Mereo Biopharma Share Discussion Threads

[marben100] 30/6/2007 23:28

wbj,

Quite agree. Moreover MM has a very substantial investment in MPH himself. He has built up this business from nothing over more than 30 years. I think it is reasonable to presume he knows what he's doing ;0).

Rest assured, I also have no intention of selling, in the absence of any hard evidence to suggest that MM's diversification strategy is failing and a very low shareprice relative to expected earnings. As I've said before, I will consider topping up if the price goes much lower - but I guess that's unlikely short-term given the positive IC mention and realisation that these shares are already trading at a discount approaching 50% of their peers.

Cheers,

Mark

[marben100] 30/6/2007 23:18

Here you can see that the Fair Value is included in profit before tax, and so has been taxed.

But ddl, just because an item appears above the tax line doesn't necessarily make it taxable. I wouldn't expect a fair value adjustment to be taxable (it is neither a trading profit nor a realised capital gain) - but I'm not a tax expert. If it's not clear from the AR, when issued, I'll ask at the AGM.

See note 2: corporation tax is 30% but the tax figure is < 25% of pretax profits [funnily enough it IS about 30% of profits without the fair value gain]. Of course, one also has consider issues such as double taxation rules on overseas earnings and capital allowances.

Best regards,

Mark

[wbjunior] 30/6/2007 23:14

Great buying opportunity for all holders caused by uncertainty, owing to no information on trading at preliminary results and stampede of small holders towards the sea. Marben100 you are right to say that some posters over the last few years have worried holders to sell on very little substantive evidence, Moda acquisition is one such case. I would have liked more indepth information on trading but it's a case of believing Morris and the other directors will perform in the interest of shareholders or sell and move on imho................Holding firm....wbj

[dan de lion] 30/6/2007 21:04

Gross profit 27,064 15,898

Distribution costs (4,229) (2,230)
Administration expenses (14,906) (9,092)
Fair value of net assets acquired
in
excess of fair value of purchase
consideration 5 2,124 418
--------- ----------
Operating profit 10,053 4,994

Finance costs (1,730) (541)
--------- ----------

Profit before tax 8,323 4,453

Tax 2 (2,096) (1,399)
--------- ----------
Profit attributable to the equity
shareholders
6,227 3,054

Here you can see that the Fair Value is included in profit before tax, and so has been taxed.

[marben100] 30/6/2007 21:02

Of course a rather vital factor in the investment decision is: what future earnings is the current share price assuming and what is the likelihood of that level of earnings being exceeded? It seems to me that the current share price is presuming a considerably worse result than Shore's current 2008 forecast already.

[marben100] 30/6/2007 20:29

Just to avoid any misunderstanding, if readers DO examine the thread pointed to, you will see that I did put MPH forward as a candidate for an investment in the HNW sector - and NO-ONE DISPUTED THAT THOUGHT. Moreover, the originator of the thread included Marchpole in his suggestions (if you check the first post on that thread and my follow up):

Things to look at in the UK could be Burberry's, Mulberry, Theo Fennell, Stanley Gibbons & Marchpole. The first hyperlink I've given above details 24 stocks. I'd add Hugo Boss (Germany), Swatch (Switzerland) & PPR (France) to the list of large cap plays. Unfortunately, many of these stocks are no longer cheap- there are a lot of clever people out there-but I'm sure there will be some small cap stocks out there beneath the radar screens of most institutional investors, yet exposed to the favourable headwinds articulated above.

Saint-Germain

What makes you think that MPH is NOT addressing this sector? Suggest you have a look at this website: www.menalamode.com and, from the prices for Ungaro and JCC merchandise, you'll get some idea of the type of individual being targetted by MPH's marketing.

..and just to put the record straight further: I am sitting on a very substantial profit, having purchased my position at below 100p, and not a loss. I am just disappointed (but not surprised) at the degree of negativity I'm reading from some people here and the selloff after good results, even allowing for the fair value adjustment. Whilst I'm fully supportive of negatives being pointed out, I have not seen anything posted (especially by you Polzeath, as you've chosen to make this personal) that is new or that informed shareholders are not well aware of.

I am also fully aware that I may be completely wrong and that the business may be on the verge of collapse but, having studied the company closely and attended meetings there, somehow I doubt it.

Regards,

Mark

[polzeath] 30/6/2007 19:20

Since that's partly directed at me, a response. A simple one because I think there's a danger of overcomplicating things. (And by the way, there was never any intention to wind up shareholders nursing a loss but if that's what posting negative truths does, so be it.)

MPH has lost a substantial part of its business and has not yet proved that it has found substitutes. There is a very real possibility that revenue and profit will be substantially lower going forward. A breakdown of revenue by brands in the last RNS could have reassured but the absence of this breakdown speaks volumes or at least gives rise to worry about the scale of the business going forward.

MPH is hardly in the HNW arena, I'm sure you (Mark) are familiar with the recent thread on Fool about this and MPH does not fit at all well with the sector.

Somewhat dodgy accounting practices are an obfuscation, a management choice to obfuscate, which again makes me wonder whether the trading sitution is as positive as the reported figures show.

Simply put, MPH are going through challenging times with the loss of YSL, acquiring businesses (at a price, obviously - beating cost of capital is another issue) to compensate but have a lot to prove over the next couple of years. Hence the uncertainty.

[marben100] 30/6/2007 18:54

ddl,

Could you explain your comment on the tax issue please and how you arrive at 17.5p. AIUI, the fair value gain wouldn't be taxable, so should just be deducted straight from the posttax figure. It seems that Shore's adjusted figure is more in line with yours here, so I'd very much appreciate an explanation.

Those that are commenting on loss of YSL and UK retail climate really haven't understood this stock. Loss of the YSL licence has been known about for 8 years. MM has diverisified the company massively to ameliorate this. The whole attraction of MPH for the last couple of years is that it caters to HNW (high net worth) individuals who are less subject to spending pressure + it has diversified to areas where wealth is growing rapidly (Middle East, Far East, Russia for example). Similar luxury brand companies are currently trading on multiples well over 15.

One point that investors need to be braced for: if MPH acquires a chain of 30 stores, I guess that'll either mean gearing up again or issuing shares to fund this.

Yes, there is uncertainty about the future - but if there weren't why would MPH be on such a low multiple? So far, MM has pretty much delivered what he has promised. If we only see a SLIGHT decrease in turnover, that will be a stunning result after the rush to shift YSL stock in 06/07. Either back him or get out. Please don't just state the obvious to wind up shareholders disappointed with the recent price drop.

Bottom line: do you trust this management to deliver sales & profits going forward? If yes, then MPH is a screaming bargain and investors will need to remain patient until results prove the point. If not - don't invest.

Thanks,

Mark

PS thanks also to Johnroger for posting the IC article, in particular for MM comments and update from Shore (last forecast was £9m pretax)

[dan de lion] 30/6/2007 17:27

With MPH having to clear out YSL lines before the deadline, then the retailers will have taken advantage of the situation by driving some pretty hard bargains, most probably explains why MPH did not squeeze so much profit out of the second half.

[corrientes] 30/6/2007 16:20

Everyone has their own agenda.

[eagle eye3] 30/6/2007 15:46

I find it strange anyone can read bad news into these results, compared with most other companies, MPH is doing excelent trading. still a safe bet

[lex1000] 30/6/2007 15:12

Good morning wbj.Impressed with what MM and team have done,is doing in the pipeline and positive about what will be the future.Changing like I have from investor,trader,investor to 100% buy to hold investor has in hindsight blurred vision of share prediction.That's over bullish and only seeing trading upside.

In hindsight all the signs were there indicating MPH share price possibly falling like it has.It is month of June afterall and markets are nervy.Tough on anyone needing to sell before the drop.ok those holding long term ignoring short term.Can't argue that would have made more selling and buying back cheaper for it is a fact.

For some time Marchpole has not come out with upbeat trading updates beating expectations in advance results and detailed numbers,however,firmly beleive those good times will return.I am of mind that MPH remains a good buy and medium to long term hold.Roll on end of 2007 summer and welcome H1.Plenty to look forward to.Good value.aimvho.........regards lex ;o)

[wbjunior] 30/6/2007 11:10

Dan what a turn up after results, must admit to expecting mph to break £2 but there you go. Hopefully some press comments on Sunday to stop the rot......................wbj

[dan de lion] 30/6/2007 10:58

Mr Morris said the group is "60 per cent there" on buying a UK retail group with 30-plus stores,

Not quite 50.

[mikepompeyfan] 30/6/2007 07:22

Just a guess but this chain is up for sale, has 50 stores and sells designer menswear.

'Alexon Group Mulls Options For Envy
06/5/2007
Alexon Group plc has reportedly appointed the Hawkpoint to carry out a strategic review of its menswear business. This could lead to a £15 million to £20 million sale of its Envy menswear arm. It is thought Envy could attract a mixture of private equity and trade buyers, such as Moss Bros. Alexon could not be reached for comment'.

[polzeath] 29/6/2007 20:56

YSL will disappear

[dan de lion] 29/6/2007 19:31

The calculations of the eps earlier where a bit simplistic, just taking the fair value off of the final profit figure is incorrect, after all, the final figure includes tax taken off whereas the fair value doesn`t, so taking in to account tax calculations then we arrive at a figure of 17.5p eps.

[polzeath] 29/6/2007 19:21

I disagree. It's down to uncertainty. Your big brand has given you notice. No more YSL. What do you do? Flog as many YSL jobbies as possible for as much (cash) profit as possible in the time remaining. Few risks, you're making money. Margins decrease, sales go up, you make more money, more cash, that's a good thing.

Going forward: lower sales, higher margins, worse cash generation. Lower profits. The hope is to replace lost line with new ones but a lot is unproven here.

Big uncertainty. YSL was not insignificant.

[dan de lion] 29/6/2007 19:18

Good job MPH is International then.

[smarm] 29/6/2007 18:24

I haven't looked at the accounts so thanks to those who have expressed their concerns but I think you are missing the point..

It's not what MPH will or won't do, it's down to how much consumers spend.

Without stating the obvious - London just lost some international attraction today...no surprise then that restaurant groups and retail stocks a little jittery. Where next?

Add to that the prospect of another 0.5% interest rate rise and the picture isn't looking too rosy for a premium brand.

Now then, facts. A friend of mine works for Harrow housing; she says that there has been a sharp rise reposessions and those defaulting on rent.

Another fact. A friend of mine is a top lawyer. He is seeing a dramatic slowdown in private equity deals. More caution, more failing to complete.

Another fact. Another lawyer friend of mine specialises in distress hedge fund sales. Last summer he was twiddling his thumbs, he predicted he would be busy by Apirl, he was wrong....he is now rushed off his feet.

Remember to use stops.

[polzeath] 29/6/2007 17:55

Times like this you need balls of tungsten carbide and a very hard hat ;-0

[marben100] 29/6/2007 17:48

It always happens

Oh yeah? Try RCG - up around 15% on results day. There are pros & cons to trading, rather than just LTBH.

[bletherer] 29/6/2007 17:01

Trouble is some stocks do go up on results day and don't come back down again...and those are probably the ones you really, really want to be in! Perhaps you would buy back in anyway but personally I find it difficult to accept the error and buy back again above my sale price. And so I've watched once or twice as great companies have sailed away into the distance...