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Does AO World bring back memories of the Dot.com bubbles?

The “Dot.com” bubble of the late 90s may be over, but a UK-based retailer is repeating same mistakes of the past. That company is called AO World. Before having a go at me, I have six good reasons to be sceptical (which I identify and explained in detail below).

What is AO World?

The company is an online version of an Argos, and unlike Amazon, it has no particular propriety technology. Anyone with a built-in distribution network and a couple of warehouses would have replicated this business model. And that is why AO World is a mediocre business.

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Understanding the airline sector with these 11 metrics

Every qualified investor knows the airline’s industry is cylindrical.

It is the one industry that Buffett hates the most.

Yet, being cylindrical makes it conform to certain trends and patterns.

The Key is down to Timing and Patience, before that you got to understand the business.

And you put together financial data from an airline annual report going back 5 to 10 years.

 

Here are the 11 crucial pieces of useful airline data and how to interpret them:

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Why Mitie could see another 25% drop in its share price

Key talking points on why Mitie see another 25% drop

  1. According to Jim Artimitage of the Evening Standard, the new CEO Phil Bentley is a sort of fella goes looking for skeletons in Mitie’s cupboard to implement a massive write-down on its assets.
  2. Goodwill is likely to get written down by 45% because Goodwill turnover has deteriorated from 8.1X to 4.8X, helping to drag overall asset quality lower.

Therefore, a write-down of £200m from goodwill will mean shareholders’ value will fall to £206m from £450m

  1. Mitie is likely to see zero sales growth in the future, along with contracting earnings.

In the last five years, average sales grew 2% p.a., whereas cash profits increased by £10m.

  1. The company runs a net debt position close to £170m.

 

  1. Some people will say Mitie go the way of Connaught PLC, but, in my opinion, this is an unlikely scenario because it has £200m+ in undrawn debt facilities expiring in 2019.

 

Therefore, the target price for Mitie in the next 12 months is £1.35 to £1.50/share.

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