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Dunelm Share Discussion Threads
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|Firstly, thank you both for taking the time to reply.
Toffeeman - As stated I arrived at a rough figure to attempt to give some approximation to future performance, based (rightly, I believe) on slowing growth in both net income and free cash flow. As you intimate, the figure is very sensitive to small changes, i.e. £80m FCF with growth at 11% for ten years gives a value of £10.65, obviously a far more attractive valuation.
Buffetteer - That you disagree is absolutely fine, obviously this is just my opinion. I will say a few things, however. Firstly I assumed FCF growth of 10% for the next ten years, only falling to 3% after that. This is not necessarily because I believe growth will in fact fall to 3%, rather a conservative assumption that growth falls to an approximate average rate of inflation.
Congratulations on your success in holding DNLM over the years. I first started following the company a number of years ago and believed it was well run and deserved a higher valuation, which it attained. It has, however, not moved to any subsequent degree for the past three years. The growth in share price has not followed the almost linear path of the years preceding it.
If you read what I wrote, I agree with you that Dunelm is an excellent company (I myself am a shareholder). The article I wrote was not condemning its future, rather an attempt at me trying to decide my own views on its valuation. I sincerely hope you are correct in your belief that growth will return and improve, however your assumptions are no more or less valid than mine. That being said, if you end up making your second mill you need not pay attention to my opinion :)|
|MrChriss I must disagree with your formulaic conclusion . Why ? Because you are only looking at the latest update & assuming low growth rates of 3% in future.
I have followed DNLM since it floated and bought along the way from 135p. Including the divis and special divi paid out of excess free cashflow Ive make a return of 10x so far.
We know that a company tends to make a total return over time similar level to its Return on Capital (Charlie Munger & Terry Smith). With over 45% ROCE consistently over many years and a consistent rollout strategy to grow from 150+ to 250 stores and a target of £1.5bn allied to a tried & tested formula it is pretty clear to me that one poor half year (predominantly due to warm weather & a new massive warehouse inefficiencies ) leaves us with a very good buying opportunity .The warm weather & Brexit vote has been a massive factor .
Also, prices will probably rise in line with cost inflation across the sector and because DNLM have a higher profit margin (15%) than anyone else (bar Next) they can remain v competitive and continue to grow market share.
The shares were floated on 15x earnings and have risen up into the mid-20s when earnings growth hit 18%. They are highly rated because of their v high returns and consistency .
I believe they will grow market share from 11% up to 20% by growing the store portfolio and faster growth online .When LFL s bounce back & earnings increase again the PE will expand upwards too.
Lets hope it keeps dropping so I can keep buying more to make my second mill here.|
|Hi Mr Chris - how sensitive is your DCF calculation to the assumptions? so what would it look like at FCF of £80m growing at 11% for 10 years and then slowing to 5%?
As a holder of DNLM I'm weighing up whether to sell. Love the business but just can't see the share price rising any time soon.
I did a little write up of the company to try to help me decide what to do going forward, if anyone's interested:
|Not looking good but hardly surprising with the statement last week|
|Needs to close above 6.76 for the monthly close or we go lower.Wait to see that month close before you all reassess?|
|That chart looks awful - staying out for the moment|
|Well done you - I didn't think it would get this low, but I do not rate the new CEO - he was responsible for growing the biggest loss-making on-line business in the world! Tesco.com.
He will be on a short leash from the family and will be gone within the year if things don't improve.
|Toffee I've closed today.Think we have a little lower to drift.|
|Kendo called £7 - but where to buy?|
|Free cashflow yield of @9% - that's cheap and will no doubt rally when the rats have left|
|The likes of Poundland, The Range and B&M will be taking the lead in recessions.|
|Picking up speed from a poor start and new sales from stores and acquisition. Onward towards 200 stores and U.K. Domination. DUNELM always do well in recessions - and we're heading head first into one of those|
|Well at least we can see in black and white that LFL stores were minus 3.5%?????The company has admitted a slowdown in homeware too!The U.K. Store revenue situation is not improving and competitors fiercely continue to steal market share with a much better pricing architecture.DNLM has to get better a delivering the right product at the right price in the right stores.|
|Yes will be adding|
|Fantastic results given the market, with world stores now on board we should see a significant re-rating towards £9+|
|I'm feeling confident dunelm is very expensive and has priced itself out of the game.|
|Defiantly looking good just sitting tight waiting to buy in on a slight drop|
|Good reversal of late. Chart looking better.|
|I've added here recently.|
|If you ask me they are too busy wasting millions on global expansion dreams in a recessionary climate instead of bolstering the gate at home?Let's gets the basics right first?|
|Sally.How wrong you are.And how right I've been.Dunelm is in a tight market where it is an overpriced player.I see the next set of results being poor IMO, they are struggling to innovate and growing space and adding to the portfolio is a selfish mistake in this harsh recessionary environment that is looking.|
|Left this one quite some time ago but it just popped up on my radar again.
The last trading statement does appear to be really rather weak but equally this current trading range has held over the last 3 years.
Kendo appears to have a axe to grind here so I wouldn't pay too much attention.
Having said that it would need to bounce from this level to instil confidence.|