morrisons are trying to pull the wool over investors eyes. Any marginal sales increases are against abysmal results a year ago. They are almost giving some stuff away (I shop at Morrisons so not complaining), margins are slipping away and Aldi/Lidl are continually eating away their market share.
II Editor
03 Nov 2016
NEW ARTICLE: Treat for Morrisons after Halloween boom "Avoiding any ghoulish Halloween tricks, LSE:MRW:Morrisons has just delivered a full 12 months of revenue growth after another quarter of improving turnover. Suffocated by a tiring price war, this looked unlikely not so long ago, and it certainly ..."[link]
Herald
27 Oct 2016
Re: Shares should be under 140 ? It's a difference of opinion which makes a market but why 140. On Feb 29 you indicated you had bought at 186. I would have thought the intervening 6 months would have been regarded as favourable for the company.Successive increase in lfl, reduced debt, less reliance on overseas imports than others etc It's all summarised well here [link] will be a little more info available shortly with the quarterly statement on Nov 3.One slightly worrying personal example is the desire to buy volume - that's another offer of 5000 points (ie £5 off) if spend £40 only a week after the last offer.
Norman Barrington
22 Oct 2016
Re: Shares should be under 140 ? "Shares should be" whatever they are. It's a marketplace! Reason they are higher than you expect could be - Good Divis, Good Balance sheet, they own most of their stores, they haven't had the dreadful PR of Tesco (The ugly face of capitalism), they might be a take-over target etc etc....The market always determines the correct price. If you really beleive it should be 140 then keep quite and short it like mad!DYOR
