Eadwig
11 Nov 2017
Re: The Fallout 25th October Short positions declared 0% (zero percent)7th November 2017 0.91% (GLG Partners LP)This company has a history of shorting MERL and may have had a holding under the reporting threshold (o,5%) for over a year. It has added to that position AFTER the steep fall.
Eadwig
28 Oct 2017
FAO Bill MERL Thesis IV Bill,I've still got more to come here yet, as those who know my posts might have guessed! I particularly want to tie-in the plans for technological expansion plans and developments, and I need to go back over your post to see if there is anything I can't answer.There's also the latest developments and latest forward guidance to analyse. I think I'll leave the numbers to you, but I have always thought the P/E multiple generally too high (it is what my first post was about on this board). The actual growth has never lived up to the multiple the market has assigned, for one reason or another, and since I have been involved the growth achieved has really been very average.However, the plans are ambitious, they are focused abroad for maximum diversification as soon as possible (although I'm sure the UK as a major tourist economy will remain a large part of the company offering, and rightly so). I don't see any immediate future where companies listed in London but earning foreign currency aren't going to have a premium attached.I'm sure MERL will continue to extend the number of brands offered and also destination hotels from which multiple MERL attractions can be accessed, but the strength of the existing brands will get more and more coverage and so far they have shown great caution and wisdom when adding brands, I think.I haven't seen it stated, but the age that attractions appeal to is being widened also and the Peppa Pig brand shores up the pre-school level nicely while Shrek appeals to a slightly older audience. (I wonder why unique licenses never seem to extend to China).I'm unsure about the whole concept of Little Big City and want to look into that further before expounding on it. I might even sneak a visit if I can get over to Berlin (drivable from here). I love models myself (ever since seeing the railway layout at Alton Towers when about 11, funnily enough) but I'm not sure they have a lot of pull.The SeaLife attractions look set to expand to just about everywhere there is thought to be a market, and there are new brands in Australia (Tree Top Tours, WildLife, skiiing resorts and others, all of which which can very easily be expanded across the world if thought suitable. Management will be key in the decisions here, of course, but so far they seem to have done well, if over-cautious in their presentations.There are some competitors such as 'Six Flags', I think it is, in the USA, but they only run theme parks - in fact pleasure parks really (rides only pretty much) and one or two others. Brands are all important, and Six Flags is unknown outside USA.I'd love to see MERL get their hands on Warner Bros and the Harry Potter franchise and theme park(s) at some future point, but that is just fantasy right now.Held up at the moment by yet another illness, and the constant antibiotics are slowly ploughing me under. I shall be back ASAP.EadwigPS. I have upped my next BUY order (5th tranche) up from @358p to @364p as part of my efforts to trade my average down to below @400p
Bill1703
27 Oct 2017
Re: FAO Bill MERL Thesis III "If I didn't think I had answers to your questions then I would be re-examining my position immediately... If you haven't done so, I do urge you to go back over my posts from the last year on this board... Like you I've never really understood or agreed with the high P/E but ultimately that was the price I had to pay to be in, I decided."Hi Eadwig - a belated thanks indeed for your considered thoughts in defence of the MERL thesis (and hope you are back on the mend now?)And again - I have been through pretty much all your previous pertinent posts on the longer term case, and I really don't find too much to challenge in any of its multi-faceted aspects... well thought out and argued, and imbued with your considerable investment experience and expertise, as I would expect. If, for me, MERL is not quite a perfect fit for some of them, it still doesn't negate their relevance to the debate - and nothing is ever a perfect fit for any thesis! And you are right to say "my questions" - as I said before, it is questions I have, rather than answers. Ultimately, for me, any such long term case is about squaring the story with the price you have to pay for it, and it is the latter I am wrestling with most, not the former! FWIW I had a very good seat to observe the IPO and, for a while, its subsequent experience as a quoted company, and was always both interested and intrigued... I wasn't allowed to buy in back then, which I might well have done otherwise, hence my renewed attention now that I can and the SP pull-back has thrown up at least a potentially "unique-ish" opportunity.For any situation, if I can't make the valuation work for me, as well as the story, I won't buy in... I have missed out on a few good 'uns as a result, but equally, dodged a few bullets. Swings and roundabouts, overall...When I said "unique" stock, I was thinking partly as a UK stock, but also that while there are a few international comparators (Disney of course, also SeaWorld? and one or two more in both US and Japan, as I recall, though would have to dig around to refresh my memory), none were that close a fit to MERL's profile. It just makes pricing the story that bit more difficult... And I do have a caveat over hotels expansion... yes, they earn higher margins (they have to), but typically lower ROCE due to capital intensity, and higher cyclicality, with high operational gearing. And (rightly or wrongly!) I was always more intrigued by the opportunity in the Midway segment, with shorter "dwell" times and where it's more about exploiting existing footfall rather than packaging longer term duration with accommodation supply. But yes, I see the sense in some level of hotel capacity... as long as they don't over-build in the wrong places, at the wrong time... "... don't accept this argument and see no evidence to back it up... major internet/media players are driven by idealism as much as ROCE and future growth is all about Intellectual Property, Access and CONTENT over which they control access to or have unique ownership of."On this point, a fair cop, I was largely thinking out loud... and ultimately, whatever the rationale, I don't doubt there's a few who could certainly buy MERL for almost any price without blinking, today, tomorrow or whenever. As for who will be the big "internet/media" players 10-20 years from now, I am less sure - could be a whole new crop, I suspect at least some of the current ones will not last the pace... though there will be doubtless others to take their place (as I can hear you say yourself!)So... I commend your case, I'm just not sure what it's worth. More than a "market average" rating, I agree... but maybe (probably) less than the 25x P/E or so we have seen not so long ago. Somewhere in between... which is where we are now! It sometimes helps to apply the binary consideration in such cases, everything's either a Buy or a Sell... easy enough answer for me in that case, down here, I would Buy it
Eadwig
26 Oct 2017
FAO Bill MERL Thesis III Bill, "the capital intensity may put off your internet/media players who are much more at home with asset-light, capital-light, high ROCE operations."I simply don't accept this argument and see no evidence to back it up. Many of the major internet/media players are driven by idealism as much as ROCE and future growth is all about Intellectual Property, Access and CONTENT over which they control access to or have unique ownership of.MERL are all about the development of I.P. (that very much includes media franchises, brands and merchandising) and pushing forward into virtual reality experiences and ever-increasing integration of technologies. Lego was rated 'the most powerful global brand' in Feb 2017, making it a critical linkage. (I've never been quite sure just how solid that linkage with MERL is - could Lego withdraw from the deal, for example?)MERL's other brands are not in the same league, although they are growing in strength and value.'Asset light, capital light?' The Google maps project. Cross-pacific fibre cables have been or are being being laid by Google, FB, MSFT. Autonomous transport, drone delivery, low-level 'satellite' internet provision across the whole of the third world.The complete depository of Chinese literature in one library (written pictorially, remember), online education up to and including degree level (Tencent Holdings)$19Bn for Whatsapp by FBOngoing R & D and applications of artificial intelligence and machine learning.Global credit cards and mobile payment systems.The development of new production studios and TV shows, bids to show/stream live professional sports in the hundreds of millions which will soon be into billions as contracts come up for renewal.Feature film projects and studio ownership.Amazon not even attempting to make a profit for the first couple of decades.The list of heavy capital projects with no guaranteed return whatsoever is just about literally endless.Apple alone have as much cash on hand as most nation states. Over a quarter of a trillion USD in cash at the last count, I think it was.Money is NOT going to be any kind of impediment to these companies when acquiring rights and assets that will help them secure content and customer interest.
Eadwig
25 Oct 2017
FAO Bill MERL Thesis II Hardboy, "BUT where do the expanding middle classes in emerging countries take their international holidays which they can now afford?"Exactly, Hardboy. As I placed in an earlier post (which I assume you have now seen, Bill), WIZZ Air, the fastest growing airline in Eastern Europe, switched one of its new, larger capacity planes onto the Warsaw - Copenhagen flight specifically to cope with the demand for Legoland:Eadwig 30-6-17 "A minor point of interest - on a flight from Poland the other day, I read in Wizz Air's magazine they are upgrading one of their routes from Warsaw to Denmark by putting a larger plane on the route (230 available seats instead of 180 per trip) due to the demand they were seeing for family visits to Legoland. "Now, you don't take plane trips for day visits as a rule, not with the family in tow. This is why the expansion of the hotel chain is a good idea. Why not put together an easy family package based on your own hotel, especially if it raises the profit margins and your take from said family - and making it much easier for them to book a package into the bargain?I bought a pack of cornflakes in Poland last week - the back of the packaging is plastered with MERL brands and package offers with inclusive tickets to various destinations, including London. I was a little surprised, I have to say, but then I don't normally buy cornflakes (neither do Poles, come to that, but Poles and Eastern Europeans generally are mad for theme parks, far more so than us Brits who might see them as a bit plastic and perhaps only grudgingly take the kids along as a treat after much badgering).Note the large theme parks that are not part of specific brands like Lego or Sealife that have opened in Central/Eastern Europe.As for the 'brand expansion':[link] Markets. Yes, its early days (that's the point of getting in now and swallowing that high P/E, though always with the intent of trading the holding price down). MERL does have Mdme Tussauds, Sealife and Legoland attractions already up and running in China, Malaysia, Turkey as well as Singapore and Hong Kong and Dubai.Expansion continues apace in Australasia and USA. Not emerging markets, but both have very fast population growth, high standards of living and deal in currencies which are not GBP. They are also now in Tokyo and South Korea. Not fast growing markets population-wise, but large internal markets all the same. Families will travel from all over Japan to visit Tokyo and add MERL attractions to their list of things to see, I assume S. Korea is much the same.Much more to come when I get time ... soon I hope.Eadwig
Eadwig
25 Oct 2017
FAO Bill MERL Thesis I Bill,I don't really have the time or energy (illness) to respond fully. I do appreciate a rigorous examination of my thesis though and if some of my answers seem a little terse or off-hand, it is purely lack of time and not in anyway meant to put you off posting more of the same. Please do.If I didn't think I had answers to your questions then I would be re-examining my position immediately with a view to imminent exit if I couldn't regain confidence in my thesis (which is a little wild for many people to go along with, when it goes so far as it does with the global internet companies etc ... however, since I first came up with it in 1985, I haven't been very far off track as yet, and I have made a ton of money based on it). That's not to say I haven't got a major thesis badly wrong in the past when I got carried away with the potential for First Group and natural gas conversions. The trouble was, FGP weren't really interested except where parents were paying to subsidize their school bus conversions in the richer parts of N. America. FGP never bought into *my* thesis. An expensive lesson, and NOT a mistake I am re-making with MERL, whose expansion plans are there for all to see and not what i would do with the company if I were in charge.Just a reminder of MERL's plans and current position: "Merlin Entertainments is the largest European entertainments company operating in Europe. Merlin runs 123 attractions in 24 countries across four continents. Our aim is to deliver unique, memorable and rewarding experiences to millions of visitors across our growing estate. We believe that we achieve this objective largely thanks to the commitment and passion of our team and the strength of our brands, which will never fail to be distinctive, challenging and innovative."I think you know I'm not one to 'fall in love' with a stock and do try to look at all sides. If you haven't done so, I do urge you to go back over my posts from the last year on this board. You can skim many that are simply tactical to do with:My trading around a position, The stock price movement, The expanding foreign earningsThe initial boost from a falling poundMERL's over value for anyone NOT looking so far ahead as me. Like you I've never really understood or agreed with the high P/E but ultimately that was the price I had to pay to be in, I decided.However, there are posts that do expand on my MERL growth thesis which I think you may not have read judging from your post, and you should read in detail.the way, I wouldn't say MERL is completely unique. MERL and Walt Disney (DIS.NYSE) have some business parallels and are going to increasingly take on aspects of each other, in my view. They are the two leading global players in 'Entertainments'.Last of the pre-amble: I'm not 100% up-to-date with all MERL's doings, I have to admit. I shall add here as and when I have found the time to do the required catching up, some of which is very pertinent to your questions and observations, especially the VR developments I discuss in one of the previous posts but which is an extremely fast moving area.Contd..
Eadwig
25 Oct 2017
Re: Heartened/Thoughts Bill,As I've stated consistently this is a conviction stock for me and a long term, ten year play on population growth, emerging markets, strong brands and ultimately the merging of all such companies into the dozen or so internet/media global giants that will dominate business globally, in my opinion.Of course, I could be wrong and the internet, branded family entertainment and indeed families, may go out of fashion. Or, more likely, I may have picked the wrong vehicle.If you can see a better one, please do point it out.
soi
23 Oct 2017
Re: Heartened/Thoughts Good MorningNice bit of analysis Bill as usual, thanks.I only just started trading it last week, to the long side, managed a handful of tight scalp trades. Then decided to take a look at fundamentals, similar conclusion to your own.It has appeal as a short term trading chip, spread is tight, liquidity good.I`ll carry on trading it for a while ( currently 2 longs in )ATBsoi
Bill1703
22 Oct 2017
Re: Heartened/Thoughts I remain undecided... forward P/E now around 18x. What price for a "growth stock" which isn't actually growing much... and while the future growth potential is there, it seems likely to come at the cost of ongoing high capital intensity - at what point are you ever going to get any decent FCF and dividend generation out of this?And if you want a hotel stock, you can buy WTB at 15x forward P/E...Probably slightly cheap IMHO, but maybe not by much - I am sure some would pay over 400p for this story, but not sure I would - at least, not yet.For completeness, see below for my considered thoughts back in August with the SP around 465p - as posted on another board: ********** ********** ***And the bottom line is... underwhelming for me. Obviously cheaper than it was when soaring up through 500p, but probably no better than 'fair value', with nothing to get too excited about in any of the key elements, as summarised:Forward P/E 21.2x (act 23.7x)... has always traded at a market premium, but not always up at this level. Reported growth continues fine, but underlying growth before FX has been pretty flat for a year or two, and this seems to be continuing... a concern as the FX kicker is now "going ex", is unlikely to be repeated and could well reverse (though probably not quickly!)FCF yield modest at 2.8% latest FY (1.4% prev)... you could argue that "steady-state" FCF is quite a bit higher, before "growth" investment, but equally, I suspect that they will always have to sustain high renewal spend, as without a constant cycle of new features and attractions their sites will quickly become stale and moribund.Divi yield well below 2% still, so no meaningful story here... it reflects the ongoing capital intensity, I would say, which (as above) might well be a much more permanent feature than some bulls suppose?A takeover is a long-term possibility, of course... but much less likely for foreseeable IMHO, there is still a 30% PE stake I think, and even absent this, EV/EBITDA of 13-14x last 2 yrs hardly screams opportunity to any prospective trade buyer. I get the medium term story, largely to do with rolling-out more sites (particularly the "midway" segment), so profitability should remain well under-pinned. But as before, it's a business where you have to continually innovate - and spend cash - just to stand still, and you have to ask what price you are prepared to pay for this story, particularly with no real dividend or FCF yield support?Probably 20x P/E max for me... there are definitely even more elevated ratings elsewhere in this market - but I wouldn't be chasing those either, on anything more than short-term view!
Bill1703
22 Oct 2017
Re: Heartened/Thoughts "... P/E looks far more sensible at the levels you mention, I have to say. If you look back at my first post I always questioned the multiple the market was giving the company..."Eadwig - without wishing to pick you up on it unduly, I find the above somewhat strange given your regular reiterations of bullishness on the stock. Surely, the market "multiple" is an integral - and pretty important - part of the investment case? Of any investment case?And it is hard to square with a number of previous comments, including the following from 15th Sept, with the SP around the 450p mark:"... Still a STRONG BUY - I hope anyone who took note of my post earlier in the week has filled their boots..."I do get the longer term structural story... but whenever I have looked at it in recent times, I have always concluded this to be pretty fairly priced in. But FWIW, I definitely feel it's getting interesting now, after the sharp correction - though I need to do more work on it. And I am not sure increasing the number of hotel rooms is the way to go here, it merely increases the cyclicality rather than exploits the structural demographic opportunity, etc... but as I say, something to ponder further.
Ripley94
21 Oct 2017
Re: limit lifted. Green Morning called this wrong again // thinking there would be brokers downgrades ( which was not correct )Should of ignored and topped @ 357p
Ripley94
18 Oct 2017
Re: NEW ARTICLE: How far will Merlin Ent... Thank you Hardboy ... 
Best of luck with your selections .
Eadwig
18 Oct 2017
Re: Heartened/Thoughts Hardboy, "In fact they are not predicting a flat year in comparison with 2016, they are forecasting like for like sales will be flat (which are completely unaffected by overhead costs.)"Thanks for the correction. Its an easy thing to overlook when skim-reading, which is all I have time for at the momentP/E looks far more sensible at the levels you mention, I have to say. If you look back at my first post I always questioned the multiple the market was giving the company.Brokers. Yes. Regualr readers may remember, my buying strategy was based on brokers pulling down the price throughout the summer, but they did the opposite. Now I'm fully loaded up with 4 tranches you can bet your life they'll start singing a different tune.However, from a 10 year perspective (which is very uncommon for me to have), I think the business is going in the right direction, with most major problems beyond its control (apart from the safety issue at Alton, arguably). If I have a complaint, I'd like to see a bit more targeting of cost efficiencies, but its probably too much to ask in these days of individual security guards conducting searches and the like. They certainly do always appear to be on top of the issue, eg. the redundancies at Alton when it failed to pick back up as quickly as they were expecting.Story. Last time I was dragged into Mdme Tussauds (2012) we went on the ghost train (or whatever the ride is). Big notices about no taking pictures etc etc. In the car/wagon in front of us were four apparent Muslim women, dressed in full coverings, including face masks.As soon as were through the doors of the 'station' and into the ride, huge, expensive cameras with every device attached you can think of were brought out from under their garb and they were clicking away like mad - as though it were a competition to see who could get the most photos rather than an experience they were supposed to be taking-in and enjoying.I seriously thought about reporting them to security in case they were surveillance for a terrorist outfit planning to hit a major attraction - and none more major than Mdme Tussauds. It was about a month before the Olympics. They could equally well have been a load of students preparing something for freshers week or something. At least one of the bare arms I saw operating the camera looked decidedly male, and all four looked to handle the cameras like professionals.A pretty surreal site to see, I have to say. I never reported it, assuming there would be internal CCTV cameras picking them up anyway.
Eadwig
18 Oct 2017
Re: NEW ARTICLE: How far will Merlin Ent... It isn't the site editor just a regular chartist contributor, and I posted about the Lego shake-up, after a turnaround and 14 years of massive profitability and growth, when it happened. They are a separate (and private) company, by the way, although obviously MERL are heavily linked, especially through their ability to use the ultra-strong Lego brand.
Hardboy
18 Oct 2017
Re: NEW ARTICLE: How far will Merlin Ent... Ripley"Can not open the link games"Copy & paste - works fine
