Mccoll's Retail Share Discussion Threads

[aleman] 07/4/2020 14:02

Food prices are definitely rising. I could not buy a small tub of premium ice cream under £4 in Tesco today. I ended up paying £4.50 for Haagen Dazs. I've never even paid £4 before. I think I only paid £3.50 once.

[tjbird] 07/4/2020 13:47

massive buy article over weekend

[thepopeofchillitown] 07/4/2020 13:23

More to come here. Currently quoted 41.7p to sell my small holding. Bought 2 weeks ago at 22.9p

[aleman] 07/4/2020 09:16

Another consequence is that increased EBITDA and accelerated debt reduction brought about by lockdown means the company can afford to accelerate it's (up until now rather slow) rationalisation and investment plans. This will bring forward the date of any takeover by Morrisons and probably increase the bid price a bit.

[totalgeek69] 06/4/2020 20:45

It is really pretty simple. The debt was already priced in and yes things have changed now so the debt is much more likely to be reduced and imho reduced significantly by events.

[aleman] 06/4/2020 20:15

If the shutdown's enhanced margins and extra turnover boost EBITDA from £32m to £40m or so (after £32m also last year), and pre-working cap operating cashflow rises from £26m to around £35m (after £21m last year), and the higher cashflow and axed dividend sees debt fall from £94m to less than £80m (after £98m last year), does it have too much debt at the end of this year if it is then less than 2 x EBITDA and falling around 20% per year?

These numbers would be similar to 2016 results except debt was then £40m lower at 1 x EBITDA. The shares rose from 180p to 200p on those results to give a market cap of around £220m. Currently, it's around £38m.

[blusteradjuster] 06/4/2020 18:52

From a valuation point of view:

The market cap is less than half net debt (so less than a third of EV).

Any, even short-lived, boost to trading that helps reduce net debt should have a disproportionate effect on the market cap and share price.

A secondary effect is to derisk the business (reduce the chance of its debt overwhelming it) which should reduce any EV discount to the sector.


From a trading point of view:

This is riding the newsflow around the epidemic restrictions. As and when restrictions are lifted, the interest of hot money might wane.


From an ongoing (valuation) point of view:

The trade that has shifted to these local shops will show some stickiness in that returning to driving to the supermarket or eating/drinking in restaurants/bars might not quickly return to normal even as restrictions are gradually lifted.

That said, the like-for-like uplift is about as good as it is going to get right now. Noises out of Europe are of slowly easing restrictions and I know for a fact that some UK online retailers are looking to relax halts/curbs on trading after Easter.

[cliff edge] 06/4/2020 18:49

I somewhat think that the debt level will be much lower at the end of all this than it was at the beginning, and that the longer it goes on the lower the debt will be. this in turn will make the business more profitable on going.

[thefartingcommie] 06/4/2020 18:24

Masurenguy

re...Be careful - this company carries a lot of debt, and when the present emergency is over their localised advantage will again be eroded by the supermarkets.

Well,thankyou so much...I'm sure we will all sleep better having had the benefit of your sage words.

[masurenguy] 06/4/2020 18:09

Be careful - this company carries a lot of debt, and when the present emergency is over their localised advantage will again be eroded by the supermarkets.

[bent banana] 06/4/2020 16:03

From the other thread courtesy of Sain@vision

hxxps://www.chargedretail.co.uk/2020/04/06/mccolls-partners-with-deliveroo-to-offer-online-deliveries-for-the-first-time/

[spectoacc] 06/4/2020 15:38

Not even sure trade will drop much from here - 1/3rd of calories used to be eaten outside the home, just can't see that coming back in a hurry. I think the casual dining chains are going to be in deep trouble.

[totalgeek69] 06/4/2020 15:34

Exactly, the way I see things is whilst most shares at the moment will be volatile, this one as it is a defensive food stock that is trading better than before the lock down can only go back to where it was. Even if trade goes back to normal in 6 months they will have paid down a chunk of debt and the share price will be very stable.

[spectoacc] 06/4/2020 14:35

"I'm unsure why this is a buy. Surely you're just temporarily bringing forward some sales as people panic buy and stock up. It clearly isn't a structural long term shift that results in MCLS gaining significantly."

To me, the main reason is that MCLS was getting priced for bust, based in its excessive debt load.

The chances of MCLS going t*ts up during the (extended) Covid-19 epidemic is now surely negligible.

In the meantime, we all expect Morrisons to move on it - eventually. Would be a good use of the c.£600m business rates relief...

[sphere25] 06/4/2020 14:31

The valuation has been cheap for a while but continued to get cheaper as the company regularly puts out warnings and then impaired to the tune of nearly £100m. It needs to be a longer term significant shift imo to warrant a material re-rating. This will likely go up in the near term though.

Fair comments though folks. Good posts.

Food for thought for investors?

(Too much? Ha. Go short on the humour)

[aleman] 06/4/2020 14:26

Sphere25
6 Apr '20 - 14:01 - 1449 of 1450
0 0 0
I'm unsure why this is a buy. Surely you're just temporarily bringing forward some sales as people panic buy and stock up. It clearly isn't a structural long term shift that results in MCLS gaining significantly.

It's a buy because the shares went the wrong way on lockdown. It is not bringing forward sales. It's added sales at higher margins. It's adding sales lost from bigger supermarkets, work and school canteens, cafes, restaurants and takeaways. Also anecdotally, sales of alcohol and newspapers have risen as other pleasures are now hard to find. Sales have been boosted but margin increases are likely to be the biggest factor. Net profit margin could double from very low levels through the lockdown period and remain higher during the relaxation period which might extend over a few months. Shares were 45p before lockdown and fell to 15p but the extra revenue and margin enhancement means the net debt/EBITDA target is likely to be reached much more quickly than previously thought and see an earlier return of the dividend. Arguably, they should have risen to 60p+ instead of falling to 15p. Time will tell but the rebounding share price on good volume suggests numerous investors think the same, though it's taken reporting of increased convenience store sales numbers reported by online banks to give them the confidence to buy.

It's also worth remembering that the shares price was £2 or more when EBITDA was £40m or so and the company's guidance before the shutdown was around £32m. It's conceivable that EBITDA might once again be pushing £40m with the shutdown boost and that board changes, store expansion and rationalisation, and the Morrisons fascia expansion could see that advance further next year.

[rimau1] 06/4/2020 14:24

Sphere - agree with you except you are missing the fact that before any covid upgrades i think that this is on less than 5 times earnings and chucking off plenty of cash to pay down debt, once the balance sheet is sorted here fair value is north of 50p, some folk would also tell you Morrisons might end up swallowing this up too

[mr roper] 06/4/2020 14:05

folk I talk to are trying to avoid supermarkets like the plague, whilst most will eventually head back to supermarkets when the situation normalises I expect quite a few will continue to mix their shop up and probably continue their usage of convenience stores.

[sphere25] 06/4/2020 14:01

I'm unsure why this is a buy. Surely you're just temporarily bringing forward some sales as people panic buy and stock up. It clearly isn't a structural long term shift that results in MCLS gaining significantly.

Well, not unless you think we're going to be locked down for years. In the short term, MCLS likely put out an ahead statement but post that the market sells this back down imo as the wider environment normalises.

[spectoacc] 06/4/2020 12:58

Go on my son.

If & when "the seller" ever clears, I think there's rocket fuel in MCLS. But I would say that. :)

[tjbird] 06/4/2020 12:54

massive buy article over weekend

[mr roper] 06/4/2020 10:57

Excellent volume today

[nw99] 06/4/2020 08:33

Yes very much so after that article as well

[rimau1] 06/4/2020 08:24

That was a bonus! There were also numerous press reports over the weekend, not directly linked to MCLS but saying the increasing trend towards shopping at local convenience stores to avoid the supermarket restrictions.