Another Jacko - It doesn't look great I grant you. They are clearly hanging on by a thread. BUT there is a scenario where they get a covenant waiver from the banks (not impossible as banks ultimately don't want any business to go bust and have to take a full write down), pulp prices stabilise, FX hedges roll off, and they agree sustainable prices with their customers. Perhaps far fetched but not impossible. Today's RNS just underlined for me that the decisions taken by the original mgmt team were obviously of the highest orders of incompetence. When coupled with spiking pulp prices the result was toxic. But new management team is clearly doing all it can in difficult circumstances and will go down fighting. Also if some of the aforementioned indicators start moving in their favour and they need a cash bridge there is always the scope for them to try a rescue rights issue before they throw in the towel. As always time will tell. But they are not completely done yet...
Re: Double audit. The more pertinent question is re. KPMG. I highly doubt that they would have taken the role if they thought it was a poisoned chalice...
Nice signal. Exec Chairman has bought 215,168 share in the last 2 days (7/8 Feb) taking his total holding to 0.32% of the company. Famous last words but with input prices peaking and GBP's recent strength against the USD perhaps we really are though the worst. One can hope...
Thanks to all for some entertaining reading. It's fascinating to see the different philosophies of the "investors" and the "speculators." Winning Streak. You said "in this game... losses are likely to exceed gains for the average private punter". It's not just private punters. Most hedge funds also struggle to make adequate returns with these strategies. And that's because (having insider information aside) it's just so freaking hard to call ST market movements. Shorters got it right on Carillion. But what about Ocado for example. They've been killed in the recent rally. Now personally I would have said their view on the Ocado story is not without merit. But the market has completely gone against them. Me, I'm in the investor camp. I'm not antagonistic to shorters. In a way I admire the courage. I just find shorting way too stressful and ultimately incompatible with the "investor" mind set - hone in on a great asset, place your chips and wait. As someone said on this board a while back it's like picking pennies in front of a steam roller. You will win... until the day you get flattened. On IQE only time will tell. Shorters ultimately have zero impact on the operational business and hence "value for long term holders". I'm a believer in the story with a LT time horizon. I guess time will tell.
Would just add that the current rise in GBP is unhelpful. But imagine that we get a bad/hard Brexit and/or Corbyn in the next 24M. Given the negotiations so far and the ineptness of the current govt neither is beyond the realm of possibilities. There are few better hedges. Do you really want to own UK banks, utilities, real estate, etc. Or a company that is riding the wave of the growing, thirsty, global EM middle classes. I genuinely believe this is a must own stock. Buy, re-invest dividends and return in 10Y...
I agree that the results weren't exciting. And I can't see the share price going anywhere fast. However, it all depends how you see this share and your time horizon. I view it as a core LT bed-rock to my portfolio, which counterbalances my riskier small cap plays. I love the fact that the economics of this business are so sweet. How many FTSE 100 companies have gross margin north of 60% and a net income margin north of 20%? How many can genuinely offer LT defensive growth? Annual DPS in 2013 was 47p. In 2017 it was 62p. Net Debt in the interim was flat. Unlike so many others Diageo has not been gearing up to increase payouts to shareholders. It doesn't need to 'cause it's a cash machine. To the extent you haven't read it I highly recommend Lindsell Train's Insight series, in particular his Feb 2017 articles on "Confounding Compounding". The focus is on Unilever but it gives a great insight into why Diageo is such a great LT hold. I would argue this is the closest we have in the FTSE to a buy and forget share. Will it blow the lights out. No. But barring global prohibition it should deliver a more than respectable return in the LT. The current value is rich but by no means outrageous for such a high quality share. All IMHO 
PIE-EATER. With the greatest respect I couldn't disagree more. What did you expect - a miracle? Sadly this isn't Fevertree but a low-margin, own-label tissue producer. There is only so much that can be done in the ST, particularly around topics such as the forward FX contracts. That being said and taking into accounts all the limitations of the business model I think the CEO gave comfort that the ship is being steered in the right direction. IMHO anyone who stayed the course so far would be mad to sell at this point. Barring any further exogenous calamities (GBP collapsing, reel prices rocketing further) there is some significant upside risk here. Bear in mind the business that EBITDA in the previous 2 years was c. £15m. At the current level the business is trading around 3x that figure. Assuming a mid-term recovery back to this level would make the current valuation a bargain. Is it high risk - absolutely. But we know that. Has today's announcement increased the level of risk. Absolutely not...
Part 2. Now of course the below is all super crude as it assumes no time value of money effect, that DPP can get from 50 to 150 stores with minimal third party capital i.e. cash flow break-even is round the corner and many of the new stores will be franchisee owned rather than corporate (which of course also changes the economics), that all stores are able to hit PLN 500K, etc, etc. However, there is also a scenario that DPP are eventually able to roll-out more than 150 stores. This is not that far-fetched given DOM UK has north of 850 stores in an area with a population less than double Poland's. Also Polish GDP has been rising and the take-out culture has been growing with it. Hence there are significant upside risks. Imagine LT DPP can get to 300 stores. Suddenly you have a company that even at 10x EBITDA is £300m i.e. 5 times today. Anyways, that's very roughly how I think about DPP and why I see it as a core LT hold...
Re: How do you analyse this stock? One back of the envelope method is to look at annual store EBITDA at maturity. In 2016 the most mature store had an annual EBITDA of PLN 536K i.e. roughly GBP100K. Assuming no further growth in store numbers and the whole estate hitting this target (nb: Peel Hunt, for example, are estimating PLN 500K as a sensible figure across the estate). You get to £5m. Apply a 10x EBITDA multiple and you have £50m i.e. a little south of the current valuation. But now imagine that DPP gets to their target number of 150 stores and apply not a 10x multiple but 15x, which is where DOM UK is still trading in its mature stage, de-rated state. So £15m & 15 equals £225m i.e. 3x upside from here
That's the $64,000 question. My suspicions would be 1. unease / impatience over the timing of cash flow break even, and 2. Erroneous read across by investors from the recent travails of DOM UK to the LT attractiveness of the DOM model / brand. The market is by definition an impatient beast so an early stage, high upfront investment company, such as DPP, is always liable to be volatile / try the market's patience until such time as it achieves "sustainability" i.e. cash flow break even. For what its worth the only way I think one can approach the investment case here is on an ultra long term basis. Hence, ignore the day to day share price drift (annoying as it is) and just focus on the operating fundamentals. And here management appear to be delivering. Moreover, there is comfort from the recent performance of DP Eurasia. The Dominos model has worked across various socio-economic models and income levels i.e. in Turkey, Russia, US, UK, Australia. I have no doubt that we will get there in Poland too. The inflection when it comes (i.e. when market realises we are close to cash flow break even) will cause a rapid re-rating of the share price. One can take the view, as many impatient investors who are pressuring the share price, that one can just jump back in then and redeploy capital in the interim. Given the relative illiquidity of the share that won't be easy. I prefer to stay invested here and just ignore the day to day flux. The turn will come here. And perhaps as early as H2 18.