1andrew1

Thanks for that informative post, Gallows-Bait. It seems the core question is can the company hang on to Kader House long enough for an upturn in the Hong Kong property market without damaging its core business too much? And that upturn might depend on Hong Kong finding a new role now for itself as it becomes more integrated into China and its position as the financial gateway into Asia is challenged by other countries. As Kader is family controlled despite a stock market listing, I can understand why it hasn't cut its losses and sold the building. Until then, the model railway business has its arms tied behind its back a bit although the UK arm still seems to get investment...at the moment.

Really enjoyed reading your post. Thank you for sharing your insights, really helpful I would be interested to hear your take on Kader/Bachmann. Their issue seems to be on the property side.

I guess you try and target different markets (geographic, types of retailer, types of purchaser) and bundle or unbundle it. And perhaps try and influence buying patterns by making it more desirable through promotion and advertising?

I think this is hard to determine from the limited publicly available information available. I don't think Kader states its external customers' names anywhere nor breaks down revenue from external brands. I suspect its minimal as with production capacity constraints, it makes sense to focus on its own brands.

Good point that the operations made a marginal profit last year but if you just include the finance costs it still made a loss. The company as a whole made a loss due to four things: Finance costs Share of losses from associates Impairment loss from loans to an associate Deficit on revaluation of investment properties

Worth comparing Kader's losses with Hornby's - Kader's turnover £38.20m, generated a £7.5m loss - Hornby's turnover £55.1m, generated a £5.9m loss Kader does own property so has a backstop although that's mainly in Hong Kong which is not performing amazingly at the moment.

Agreed but they've been going in the US for a lot longer and I thought that would be their largest market. Credit to their European/UK presence for being bigger.

Bachmann's parent company Kader published its 2023 results last month. I think it's interesting to see that Europe (including the UK) is Kader's largest market, that it continues to be loss-making (last profitable year was 2018) and that permanent staff numbers have been reduced by a fifth. Until I looked at the accounts, I would have expected North America to be its largest market. 2023 £38.20m turnover £7.5m loss 2022 £36.09m turnover £8.7m loss Notes Europe accounts for 46% of income, US 39% Rental income represented approximately 13% of the Group’s revenue for the year. Full-time staff numbers reduced from 1,009 in 202 to 817. Source: https://www.kader.com.hk/investor_relations/pdf/press_240327_2e.pdf (HK $ converted to GB £)

Question for me is how PlayTrain's 00 gauge offering fits into this? It encourages owners to upgrade to a proper OO model railway as their existing trains can run on it.

I guess success here would be both where these locos operated in Europe and the popularity of TT120 in those countries. France might be logical for the class 20s, 58s and Eurostar but TT120 is not really a thing there as far as I know.

If Hornby does retain Oxford Rail, would it make sense to direct that brand to focus its efforts on TT120 as well? Maybe it could play to its strength in wagons?

There has been a change of management since TT120 was launched. Plus, we don't know what resources Hornby have. eg if a designer targeted to do GWR wagons has left Hornby, then the company may decide to realign its pipeline.

This is the day's share price graph: https://www.Hornby.plc.uk/share-price-graph/ Hornby plc opened the day at 38p, went up to 40p at 10am and again at 11am and now 37.33p (4.15pm)

The signals and level crossing looked good and better than their 00 Hornby counterparts. Understandable as the 00 ones must be 40-50 years old.

Just missing the Azuma...

A YouTuber has already shared a video with a mocked-up Sport Direct wagon and trainer brands applied to the Hornby 0-4-0😆

If the price is right, I'm sure they would sell as that would maximise the return for their investors in the fund. They're a financial investor, it's not like they're a family holding onto the stake for more emotional reasons. And I don't think Hornby has been a great investment for them to date.

Modelleisenbahn GmbH (Roco & Fleischmann) has ported its manufacturing skills over to its factory in Vietnam. However, this doesn't directly benefit Hornby. It's more a case now of the OEMs in Vietnam getting up to speed on model railway manufacture so they can deliver and bid for more work from brands like Hornby than just Playtrains.

So far, Frasers has bought a stake in Hornby and seen the investment rise substantially in value. Not bad for Frasers or the other shareholders, primarily Phoenix. The next step seems to be to try and help continue the share price growth by sharing expertise with Hornby and seeing if there's more areas the two companies can collaborate on. After this, it's all a bit of an unknown. If Frasers think they can run Hornby better by taking control and it's worth their while, then I'm sure Phoenix will be pleased to sell them their controlling stake. But would it really be worth spending Frasers' management time on such a niche, low margin business? Perhaps Frasers see a Wonderworks or a Warlord retail opportunity they can roll out to reinvigorate Game? With traditional computer games sold by Game moving to online downloads, it does seem to be moving towards being a more traditional games retailer by necessity.

I think it's relatively few manufacturers who can do without China as it's become a centre of expertise for the industry. Playtrains are made in Vietnam so another benefit of that range is to test supply chains from another country. Vietnam is certainly picking up other work that used to go China so that's a possible new location if there is a factory there that can go beyond Playtrains level.

Showing today as 1%. It's interesting to see the stakes Frasers holds in other companies. It doesn't always acquire full ownership. ASOS 20.00% Boohoo 22.08% Castelnau 1.59% Currys 6.59% Hornby 8.94% Hugo Boss 0.99% Mulberry 36.82% N Brown 20.02% Northern Bear 0.43% https://uk.marketscreener.com/quote/stock/FRASERS-GROUP-PLC-9590226/company/

Alternatively, push TT train sets cheaply through Frasers and Game. That way, future modellers are in a scale dominated by Hornby rather than selling OO train sets where Hornby's market share for OO is a lot lower. If a train set buyer wanted to expand their set, sticking with the same gauge is highly probable. Right now, TT is Hornby except for a few Peco wagons. The same is not true for OO where the train set owner's next purchase could come from Dapol, Bachmann and many more manufacturers. Both Frasers and Hornby would conceivably gain from such an arrangement.

Apparently, the share price rose 7% on the announcement before falling back. I wasn't a fan of Ashley over his ownership of Newcastle but he has invested in the high street at a time when other retailers have gone online or closed down altogether. The traditional opportunities to asset-strip Hornby are limited as a lot of this has already been done. Move to a cheaper part of the country. Done. Sell and lease back your HQ. Done. Offshore manufacturing. Done. Offshore distribution. Done. What opportunities are left? Maybe the big opportunity is to focus on Warlord Games and introduce specialist Warlord areas into Game and Frasers. Sell Oxford Diecast back to the founder and decide on the other brands once their performance is better understood.

It will be interested to see if WonderWorks is rolled out in conjunction with Frasers Group. With space in shopping centres and a move to leisure provision in them, there could be an opportunity but I think it will be limited to a handful of big UK cities.

I think a lot of your hypothesis makes sense. Small point of accuracy - Blacks went into administration and was acquired by JD Sports. Sports Direct did have a 30% stake in Blacks but failed to acquire the company.