Mbl Share Discussion Threads

[jeffian] 02/2/2011 16:35

I rather agree with gg's final sentence but that was the point of my question - is there anyone who could easily and seamlessly take over the role? Can't see MRW taking it in-house for all sorts of reasons and if they were going to do that, why 'tender the business'? As for The Hut, do they have the logistics resources in place to service MRW's national estate? Do they provide the product selection/marketing/display and no-quibble returns services provided by MUBL? Looks like a game of Call My Bluff to me.

[liarspoker] 02/2/2011 16:29

Thanks for your replies guys.

I have a loose value of the business which is above the current market price however with the uncertainty and somewhat dodgy management I want a large margin of safety before I start putting any money in. My target buy price is getting closer though but I am thinking of moving it down a little more. Anyhow tomorrow is another day.

[greengiant] 02/2/2011 16:22

dd, It wont be in-house I know from other businesses I am involved with that they are looking to move things out. For example own label pizza's were done in house now moved to Northern. Own Label labelling was done in house now moved out. They were even looking at moving the salad bars out to a 3rd party supplier.

This could all just be an excuse to drive prices down, the last year Morrisons have been relentless in tenders. No retailer wants to move, it causes disruption and uncertainty of supply. My guess is they will retain it but margins will be squeezed.

gg

[davidosh] 02/2/2011 16:17

Morrisons doing it in house or The Hut doing a physical rather than white label online deal maybe. MUBL are by far the largest distributor of entertainment products in the UK.

[jeffian] 02/2/2011 16:09

Who would the competitors be for the MRW contract?

[dangersimpson2] 02/2/2011 16:03

miamisteve,

The remaining period of the Morrison's contract will only add to NTAV if it generates more cash than the company spends on salaries, bonuses, capex and acquisitions in that period.

Since the company is operationally geared and under volume and margin pressure this is far from clear from the latest announcements that this will be the case. Maybe if we get some actual figures from the company we might be able to make a better guess and MUBL will look cheap, however at the moment I wouldn't be prepared to make an investment on that basis.

Danger

[kimboy2] 02/2/2011 15:59

If MUBL lost the contract in March then they would virtually stop buying stock for Morrison's unless they underwrote it.

I see the tender as a process of getting down to MUBL's bottom line quicker and without argument.

I have argued in another place that MUBL will keep the contract as the margins are too thin and the investment too large for others to want to take it on, but we shall no doubt see.

However if Morrison's were unhappy with the MUBL performance for whatever reason then the balance might change. I suspect that they have just seen how much MUBL were making, and how much the CEO was being paid, and thought that there was some fat to trim out of that.

The problem at the moment is that the market knows virtually nothing of what is happening. In particular there is no inkling of potential revenues and costs from the other ventures due to the appalling company PR.

Given the absence of this information the market will just assume the worst, and why not.

[davidosh] 02/2/2011 15:56

You guys seem to be assuming that Morrisons is ALL the MUBL business and no other contracts or customers exist ? At full speed the Sainsburys online business should reach £20m annually and who knows how many more of those can be achieved. As it stands MUBL has at least £40m of business through other customers and as we know GMV are building a presence in the Middle East so even worst case scenario revenues should be £50m plus going forward.

It was only three years ago that revenues were only £61m and eps 22p so with appropriate slimming down and the new efficient warehousing and systems there is no reason why similar eps cannot be earned going forwards IMO with hopefully the new revenue streams bearing fruit. More importantly there should be huge cash generation and deposits by March 2012 and so this level of share price really should have minimal downside but it seems most have totally lost their confidence.

For that reason I may start buying again soon. In my opinion the prospect of retaining the Morrisons contract is now priced in at zero.

[timesmoney] 02/2/2011 15:40

There were a number of reasons behind the stock announcement.
From the MBL prespective it was the only possitive they could find to say, however weak. From Morrisons point of view despite having given MBL the dear John letter they are clever enough to keep MBL sweet by letting them know that they will not be left holding the stock baby. However i would bet the contract is silent on all these matters.When MBL get the final goodbye I am sure Morrisons will buy the stock but there will be no gaurantee for how much or when. If the picture were any better than that they would have said so.I an sure the auditors will ensure that this vague promise from Morrisons does not turn into a sales invoice!

[greengiant] 02/2/2011 15:27

Liarspoker

Maybe I can help, I don't know if this is the situation here but....

What can happen is that a Retailer can agree to underwrite stock. That is they do not physically take possession of the stock but agree that if a contract is lost then they will agree to buy the stock from the supplier. The stock sits as an asset in the Suppliers (MUBL) Balance sheet as it still has to be invoiced. When the stock is "sold" you have the accounting entry

Credit Stock
Debit Revenues

This isn't unusual and the benefits to Morrisons is that it doesn't take possession of the stock until it needs it. The benefits for MUBL is that it can potentially buy cheaper (volume) and it ties the company in. I imagine that this is what has happened here. Generally this sort of accounting is used for forecasting reasons so again, may be the case here

Hope that helps and sorry to see this one fall so far.

gg

[masurenguy] 02/2/2011 15:21

Would imagine that Graham Edwards is not a very happy man having added 750,000 shares at around £1.50 some 4 months ago !

[liarspoker] 02/2/2011 15:15

I think it has been lost fmcalorum. Why is Morrison's taking back stock ?

I find this a perplexing situation. MBL was holding stock on Morrison's behalf. Is this the inventory on the balance sheet or is this a different inventory set up all together ( ie off balance sheet so to speak ) ? And how much money will MUBL receive for handing back this inventory ?

I hate these mumbo-jumbo RNS's.

If someone could shed some light on the matter that would be appreciated.

[fmcalorum] 02/2/2011 15:10

If they retain the Morrisons contract from Sept 11 for a further 3 years what is that likely to add to the share price? The current prices seems to assume it will be lost!

[miamisteve] 02/2/2011 14:55

dangersimpson - The morrison's contract regardless of the tendering will run until sept. 11 , so I'd expect it still to generate some cash NTAV, which you seem to ignore. I'd guess in the 10-15p region.

[empirestate] 02/2/2011 13:29

have put this one on the radar as quite like distress scenarios. having looked at the books from the interims the negative balance between payables and receivables was quite alarming at GBP9M with GBP2M in cash. As they stated diversity in income streams is imperative in this over competetive market in which total sales are dropping alarmingly. a small gamble for me if it gets to 20-25p which is looking probable at this stage.

[dangersimpson2] 02/2/2011 13:27

Maybe, maybe not.

With uncertain earnings potential in the short term (profit warnings) and the medium term (competitive tendering of the Morrison's contract) then its hard to argue that MUBL should be valued on earnings. I think this is why the last trading statement has had such an impact - in the light of it we can no longer value MUBL on its earnings.

So what about valuing it on assets? Well I doubt the PPE are worth much to anyone else, or UExplore or other intangibles apart from GMV which is hard to value.

Looking at the the Sep10 interims NTAV (Excluding PPE & Investments[UExplore]) (I'll call it NTAVX) is about 74p/share but a large part of this is inventories. We know that Morrison's will pay up if they transfer the business so we shouldn't apply too big a discount however a 10-20% discount would give a NTAVX of 50-62p/share for a worst case scenario.

There's then the question of movements in NTAVX since Sep10. We know they've paid out a Divi of 7.5p and the NTAVX has been falling over the past year as they've invested in a distribution centre. I would therefore expect NTAVX to be maybe 10-15p lower at March11 Prelims.

So we have a valuation of 35-52p/share + UExplore Stake + GMV.

So 'too cheap' really depends on your valuation of UExplore & GMV and your view on the management's ability to generate earnings & cash-flow in the future.

Of those I'd only really place any value on GMV however what that value is I have no idea! So at sub-30p I'd be interested, but not really at 50p since I couldn't say that the downside was fully covered (which is what I'm after in these sort of situations.)

[mr hangman] 02/2/2011 13:00

Bit like buying a canoe with holes in it..

[timesmoney] 02/2/2011 12:59

Des
In that case go buy some, come to think of it buy them all!
You get free membership to the Guy Hands school of shrewd investments.

[deswalker] 02/2/2011 12:05

Too cheap this IMO

[mr hangman] 01/2/2011 12:48

Wake up guys we are now in the digital age

[typo56] 01/2/2011 12:46

Buyers must be hoping that there's "a cunning plan", and a cunning plan that has ordinary shareholders rather than management at heart.

Can you see what it is yet? I can't.

[cockneyrebel] 01/2/2011 11:29

Ok - I could have posted that Indy link early but didn't - I hope that in some way clears me as someone who's out to knock the shareprice with any opportunity.

I would just like to ask holders if you've thought this through still. If MUBL are now in a tender for the Morrisons contract, even if they win it they are going to be on less favourable terms imo. Morrisons also know just what it means to MUBL because the shares got walloped on the news the contract might be up - so MUBL over a barrel imo.

With all the competition in CD/DVD sales MUBL will have constant pressure from their customers imo - that was my reason not to buy these a year ago. They get squeezed both ways from customers and suppliers. If retailers keep selling CD's/DVDs at ever reducing margins then why sell them from a store where they could use the space more effectively selling higher margin stuff? Better to do it nearly all over the internet with one central hub and keep the margins up, in which case they will end up dealing direct and cutting out distributors eventually, imo.

I think the likes of Sainsbury might use MBL to test the water with internet sales and if it works well, dump MUBL and go it alone - if it fails, MUBL take the hit I guess.

So that leaves downloads - seems to be taking MUBL a ruddy long time getting sales going on the downloads. The important point about this is that's all about size and first mover advantage - they are miles behind the competition - if they even have a prayer of competing they will need to spend a fortune on advertising imo.

I can't see any investment case here myself.

I bought a nice kevlar vest last week so get the machine guns out guys I guess :-)

CR

[liarspoker] 01/2/2011 09:27

I agree...sell this dog...so that it will reach my buy price. ;o)

Edit: Though that's about 20-25% south of here. Hopefully for holders that sort of price won't be reached.

[rbcrbc] 01/2/2011 09:06

MBL Group

Our view: sell

Share price: 56.5p (-21.5p)

MBL may feel that in the business of supplying large retailers, independent stores and export customers with DVDs, CDs and video games, the landscape is shifting under its feet.

This is a market in structural decline, and MBL released an update yesterday that was not for the faint- hearted. Management said the conditions had deteriorated since it revealed in December that trading was "challenging" and yesterday warned that profits would be "substantially behind management's revised expectations".

Competing with online giants such as Amazon and online piracy has proved a struggle for the entire industry, which is increasingly moving digital. Also, MBL's contract with Morrisons has lapsed and now has to enter a competitive tender to win it back. The company is also trying to diversify but admitted the strategy was burning cash. It added yesterday it was no longer in takeover talks.

It has reshuffled management roles at the top to spark a recovery but despite a valuation of 2.14 times estimated earnings in the year to March, we feel investors should stay away.