Monsoon Share Discussion Threads

[paulypilot] 28/9/2007 08:31

Hi,

Jeffian - the main risk from shorting Monsoon was that Peter Simon would take it private,that was a known risk. However, because the shares were already significantly over-valued, there was never going to be a large bid premium, so the risk was modest.

As it turns out, Simon has done the deal, but it's only cost us shorters about a 5-10% loss, nothing to worry about.
Ironically, if he had just let the share price go into freefall, then it would have found fair value around 200-250p, and he could have bought it back at 300p.

Let's face it, this share has been in a false market for some time - being supported at a level, with pressure no doubt being put on Simon to take it private by the hedge funds who had hoovered up the rest of the shares.

Incidentally, I also had my short position pulled by IG - the stock lenders recalled all Monsoon stock last Friday. So this Bid was obviously known about.

Regards, Paul.

[scburbs] 28/9/2007 08:08

jeffian,

Strangely MSN became unshortable last week and I was forced by the sb company to close!

However, shorting MSN was still the right thing to do as the upside was very limited and the downside massive. A takeout at 424p is hardly likely to result in much of a loss to shorters. A 4% premium to the price!! It was always clear that if a bid came in it would be at a very low premium and the trading statement that accompanies today's bid look like an effort to make sure shareholders accept the offer.

[jeffian] 28/9/2007 08:02

Ah, the dangers of shorting, eh? What's the point? Why not get down to Kempton Park and stick it on an outsider (at least that way you'd only lose 100% of your money!)?

I must admit to a slightly warm glow seeing that Peter Simon had to pay 424p to mop up the minority holding. The irony is he could have had it for less than half a couple of years ago if he hadn't been such a cheapskate and tried to pick it off for around 130p(?). Like paulypilot, I was in around 60p and I took my money off the table at 315 after falling out with PS over the divi cancellation and other underhand stunts. Well done to those who held out to the bitter end. Oh, and sorry to the shorters.....

Regards, Ian

[paulypilot] 29/8/2007 01:45

Hi,

Given the sad passing of Frank Butcher, maybe we could migrate to a new thread.

In the meantime, Monsoon remains a great business, but significantly over-valued right now, IMO.

Personally I'm long Sportsdirect & short Monsoon. Both have complete megalomaniac loonies running them, but one is cheap to reflect that fact (sportsdirect - PER of about 10), and the other is expensive (Monsoon is probably on about 25-30 times this years' earnings).


I think Monsoon will warn again on profits soon, because summer has not really happened this year, and this means that both sales & gross margins will be massively down on last year. As a summer-reliant fashion retailer, this means that their results for this year will almost certainly be well below broker estimates.

That does not mean that Monsoon is a bad business. On the contrary, it is a fantastic business - great product, fab margins, good management.

But at 400p a share, it's priced at about twice what it's actually worth, on a sensible multiple of forward EPS.

That said, assorted loonies like to keep the share price high, to qualify for the Sunday Times Rich List.

Regards, Paul.

[paulypilot] 27/7/2007 16:11

Hi,

Well I lobbed out another 50k shares today, and sure enough the price supporter at 380p hoovered them all up again !!

Cheers, Paul.

[paulypilot] 27/7/2007 14:11

Hi,

scburbs - thanks for that. I've googled it as well, and come up with similar stories from 2005 & 2006.

So risk/reward does indeed look pretty good - main (limited) downside risk is of a leveraged buyout, but poor current trading probably rules that out. Upside (for shorters) is that the stock is clearly overvalued by a significant amount, based on current trading & lousy results for last year.

Regards, Paul.

[scburbs] 27/7/2007 13:30

That was my recollection of the rumour at the time. The article below broadly backs this up, but says he wasn't prepared to pay 416.5p.

MONSOON

Six months ago, Monsoon shareholders were put on stand-by for a possible takeover bid from the retailer's chairman himself, Peter Simon (Simon's family controls three-quarters of the stock). Since then, the stock has soared almost 100p to more than £4. But because even Monsoon is finding the going tough - interim pre-tax profits fell by 9 per cent - Simon can't figure out how much the company is worth. He isn't prepared to offer a premium to the current 416.5p, but he knows that the hedge funds won't accept less. Hence the impasse. That, with the downturn in trading, makes the stock a sell.

[paulypilot] 27/7/2007 13:07

Hi scburbs,

Very good point you make about Simon not bidding at 425p when business was going well. Do you have any links about that, would be good to check it out in more detail.

I'm hitting it for another 50k shares short today, let's see if the support at 380p holds !

Cheers, Paul.

[scburbs] 27/7/2007 10:14

Hi PP,

Thanks. Any views on who/why? No disclosures so presumably through CFD/SB's, but then presumably the CFD/SB provider would have had a disclosure obligation if there was a significant buyer?

The share price seems to have defied logic since I first shorted after last years rise to £4. It has stayed pretty much at that level since despite a quite terrible set of announcements.

In terms of downside risk, PS walked away from a bid estimated at c.425p when the business was performing much much better so it is difficult to see significant downside risk (for those who are short). Significant downside risk for any longs.

[paulypilot] 26/7/2007 21:04

Hi,

scburbs - someone is supporting the share price at 380p. I shorted another 20k shares at that level today, and it was hoovered up. Also, very illiquid share, so easy for someone to maintain price support.

But in the absence of a bid from management, it can't defy logic or gravity forever. This stock is clearly overvalued significantly now.

Regards, Paul.

[scburbs] 26/7/2007 13:18

LFL sales down 13% off a weak comparative! Now that can't be good for margins which are being hit by running two distribution centres.

The share price continues to defy reality. Amazing to see the share price fall so little on such a bad set of results together with an atrocious current performance/outlook.

[paulypilot] 26/7/2007 09:53

Hi,

irrationalexuberance asked;

Any one have any strong views?


Yes, I used to be a big fan of Monsoon, and remember buying the shares at around 55p years ago, and then again at 160p. However, currently I am short of this stock, because it just looks significantly overvalued.

The figures announced today for y/e 26/5/2007 are "very disappointing" (in the words of the Monsoon Chairman), with PBT down 16% on last year.


Moreover, current trading is dire, with LFL sales down an astonishing 13% for the first 7 weeks. This will mean a complete wipe-out for the summer season, with stock levels probably way too high by now & the necessity to go into Sale early & take a massive hit on markdown, to shift the stock.

Mind you, there's no doubt that the appalling weather this summer is partly to blame.

So with EPS of 17.18p for last year, and terrible current trading, I can't help thinking that the house broker will have to slash their current year forecast from 22.4p to maybe even something as low as 15p ??

Incidentally, the house broker only has a "Hold" recommendation on the stock, which as we know really means "Sell" !!

With earnings falling, a PER of about 12 looks about right to me, so 12 * 15p gives a price target of 180p, or less than half the current share price.

Therefore I shall probably be adding to my short position here.


The main risk is that the egomaniac Chairman & majority shareholder, Peter Simon, will buy the business back. Although whether he could get the necessary funding together when trading is so poor, is questionable.

Regards, Paul.

[irrationalexuberance] 23/7/2007 12:01

Anyone alive on this site? This stock seems remarkably resilient to bad news ie terrible trading conditions due to weather but they also seem to have a high valuation for a patchy earnings record. Results due befoe end July.Any one have any strong views?

[maiseymouse] 12/3/2007 13:52

it never rains, but it pours. not long before this one is put out of its misery though it will be very much on the cheap. have a look at this

[scburbs] 25/1/2007 11:53

Amazing how this one continues to defy gravity. Poor results, terrible Christmas sales and management resigning left, right and centre. Only being held up by block shareholdings and possibly continued bid speculation from the previous bid that didn't materialise.

LFL down 8% over Christmas period!

[jeffian] 22/7/2005 11:53

Blimey! Spooky or what?! I promise I hadn't seen this before posting -

"Monsoon PLC
22 July 2005



Monsoon plc ('Monsoon' or the 'Company')
Statement with respect to possible Offer


In light of recent share price movements, the Board of Monsoon confirms that it
has entered into preliminary discussions with its Chairman, Peter Simon,
regarding his family interests making a possible offer for the 24.6 per cent of
the issued share capital of the Company not already owned by them. These
discussions are at an early stage and there can be no assurance that any offer
will be forthcoming.

In accordance with Takeover Panel rules, the Company is currently in the process
of appointing an independent Rule 3 adviser to provide advice to shareholders on
the value of any offer.

A further announcement will be made in due course.

22 July 2005"

[jeffian] 22/7/2005 11:44

Crikey O'Reilly! Will this ever stop?! Must admit I took profits at 315p (in from 75p) on concerns about High Street spending (although I suspect that Monsoon are doing better than most) but at 22x 2004 earnings, someone's pretty sure that they will pull off the vast expansion of UK floorspace and the investment in Russia. Mind you, Numis have been hoovering up every share they can get their hands on - whether for the Simon family or for cancellation, I don't know - and it may be that, rather than trading fundamentals, which is keeping the price so strong.

Regards, Ian

[cat] 07/2/2005 17:00

chart looking brill

[jeffian] 07/2/2005 11:52

Phew! Since Peter Simon walked off the pitch in a huff and took his ball home by flouncing off to AIM and cutting the dividend, this share has gone from strength to strength. Clearly the reverse psychology worked. Keep treating 'em rough, Peter!

Regards, Ian

[cat] 17/1/2005 17:03

this stock has today confirmed a 6 year breakout.
Could easily put on another quid from here - more if the Russian expansion goes well.
Those Russkies love dressing up...

[hyper al] 17/1/2005 07:45

Is the market cap not getting a bit high?

[chester] 17/1/2005 07:16

RNS Number:4228H
Monsoon PLC
17 January 2005


Monsoon

Interim results for six months to

27 November 2004



Highlights

*Pre-tax profit up 32 per cent to #27.8 million
*Total sales up 29 per cent to #169 million
*Like for like sales increased by 10 per cent
*Successful opening of 23 new stores in the UK
*Like for like sales in the six weeks to January 8 up 13 per cent

Commenting on the results Peter Simon, the Chairman, said: "We are pleased with
this performance. The benefits of the investment in our two strong brands are
bearing fruit. We are not complacent as we recognise we are trading in difficult
environments.

We look forward to investing our money on long-term projects at the appropriate
time without any pressure to do so.

These record half-year results are due to our customer's loyalty and support and
especially to members of the company from our part timers to store management,
creative teams, support teams, middle management and directors. Well done and
thank you!."