15 Comments

Great write-up Iggy, enjoyed reading it.

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Hello Iggy. Thank you for your job!! great article and great blog. I've discover you from the youtube channel Momentum Financial. I have a question related to your article: How do you calculate the 50M FCF? If I'm not mistaken, I get an FCF of around 20M for the year ending January 2023: (+) Operating FCF 100M (-) Investing Activities FCF 18.2M (-) Loan Interests 6.2M (-) Leasings 52.5M (-) Leasing Interests 4.5M = 19M .

The investment spending is recurring, as it involves upgrading stores and such. The interest expense will decrease as the debt decreases, but it is not very significant.

Thank you!!

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There are some easy ways to think about it. The company is now better run, in my opinion, than before COVID. Before COVID, they could easily generate $50 million in free cash flow (FCF), so that should also be possible now. Also, the $100 million operating cash flow in January 2023 was understated due to working capital movement, and at the same time, new management was investing heavily, so investing activities are overstated. Leases in January 2023 are overstated by $11 million due to overdue rent payments stemming from the pandemic.

So, normalized operating cash flow should be approximately $110 million, minus $15 million in capital expenditures, and minus $50 million in lease payments. That results in a minimum of $45 million in FCF, but, as I mentioned, I think $110 million is a conservative estimate so 50m is more likely.

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Jan 11Liked by Iggy on Investing

Thanks for your response Iggy. Since I wrote my post, I have been looking more in detail in reports and I understand better your calculation. I agree with you. Furthermore, the interest payment will surely be reduced in the coming years, so the FCF may even be higher. I am really getting excited with this so cheaper business, thank your for your post again. For me, the ideal scenario would be that a large part of this FCf was returned to the shareholder, and that they did not venture too much into large investments in websites and other stories. I see this business more as a stable business to squeeze through dividends

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Cheers

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May 15Liked by Iggy on Investing

At the end, your calculate have been more accurated than mine :-). I think that is a big investment. Really really cheap at this moment.

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author

Yeah it seems really really cheap still.

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Great write-up. Sounds on the conf call that they will have a quit substantial Capex the next 3 years to launch in new markets? Thoughts? Seems they are talking quit much about FY 2027 and their strategy to arrive there. Seems profit could be lower due to that the coming years

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most new growth seems quite capital light. Maybe the investment in the website will eat into the fcf next year. Otherwise most investments seems capital light and quick payback.

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Would be cool to see them compared with their competitor, Moonpig

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v interesting. thanks. what makes you think this will trade at 15x EBIT when pre-covid (easier rate environment) it traded at 10?

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Just curious, how do you invest in these low vol. stocks? Do you invest in OTC or LSE? Which broker is the best for trading international stocks?

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author

So, for one, I am still quite young, so I am working with small sums. Therefore, low volatility is not really a problem for me. That's why I invest in highly illiquid areas, as it's a place where I might have a little edge.

On the question of what is the best broker, I have only used Saxo Bank and Interactive Brokers (IBRK). IBRK seems to be the best, as it allows me to buy truly niche stocks. For instance, they are the only broker outside of Poland that I know of which allows trading on the minor exchange in Poland.

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It is a good write-up. A leading company in a slowly declining industry. It appears to me that the stock price will depreciate as the interest start to become lower. In the current interest situation, the market does not price too wrong on this company.

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I mean the interest rate.

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