EssentialInvestor
10 Nov 2017
MRW v KGF Which is the better value?.Ok appreciate they operate in different market placesand KGF is also a multi country buiness., That aside..Any views appreciated.
Bill1703
09 Nov 2017
Merry Christmas for Morrisons Or so says Shares magazine - which also says Buy at 217.8p.Full text from today's edition below:"A downwards drift at WM Morrison Supermarket (MRW) presents a buying opportunity before the grocer unwraps its Christmas trading update (9 Jan 2018). Chief executive David Potts’ charge has reported an eighth consecutive quarter of like-forlike sales growth, up 2.5% (ex-fuel) in the third quarter to 29 October. Though representing a modest slowdown on the prior quarter, Shore Capital believes Morrisons ‘enters the forthcoming “peak” trading period in good shape and on the front foot’. Shielding cash-strapped shoppers from the impact of lower sterling, Morrisons’ Price Crunch and Way Down promotions are pulling in consumers and its Best premium own label range has been dramatically expanded in time for Christmas.Vertically integrated, the grocer is building out its wholesale business with Amazon UK and forecourts operator Rontec, while preparing to supply neighbourhood retailer McColl’s (MCLS) from January 2018 in a deal that revives the Safeway label. Forecasting a rise in pre-tax profit to £365m (2017: £337m) this year ahead of £407m next, Shore stresses Morrisons is ‘a business with a strong financial constitution’. Year-end net debt will have fallen below £1bn for a comfortable leverage ratio of 1.1 times, Morrisons has a strong balance sheet with freehold backing, not to mention a progressive dividend and a pension surplus."
EssentialInvestor
08 Nov 2017
Re: Illogical?..games Late gain for SBRY and the sector.MKS did not look a great report and closes up, perhaps a fair deal of caution priced in?.However need to keep in mind the UKX is nudging all time highs here.
PIE-EATER
08 Nov 2017
Re: Illogical?..games GamesGenerally agree re your posts.....Yes SBRY prices steep, even local Waitrose cheaper on many items.Quality of Morrisons meals.....mmmmm not too sure on thatBIG improvement for Morrisons would be for our local stores to actually consistently have the correct pricing! Twice in the last 8 days been in to local store and a product has been at SBRYs level when in actual fact should have been on promotion at 30% less. Twice I have gone elsewhere only to find out today re the issue. This was the same BASIC issue I flagged up with them and HO last year. In BOTH cases I was promised a call back but nothing materialised....(including the one from HO). IF (or possibly when) MRW can address this issue then they will stop losing sales and progress could be made, but there is enough competition out there to make sure that everyone should be hanging on to whoever comes though the door, not going out with an empty basket.GLAPE
Herald
08 Nov 2017
Re: Illogical? The contention that it was the Amazon deal which artificially boosted the SP (rather than improved management and performance) doesn't seem to fit with the SP history. The Amazon deal was struck in late Feb 2016. SP closed at 199p after the Amazon news. June it was back at 175p and stayed lower than that Feb close until September. Meanwhile the shorting interest kept expanding to be over 19% by October/November. Potts was getting on with the job, improved lfl, reduced debt etc.The recent SP weakness is just part of an overall bearishness on anything retail. Any results which are not above forecast seem to be met by a sell-off.
gamesinvestor
06 Nov 2017
Re: Illogical? "Beyond that, there is the medium term M&A theme... pretty sure we will see more of it in Food Retail."Well I have to say, Morrisons food is far better than anything at Sainsbury or Tesco and their home branded meals are excellent.It's more the shebang of the market that'll keep dragging it it all down methinks !!It's not a major fault of MRW as they seem to have steadied the ship, it's just the competition like Aldi, who's food is also generally pretty good with a few exceptions, but they keep slapping up a shop with in yards of MRW, SBRY and Tesco and it's forcing them to compete.Well in many respects some are not doing so -- everything in Sainsbury is still overpriced, like a standard 500ml bottle of beer (any brand you can think of) starts at £1.8 a bottle and £1.19 in the competition -- so many many products are an order of magnitude more expensive for the same item with the same quantity involved.Games
Bill1703
06 Nov 2017
Re: Illogical? "Bill, unsure the valuation differential with SBRY can be justified?..."Short answer, Essential - it can't. SBRY is cheap relative to MRW IMHO... though less easy to say by how much, and the situation gets more clouded the more you delve into it. SBRY earnings were down last year, and likely to decline again this year... albeit moderately. MRW meanwhile has delivered decent earnings growth (ie. recovery) for a couple of years now, and this is forecast to continue into the medium term - though at a slowing rate. This divergent trajectory is not enough to square off the current significant valuation (on P/E) gap, but it does explain part of it, and it's understandable that SBRY may struggle to outperform until it proves earnings have bottomed (NB. consensus forecasts an EPS recovery in 2018/19).On EV/EBITDA, the valuation is gap is still there but more modest (7.6x MRW vs 6.1x SBRY, most recent actual FY), and looks set to close appreciably again this year - reflecting MRW's relatively stronger balance sheet and cash flow profile. Of course, neither looks expensive on this basis, relative to both the market and to TSCO, which trades on over 9x.And MRW is actually the "cheaper" on FCF yield, 10-11% last 2 FY vs 8-9% for SBRY. This is likely to decline somewhat this year for both, but it's a crucial and under-appreciated metric IMHO, both in absolute and relative terms, and one to keep a close eye on (and of course, both look absolute "cheap" on this measure, around 2x the UK market average). So overall, I see SBRY trading at a big discount to "fair value", and MRW much less so (albeit getting more attractive now) - but equally, I understand why we'll probably have to wait for any meaningful catalyst to see any sustained narrowing in this differential. "On a wider market point, just looking at some of the savage (recent) post results sell offs, wondering if this is indicative of a market top, or some significant interim peak forming..."Yes, certainly suggests a market where further upside will be harder to sustain - but equally, it does show me a market much less likely to crash. With the latter, you tend to see increasingly irrational exuberance in the run up to a correction - yet we are currently seeing the opposite?
EssentialInvestor
06 Nov 2017
Weybridge MRW Very impressive store, if anyone ever finds themselves in my local area.
EssentialInvestor
06 Nov 2017
Re: Illogical? Bill, unsure the valuation differential with SBRY can be justified?,however appreciate that may be a rudimentary take, and have nodoubt you are much better on detail than me!!.On a wider market point, just looking at some of the savage (recent) post results sell offs, wondering if this is indicative of a market top, or some significant interimpeak forming.Often find I'm too cautious, as I was with VOD!.
Bill1703
06 Nov 2017
Re: Illogical? "It looks a la la land valuation to me as I've posted elsewhere previously..."Essential - at the current SP, 11%/10% FCF yields for the last 2 FY... not so much "la la land", more Butlins - cheap and cheerful!?FCF will likely trend lower this year, but these figures - on an already depressed profit base, don't forget - attest to the medium term potential. With further support to earnings from balance sheet "optimisation" (in due course) as they throw off surplus cash."... having said that Amazon may pounce."Yes, indeed - see my previous post on the "M&A theme". Things will definitely happen in this sector - just not as sure exactly what!
Bill1703
06 Nov 2017
Re: Illogical? "Based on it's current P/E, it's tiny 2% profit margins, it's modest yield and the massive supermarket comp, wouldn't 150-175 be the right sort of level to take on the risk of the ever growing depletion of the business to the comp?"Yes, still in MRW, not a huge holding. Not amazed to see it settle back a bit, it managed to defy gravity at a pretty full rating for some time - unusual indeed in this market for anything "UK" or "retail" - and even today it is not massively out of line with 'fair value' IMHO.I think your price range may be about right, if earnings were now plateauing... and without doubt, the top line and market share will remain under concerted competitive attack for the foreseeable. But I think there is a lot more to go for, on margins and profitability, even on a lower business base... and operational momentum to this end remains very good for MRW, as per last week's trading update, and as it has for a while now.MRW has specific advantages over peers... the margin opportunity is greater due to their vertically-integrated structure, the balance sheet is better and FCF has been particularly compelling - it is the latter that keeps me invested, more than anything.But on a risk/reward basis, I can understand anyone hesitating to commit new money... if they can meet forecast expectations over the next 2-3 years (and from the above, I think they can - at least) I think the shares will perform at least fine from here. But I don't see scope for spectacular returns, and there is then the risk that management delivery falters again in a tough environment. Beyond that, there is the medium term M&A theme... pretty sure we will see more of it in Food Retail. And there are scenarios here which could be very positive for MRW... albeit not all of them, of course! But it is another reason to keep me invested, in a moderate way...
EssentialInvestor
06 Nov 2017
Re: Illogical? It looks a la la land valuation to me as I've posted elsewhere previously,having said that Amazon may pounce.
gamesinvestor
05 Nov 2017
Re: Illogical? """MRW has held up well for a while, and the valuation remains full, with at least most of the good news already in the price."""Bill - you still holding this?I sold this for 248 in January and it seemed expensive then, as it does now at 219.Based on it's current P/E, it's tiny 2% profit margins, it's modest yield and the massive supermarket comp, wouldn't 150-175 be the right sort of level to take on the risk of the ever growing depletion of the business to the comp?Games
Herald
17 Oct 2017
Re: SHORTS DATA Are the shorters getting fed up? [link] the publicly declared percentage now at 11.55%. So that's about 120 million shares bought back since that 16.83% mentioned below in July. Unless there are a stack of hedge funds sitting just under 0.5%, the threshold to declare, there does seem to be a decline in their bearish view. What is different now?
II Editor
28 Sep 2017
NEW ARTICLE: Eight top tips for more experienced investors "There are plenty of ideas and guidance provided for novice investors which typically revolve around standard rules such as invest regularly, don't panic when things go wrong, invest for the long-term etc - all of which are perfectly reasonable ..."[link]
