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Card Factory (CARD)

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jackdaww
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Re: Card Factory (CARD)

#110869

Postby jackdaww » January 16th, 2018, 8:06 am

i topped up yesterday .

:idea:

CommissarJones
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Re: Card Factory (CARD)

#111104

Postby CommissarJones » January 16th, 2018, 9:29 pm

FredBloggs wrote:Bargain or falling knife? I have been watching CARD for a while. I have been tempted, but it got too expensive. After two profit warnings it is looking attractive for a total return buy. Question is though, profit warnings often come in threes. Consensus seems entirely positive about CARD too, that adds another layer of caution. I will never, ever forget my buying of Marconi, "this is not a company that is going out of business". Then it happened.

As I just said elsewhere (didn't see this thread had begun), IMV the recent share-price slump was an overreaction - if underlying EBITDA for the current fiscal year were to come in at the bottom end of the range specified in CARD's recent trading statement, that would equate to a drop of just 5.6% from the prior year. Given that CARD is continuing to generate lots of cash and like-for-like store sales rose 2.7% in the first 11 months of the financial year, I don't see any obvious signs of serious danger.

Your caution is understandable following the Marconi experience, but I'm not certain the analogy works in this case. IMV, Marconi shot itself in the foot to some extent with corporate missteps, whereas I view CARD as a well-run company that happens to be in a sector experiencing much pressure at the moment.

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Re: Card Factory (CARD)

#111105

Postby vrdiver » January 16th, 2018, 9:35 pm

It seems the shorters are starting to take an interest in CARD. It's moved from 0% in July to 2.5% shorted now.

Not a massive amount (cf Carillion or Petrofac) but perhaps worth monitoring to see if the shorters continue to build their position.

https://www.shorttracker.co.uk/company/GB00BLY2F708/

Bouleversee
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Re: Card Factory (CARD)

#111713

Postby Bouleversee » January 18th, 2018, 6:27 pm

Encouraged by the directors' purchases and the general sentiment on BBs ("seriously undervalued") I decided to make a small top up of CARD at £2.1026 today. Fingers crossed.

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Re: Card Factory (CARD)

#115344

Postby westmoreland » February 2nd, 2018, 11:14 pm

i've had a good look at card factory. it looks like a very reliable dividend payer in the making to me - 4.7% yield covered twice by profits. card buying is a very defensive sector and it doesnt have serious competition. customers seem to like the low prices and high quality. and yet they still manage a 20% operating margin. low capital intensity, too, which means the vast majority of that will go back to shareholders.

the days of 15p specials are gone, but by my calculation, they should be able to sustainably distribute £40 - 50m annually, which puts it on a prospective 6.6% yield. it has significantly derisked in the past 6-9 months and i see plenty of upside.

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Re: Card Factory (CARD)

#115393

Postby Bouleversee » February 3rd, 2018, 9:45 am

I hope you are right, Westmoreland. My top up was clearly premature, as was that of the directors which is a slight consolation.

westmoreland
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Re: Card Factory (CARD)

#115480

Postby westmoreland » February 3rd, 2018, 2:54 pm

as i said, £40-50m of dividends in total per year looks likely (assuming no profit growth),on the basis of NOPAT at between £60-65m and capital expenditure at £11-13m, with the rest returned to shareholders.

the key is that they stick to the UK roll out and don't get carried away with opening too many stores. retail is very tough, but there are reasonable companies in many crap sectors.

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Re: Card Factory (CARD)

#128873

Postby westmoreland » March 29th, 2018, 4:46 pm

share price weakness still persisting - market is pessimistic about UK plc, and particularly pessimistic about all retailers now.

since the last post, toys r us, maplin and now conviviality have gone into administration (albeit through an accounting error for conviviality) - i may have missed others :lol:

as above, i view this as a reasonable business trading at an attractive value. it's basically valued at the same as other retailers suffering from structural threats. i'm very cautious about investing in retailers so i haven't bitten the bullet yet.

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Re: Card Factory (CARD)

#128905

Postby CommissarJones » March 29th, 2018, 7:56 pm

westmoreland wrote:as above, i view this as a reasonable business trading at an attractive value. it's basically valued at the same as other retailers suffering from structural threats. i'm very cautious about investing in retailers so i haven't bitten the bullet yet.

Agreed on both points, I like the business but have not yet added to my position. We're getting close to the release of CARD's final results on 10 April, so I will probably wait for the numbers and the market reaction. I am concerned about the recent severe weather, which can't have been helpful for store chains. CARD's fiscal year ended on 31 January, before the bad weather, but I expect the company will comment on current trading, and the market seems to be in an unforgiving mood at the moment.

jackdaww
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Re: Card Factory (CARD)

#129020

Postby jackdaww » March 30th, 2018, 2:57 pm

CommissarJones wrote:
westmoreland wrote:as above, i view this as a reasonable business trading at an attractive value. it's basically valued at the same as other retailers suffering from structural threats. i'm very cautious about investing in retailers so i haven't bitten the bullet yet.

Agreed on both points, I like the business but have not yet added to my position. We're getting close to the release of CARD's final results on 10 April, so I will probably wait for the numbers and the market reaction. I am concerned about the recent severe weather, which can't have been helpful for store chains. CARD's fiscal year ended on 31 January, before the bad weather, but I expect the company will comment on current trading, and the market seems to be in an unforgiving mood at the moment.


================

yes , waiting for results also , and possibly topup then .

:)

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Re: Card Factory (CARD)

#129848

Postby westmoreland » April 3rd, 2018, 10:35 pm

from 2017 annual report:

i've worked out lease adjusted ROIC as follows:

pre tax: 16%
after tax: 13.7%

86% of the lease obligations are less than 5 years. this is not a business that is locked in to unprofitable sites. in fact, surprisingly, despite expanding the number of outlets, the total rent obligations was actually lower in 2017, than 2016 (£169.6m to £172.1m). goes to show that leases coming up for renewal are often for less than what they were before.

slightly better than being a 'reasonable' business, after all. all my instincts are telling me not to buy a retailer, though :lol:

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Re: Card Factory (CARD)

#129856

Postby CommissarJones » April 3rd, 2018, 11:25 pm

Nice job on the figures.

westmoreland wrote:goes to show that leases coming up for renewal are often for less than what they were before.

The Peel Hunt research report that encouraged me to invest in CARD mentioned this. As I recall, it said CARD opted on some occasions in the past to take a hard-nosed attitude in rent negotiations and hand back the keys to a property rather than renew on poor terms; knowledge of this helps to concentrate landlords' minds when renewal time comes around, according to Peel Hunt.

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Re: Card Factory (CARD)

#129864

Postby westmoreland » April 3rd, 2018, 11:49 pm

CommissarJones wrote:Nice job on the figures.

westmoreland wrote:goes to show that leases coming up for renewal are often for less than what they were before.

The Peel Hunt research report that encouraged me to invest in CARD mentioned this. As I recall, it said CARD opted on some occasions in the past to take a hard-nosed attitude in rent negotiations and hand back the keys to a property rather than renew on poor terms; knowledge of this helps to concentrate landlords' minds when renewal time comes around, according to Peel Hunt.


no problem!

yes, i'm not surprised CARD take a hard nosed approach. i see the CEO karen hubbard came from the world of discount retailing with B&M bargains so i'd expect every 'efficiency' to be teased out of the business. CARD is clearly highly profitable for a budget retailer and i'm sure landlords' would sooner rent to them instead of one of the teetering retailers who's future is in doubt.

plenty of anecdotal evidence on the discussions of interactive investor which suggest that the stores are all busy.

http://www.iii.co.uk/investment/detail/ ... no=1&it=le

to put things in perspective, B&M trades at 25 current earnings, compared to CARD at 10.

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Re: Card Factory (CARD)

#129865

Postby WickedLester » April 3rd, 2018, 11:52 pm

These don't look all that cheap to me for a retailer given the fairly dodgy balance sheet. Why are these any different to Clinton Cards?

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Re: Card Factory (CARD)

#129931

Postby westmoreland » April 4th, 2018, 12:24 pm

WickedLester wrote:These don't look all that cheap to me for a retailer given the fairly dodgy balance sheet. Why are these any different to Clinton Cards?


they have a cost advantage over clinton's as they make their own cards. i acknowledge it's not a blockbuster of a business, but 20% operating margins and 16% ROIC puts it in the top 5-10% of retailers in the UK. i'm not sure what clinton's figures are but it won't be near that.

they have distributed all excess cash since IPO through special dividends. interest cover is around 24 and fixed charge cover over 3 so i wouldn't regard it as having a weak balance sheet.

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Re: Card Factory (CARD)

#129954

Postby staffordian » April 4th, 2018, 2:00 pm

FredBloggs wrote:
westmoreland wrote:
WickedLester wrote:These don't look all that cheap to me for a retailer given the fairly dodgy balance sheet. Why are these any different to Clinton Cards?


they have a cost advantage over clinton's as they make their own cards. i acknowledge it's not a blockbuster of a business, but 20% operating margins and 16% ROIC puts it in the top 5-10% of retailers in the UK. i'm not sure what clinton's figures are but it won't be near that.

they have distributed all excess cash since IPO through special dividends. interest cover is around 24 and fixed charge cover over 3 so i wouldn't regard it as having a weak balance sheet.

The best way to answer the question regarding Clinton and Card Factory is fairly simple. Go to your nearby towns and look in both shops. In Clintons you'll be shocked by the prices (I was) in Card Factory you'll find similar stuff much cheaper. Then look at the number of people in the shops. Card Factory will be busy and people will be leaving the shop with bags of products. Look at Clintons and you'll see mainly empty or sparse shops and most people leave empty handed. Very simple test to do but one that tells me which I am investing in. One other important thing too - Card Factories on line offering is very good and very reasonably priced even for personalised cards. In fact I don't bother to go into the shops these days. The petrol and parking costs me more than the postage does. For me, Card Factory is a rare thing, a clicks and mortar retailer that actually works well.


The very same test I applied a decade or more ago when I decided to invest in Greggs. When it comes down to brass tacks, footfall and the amount of product sold is pretty high on the list of important attributes for a retailer.

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Re: Card Factory (CARD)

#130024

Postby westmoreland » April 4th, 2018, 6:55 pm

FredBloggs wrote:
staffordian wrote:The very same test I applied a decade or more ago when I decided to invest in Greggs. When it comes down to brass tacks, footfall and the amount of product sold is pretty high on the list of important attributes for a retailer.

Yes, I would buy Greggs too, but only if the share price ever does a "Petrofac or a Card Factory". And Greggs is one of the few retailers out there that has nothing whatsoever to fear from Amazon and similar.


no doubt an excellent business, but it's too expensive for me to jump on board. i see better value elsewhere.

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Re: Card Factory (CARD)

#130029

Postby WickedLester » April 4th, 2018, 7:05 pm

they have a cost advantage over clinton's as they make their own cards. i acknowledge it's not a blockbuster of a business, but 20% operating margins and 16% ROIC puts it in the top 5-10% of retailers in the UK. i'm not sure what clinton's figures are but it won't be near that.

Well just playing devils advocate but do you think they'll be able to maintain those excellent margins into the future? I can't imagine there is any "moat" around this business and I can't imagine it being hard to replicate the business model. In fact I notice from the recent trading update that EBITDA is down on last year and margins are under pressure despite opening 50 new stores so it's not really growing anymore.

I can imagine their margins getting competed down to a more reasonable level. Greggs' margins appear to be much more reasonable and sustainable.

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Re: Card Factory (CARD)

#130034

Postby WickedLester » April 4th, 2018, 7:21 pm

Yes, I would buy Greggs too, but only if the share price ever does a "Petrofac or a Card Factory". And Greggs is one of the few retailers out there that has nothing whatsoever to fear from Amazon and similar.


Greggs has been an excellent investment over the past few years but can they continue growing also? They have nearly 2000 stores already and it must be getting increasingly hard to find new sites to open. I wouldn't have thought International expansion was an option, sausage rolls strike me as a pretty British snack.

Maybe if i'd held these for years and watched them multibag i'd consider whether it wasn't time to take the profit and look elsewhere.

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Re: Card Factory (CARD)

#130067

Postby Bouleversee » April 4th, 2018, 10:07 pm

Wicked Lester said (a propos Greggs)

"Maybe if i'd held these for years and watched them multibag i'd consider whether it wasn't time to take the profit and look elsewhere"

My Greggs shares are up over 160% and not in my ISA. I am debating whether to bed-and-ISA or just take the profits, though I don't know what I'd buy instead. They are down a fair bit from their highest but I don't know whether they will get back to that.


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