OB..for some reason I am reading this at 3.00am despite TRN being well outside my normal area of investment interest...As I am enjoying it to much, am I becoming an investment "anorak" ? .... Fascinating, thought inspiring and amusing research!
Mr Buffett does advise sticking to your own wheelhouse but i do agree OB research is second to none. Also 3AM way to late / early - get some sleep and read it again! :D
Fantastic overview of what I think is an outstanding opportunity. I use Trainline a lot, and my user experience matches yours, I don’t see how AI disintermediates the Trainline app.
The market has thrown the baby out with the bath water - it is pricing this at roughly half what my back of an envelope guess at fair value might be.
Your chosen charity was Emmaus I believe? I will donate in thanks.
Last looked at this end 2024 when the sp was a bit over 400p! Main thesis was a market leading position in the U.K., a burgeoning TAM (in particular Europe, and a well invested tech platform. I passed on the basis that it’s a bad idea to invest in anything where govt can transform your economics for the worse (whatever they may say to the contrary) and to act irrationally. Mr Market has placed this in a consistent down channel since then and sp now 200p and all metrics of value seem dead cheap for a tech rich company. Obviously competition has intensified but TRN still has leadership but we are now governed by socialist nutters who will do anything to reduce the cost of living at the expense of industry, and TRN is still 80% U.K. Surprisingly, the top line growth rate seems a bit modest (£442m going to £487m revs by Feb 28 - per S&P aggregating 13 sellside analysts - never knowingly undersold - that seems to be 3% CAGR - 0% in real terms? - But with a few % profit growth with operational gearing). Doesn’t seem to be a strong growth play on the numbers (although longer term greater penetration of Europe might change this albeit against strong local competition (and no doubt peculiar local advantages as is the European wont). Clearly there is scope for positive multiple changes and I suppose this underlies the broker target prices (these guys don’t bear downside risk of course) which mostly are in the high 300s. But what is the catalyst?
However, the general government risk of messing markets and companies up remains a killer for me, even though it currently looks terribly cheap - there are so many other more straightforward investment cases around.
Sharebase 20% smaller than when you looked as per article? Makes it very cheap especially if keeps buying back. What else you going to do with the cash. Bigger cash dividends and government will take a closer look. Banks look out.
Government intervention can work both ways. I owned Intel and sold when US gov took a stake for a small profit...2x later :(
One to keep tabs on.
Push my own pick but Ramsdens RFX on a PE of 8 for 2026. EPS to be around 50p and dividends of 45% of earnings so 5.5% yield. Maybe reliant on gold for its recent big growth but its a well run business. Competitor bought out by PE for 12x earnings so at least 50% upside.
Particularly this government!!! If there were to be a smaller scale non interventionist government, my view might be different.
I made a hefty profit on the always lowly rated HAT. RAmsdens a somewhat different business model, but I’ll take a look - I’m fine with gold, which I think is going higher sustainably.
Yes HAT - couldn't remember the ticker. They had debt, RFX has net cash.
Its a little gem.
There's a Cavendish broker review on it which is very good.
They've flagged a 20% outperformance in trading update only 4 months into the financial year. Everyone buying gold coins and watches no doubt. I did...haha
HAT had a much bigger pawnbroking book, and relatively cheap debt (from major institutions) partly financed this (so an efficient cap structure). Met management a number of times - good operators, who got a very good exit!
Cavendish posit 550p (plus more if gold price sustainable) so I’ll do some work on it. The 2 analysts who do their financials stuff I rather rate.
Thx. Had a good look and bought a small starter position. At 404p seems to have come off a recent 440p high. Clearly business is booming given the guidance upgrade, and pawnbrokers seem to be ideally placed to do well in a tough environment for consumers. Quite a small pawnbroking book at £12m (versus £130m at HAT, which had 280 shops versus RFX’s 169 - surely this can be grown significantly?). So a lot of metals buying etc, so RFX is significantly geared to the gold price - ok by me. My referencing indicates that P Kenyon (in post since 2001) and team run a tightly managed ship. Current PE probably a bit low although you have to factor in a sort of “DIckensian discount” to pawnbrokers as most investors don’t really understand the biz model, but a 50% div payout underpins value a bit. Cavendish’s TP of 550p seems more like an exit value, based on SOTP of the segment exit multiples. Not many buyers of pawnbroking businesses though. I’d like to hear the expansion strategy from CEO/management before bulking up the position.
They're very conservative on lending against the book especially with the higher gold prices. It's probably somewhere they can expand - i get the feeling that because of the outperformance of the rest of the business they'd be in no rush to materially expand this.
They want to open 8-12 new stores each year. Pre-owned watches seem a growth area and obviously the gold buying / melting.
Its probably undervalued at £4, most likely will get to £5 later this year and a buy out you'd be looking near £6 but as you say not a lot of buyers otherwise its happy to keep compounding.
HAT’s LTV was 60% and the loan losses were pretty small on loans which can’t be more than 180 days. Looking at loan book per outlet, HAT was £440k whereas RFX seems to be a mere £70k. Pawn loans are high margin and fully secured by the pledge - most of them are redeemed and not defaulted. Seems like money for old rope, and surely if you are bothered about volatility in pledge value, you tweak the LTV a bit rather than decide to constrain the pledge book size. The smallness of the pledge book poses a valuation quandry - is this like a financial instie, a bullion trader or a retailer?
Interesting discussion between Messrs Hill and Jourdain this am on this one. J is bothered that GBR may mess up the market with its proposed own app (he suggested that perhaps an Oz developer might get chosen - why not buy British) and that they may ply dirty in order to rig the market in favour of its own app. Who knows but that’s the risk of HMG trying to play in a market in which one has invested.
Don’t know whether he’s invested here, but he mentioned that TRN had a small army of developers - 600 it seems - and he wd prefer, in view of end market uncertainty, for TRN to savagely cut costs, run it for cash for a while and pay off debt, rather than cutting loads more code for now. Seems likely that mgmt probably won’t do this.
Yes it was interesting. Mr J didn’t mention the provisions of the Railways Act 2026, and I find it hard to believe your notion that there’s a risk of HMG trying to play. After all it was the same HMG that produced the RA 2026 bill, and introduced the ORR to oversee a “thriving” market. Why do that if they intend to cut TRN out of the market? Why would the Transport Secretary days ago make contradictory statements - if that is the plan?
If you intend to maximise your survival chances in Russian Roulette then you don’t deliberately put bullets in the gun, do you?
Mr J also appeared to believe there are millions of calculations for each split fare. There’s not. If there are 20 stops there are 20 iterative calculations relating to a single ticket. 20 more relating to a return ticket. TRN only does a single split and the number of fare combinations are only as many as there are stops times two….. 40 calculations perhaps, but not millions.
Mr J also believes TRN should fire 100s of developers and “use AI” to “do the same”. I disagree that that’s a practical option, or the right strategy to support a GROWING business, and it’s also a view that ignores the reductions in overhead that are already being achieved (including via the use of AI to support development).
GBR’s choice of app isn’t yet a done deal, and the LNER app Mr J refers to is actually a hodge podge bespoke app of several UK specialist digital agencies Valtech, Softwire, Inviqa as well as developers employed by LNER who presently are seconded to the GBR transition team. This is an App that cannot do split ticketing!
I think you can always rationalise in a complex market situation that HMG will play nicely and not do stupid or unhelpful things. But in practice in commercial situations HMG is always the dumbest money in the room, and this HMG is in hoc to Unions etc. So I prefer to avoid situations where governments are regulating or seeking to play.
I haven’t really looked at their dev spend and where it is located and whether it is oversized relative to the growth prospects which the business is going to achieve, which based on the sellside consensus is a pretty miserable 3% pa top line growth for the next few years.
Anyhow there’s now a new CEO going to arrive and no doubt he will recalibrate the strategy and objectives according to how he sees things. A bit odd not to give some reasons for Jody Ford quitting.
May not be your bag, but the income investors have bailed out of Diageo, trashing the sp, following Drastic Dave’s first earnings call and the divi cut, exemplifying new CEO risk, but one can reasonably see £22-27 ps SOTP value here as Dave works his magic, on a fairly low risk basis with income on the way.
I have yet to use Trainline. I always buy at the station as i always want an open ticket. Doesn't seem available on Trainline. You can still claim on an open ticket for delays.
ALSO very noticeable that train service is going downhill since government took over. Reducing the number of carriages from 6 to 3 on the transpennine line.....over Christmas. How ridiculous is that. Actually impossible to get on the train.
As i understand Trainline is just a lot of APIs plugging into the Trainline "brain" which on the surface should be easy to replicate but i feel AI would struggle because the UK booking system is so archaic and maybe the UK is a bit too niche for the hyperscalers to really get involved? A smaller player might try too but i always feel if your the dominant force in that market you could buy them out.
Constellation on the otherhand as per video...will be interesting to see how that pans out.
Good article, this has been fixed by Uber though. Their app is pretty slick now and seems just as cheap as Trainline? Their £5 in booking credit will get a fair few to sign up.
"I then tried Uber, but this only lets you pick a date for a train then forces you to scroll through all the trains from the first one of the day at 4am so by the time I’d scrolled several pages to 8am I’d given up. Uber launched 3 years ago and threw a lot of money at competing with Trainline yet three years on it’s rubbish. Utter utter utter rubbish."
CEO leaving is also not a great sign. I agree that GRR's app is likely to be a toothless competitor however.
It hadn’t been fixed by Uber as at the date of the article and that’s 3 years after launch. But giving you the benefit of the doubt I just tried booking a train from Reading to Edinburgh using Uber.
Here’s what happened:
I pick Public Transit.
A picture of a globe and tells me to zoom in to get options.
I zoom in to Reading, and zoom and zoom and zoom.
Ok I’m getting options.
Ah, it’s a taxi from Reading to Edinburgh.
I go back and choose “Public Transit” (so “Train” doesn’t even appear)
I then get a list of flight providers (I can pick just one)
So no it’s not been fixed by Uber. Overcomplicated and virtually all would give up.
Clearly you’ve somehow figured out their interface and enjoy the £5 credit. Which incidentally makes your train ticket a profitless endeavour for Uber. It remains the case that Uber have not had any success in the UK rail market after 3 years and while you believe “a fair few” will make a difference in their 4th year it seems to me just as likely that they’d cut their losses and exit the space to focus on more profitable areas like AV (the CEO of Uber said as much in a recent interview).
OB...I first picked up on TRN about two years ago. Initially, I appeared to have missed the opportunity, but since Jan 2025, TRN has been in a downward spiral. Apart from my local operator through which I can get cheapest tickets on its app and is very convenient, going further afield I always use TRN. It's website is really good and ticket prices are always the lowest. What has surprised me looking the the RNS releases is how well it is developing internationally and I see this as a really big growth opportunity, as it seems to be way ahead of any local (i.e. national) competition. Your report has prompted me to take another look. now its back down around 200p.
OB..for some reason I am reading this at 3.00am despite TRN being well outside my normal area of investment interest...As I am enjoying it to much, am I becoming an investment "anorak" ? .... Fascinating, thought inspiring and amusing research!
Mr Buffett does advise sticking to your own wheelhouse but i do agree OB research is second to none. Also 3AM way to late / early - get some sleep and read it again! :D
Thank you for an interesting view on TRN.
And making the very last word of the Conclusion "platform" is almost, almost poetic 🙄
Bill I must admit that one was accidental!
Thanks OB, it's complex, great piece of work. I'm looking forward to reading this again/ listening tomorrow
Fantastic overview of what I think is an outstanding opportunity. I use Trainline a lot, and my user experience matches yours, I don’t see how AI disintermediates the Trainline app.
The market has thrown the baby out with the bath water - it is pricing this at roughly half what my back of an envelope guess at fair value might be.
Your chosen charity was Emmaus I believe? I will donate in thanks.
Last looked at this end 2024 when the sp was a bit over 400p! Main thesis was a market leading position in the U.K., a burgeoning TAM (in particular Europe, and a well invested tech platform. I passed on the basis that it’s a bad idea to invest in anything where govt can transform your economics for the worse (whatever they may say to the contrary) and to act irrationally. Mr Market has placed this in a consistent down channel since then and sp now 200p and all metrics of value seem dead cheap for a tech rich company. Obviously competition has intensified but TRN still has leadership but we are now governed by socialist nutters who will do anything to reduce the cost of living at the expense of industry, and TRN is still 80% U.K. Surprisingly, the top line growth rate seems a bit modest (£442m going to £487m revs by Feb 28 - per S&P aggregating 13 sellside analysts - never knowingly undersold - that seems to be 3% CAGR - 0% in real terms? - But with a few % profit growth with operational gearing). Doesn’t seem to be a strong growth play on the numbers (although longer term greater penetration of Europe might change this albeit against strong local competition (and no doubt peculiar local advantages as is the European wont). Clearly there is scope for positive multiple changes and I suppose this underlies the broker target prices (these guys don’t bear downside risk of course) which mostly are in the high 300s. But what is the catalyst?
However, the general government risk of messing markets and companies up remains a killer for me, even though it currently looks terribly cheap - there are so many other more straightforward investment cases around.
Sharebase 20% smaller than when you looked as per article? Makes it very cheap especially if keeps buying back. What else you going to do with the cash. Bigger cash dividends and government will take a closer look. Banks look out.
Government intervention can work both ways. I owned Intel and sold when US gov took a stake for a small profit...2x later :(
One to keep tabs on.
Push my own pick but Ramsdens RFX on a PE of 8 for 2026. EPS to be around 50p and dividends of 45% of earnings so 5.5% yield. Maybe reliant on gold for its recent big growth but its a well run business. Competitor bought out by PE for 12x earnings so at least 50% upside.
Particularly this government!!! If there were to be a smaller scale non interventionist government, my view might be different.
I made a hefty profit on the always lowly rated HAT. RAmsdens a somewhat different business model, but I’ll take a look - I’m fine with gold, which I think is going higher sustainably.
Yes HAT - couldn't remember the ticker. They had debt, RFX has net cash.
Its a little gem.
There's a Cavendish broker review on it which is very good.
They've flagged a 20% outperformance in trading update only 4 months into the financial year. Everyone buying gold coins and watches no doubt. I did...haha
HAT had a much bigger pawnbroking book, and relatively cheap debt (from major institutions) partly financed this (so an efficient cap structure). Met management a number of times - good operators, who got a very good exit!
Cavendish posit 550p (plus more if gold price sustainable) so I’ll do some work on it. The 2 analysts who do their financials stuff I rather rate.
Thx. Had a good look and bought a small starter position. At 404p seems to have come off a recent 440p high. Clearly business is booming given the guidance upgrade, and pawnbrokers seem to be ideally placed to do well in a tough environment for consumers. Quite a small pawnbroking book at £12m (versus £130m at HAT, which had 280 shops versus RFX’s 169 - surely this can be grown significantly?). So a lot of metals buying etc, so RFX is significantly geared to the gold price - ok by me. My referencing indicates that P Kenyon (in post since 2001) and team run a tightly managed ship. Current PE probably a bit low although you have to factor in a sort of “DIckensian discount” to pawnbrokers as most investors don’t really understand the biz model, but a 50% div payout underpins value a bit. Cavendish’s TP of 550p seems more like an exit value, based on SOTP of the segment exit multiples. Not many buyers of pawnbroking businesses though. I’d like to hear the expansion strategy from CEO/management before bulking up the position.
They're very conservative on lending against the book especially with the higher gold prices. It's probably somewhere they can expand - i get the feeling that because of the outperformance of the rest of the business they'd be in no rush to materially expand this.
They want to open 8-12 new stores each year. Pre-owned watches seem a growth area and obviously the gold buying / melting.
Its probably undervalued at £4, most likely will get to £5 later this year and a buy out you'd be looking near £6 but as you say not a lot of buyers otherwise its happy to keep compounding.
Annual results > https://www.youtube.com/watch?v=JOBCpvQt39I
HAT’s LTV was 60% and the loan losses were pretty small on loans which can’t be more than 180 days. Looking at loan book per outlet, HAT was £440k whereas RFX seems to be a mere £70k. Pawn loans are high margin and fully secured by the pledge - most of them are redeemed and not defaulted. Seems like money for old rope, and surely if you are bothered about volatility in pledge value, you tweak the LTV a bit rather than decide to constrain the pledge book size. The smallness of the pledge book poses a valuation quandry - is this like a financial instie, a bullion trader or a retailer?
Interesting discussion between Messrs Hill and Jourdain this am on this one. J is bothered that GBR may mess up the market with its proposed own app (he suggested that perhaps an Oz developer might get chosen - why not buy British) and that they may ply dirty in order to rig the market in favour of its own app. Who knows but that’s the risk of HMG trying to play in a market in which one has invested.
Don’t know whether he’s invested here, but he mentioned that TRN had a small army of developers - 600 it seems - and he wd prefer, in view of end market uncertainty, for TRN to savagely cut costs, run it for cash for a while and pay off debt, rather than cutting loads more code for now. Seems likely that mgmt probably won’t do this.
I happy just to observe.
Pierot,
Yes it was interesting. Mr J didn’t mention the provisions of the Railways Act 2026, and I find it hard to believe your notion that there’s a risk of HMG trying to play. After all it was the same HMG that produced the RA 2026 bill, and introduced the ORR to oversee a “thriving” market. Why do that if they intend to cut TRN out of the market? Why would the Transport Secretary days ago make contradictory statements - if that is the plan?
If you intend to maximise your survival chances in Russian Roulette then you don’t deliberately put bullets in the gun, do you?
Mr J also appeared to believe there are millions of calculations for each split fare. There’s not. If there are 20 stops there are 20 iterative calculations relating to a single ticket. 20 more relating to a return ticket. TRN only does a single split and the number of fare combinations are only as many as there are stops times two….. 40 calculations perhaps, but not millions.
Mr J also believes TRN should fire 100s of developers and “use AI” to “do the same”. I disagree that that’s a practical option, or the right strategy to support a GROWING business, and it’s also a view that ignores the reductions in overhead that are already being achieved (including via the use of AI to support development).
GBR’s choice of app isn’t yet a done deal, and the LNER app Mr J refers to is actually a hodge podge bespoke app of several UK specialist digital agencies Valtech, Softwire, Inviqa as well as developers employed by LNER who presently are seconded to the GBR transition team. This is an App that cannot do split ticketing!
We’ll see. Enjoy the sidelines.
OB
So I assume you’ve taken a position?
I think you can always rationalise in a complex market situation that HMG will play nicely and not do stupid or unhelpful things. But in practice in commercial situations HMG is always the dumbest money in the room, and this HMG is in hoc to Unions etc. So I prefer to avoid situations where governments are regulating or seeking to play.
I haven’t really looked at their dev spend and where it is located and whether it is oversized relative to the growth prospects which the business is going to achieve, which based on the sellside consensus is a pretty miserable 3% pa top line growth for the next few years.
Anyhow there’s now a new CEO going to arrive and no doubt he will recalibrate the strategy and objectives according to how he sees things. A bit odd not to give some reasons for Jody Ford quitting.
May not be your bag, but the income investors have bailed out of Diageo, trashing the sp, following Drastic Dave’s first earnings call and the divi cut, exemplifying new CEO risk, but one can reasonably see £22-27 ps SOTP value here as Dave works his magic, on a fairly low risk basis with income on the way.
I have yet to use Trainline. I always buy at the station as i always want an open ticket. Doesn't seem available on Trainline. You can still claim on an open ticket for delays.
ALSO very noticeable that train service is going downhill since government took over. Reducing the number of carriages from 6 to 3 on the transpennine line.....over Christmas. How ridiculous is that. Actually impossible to get on the train.
OB - just wonder if you've tried factoring in AI alternative POVs to get a more rounded view? It's something i'm going to try and use a bit more.
https://www.youtube.com/watch?v=frh_-XyzhHU
As i understand Trainline is just a lot of APIs plugging into the Trainline "brain" which on the surface should be easy to replicate but i feel AI would struggle because the UK booking system is so archaic and maybe the UK is a bit too niche for the hyperscalers to really get involved? A smaller player might try too but i always feel if your the dominant force in that market you could buy them out.
Constellation on the otherhand as per video...will be interesting to see how that pans out.
That share price really is ... a train crash!
I'll get my coat.
Good article, this has been fixed by Uber though. Their app is pretty slick now and seems just as cheap as Trainline? Their £5 in booking credit will get a fair few to sign up.
"I then tried Uber, but this only lets you pick a date for a train then forces you to scroll through all the trains from the first one of the day at 4am so by the time I’d scrolled several pages to 8am I’d given up. Uber launched 3 years ago and threw a lot of money at competing with Trainline yet three years on it’s rubbish. Utter utter utter rubbish."
CEO leaving is also not a great sign. I agree that GRR's app is likely to be a toothless competitor however.
It hadn’t been fixed by Uber as at the date of the article and that’s 3 years after launch. But giving you the benefit of the doubt I just tried booking a train from Reading to Edinburgh using Uber.
Here’s what happened:
I pick Public Transit.
A picture of a globe and tells me to zoom in to get options.
I zoom in to Reading, and zoom and zoom and zoom.
Ok I’m getting options.
Ah, it’s a taxi from Reading to Edinburgh.
I go back and choose “Public Transit” (so “Train” doesn’t even appear)
I then get a list of flight providers (I can pick just one)
So no it’s not been fixed by Uber. Overcomplicated and virtually all would give up.
Clearly you’ve somehow figured out their interface and enjoy the £5 credit. Which incidentally makes your train ticket a profitless endeavour for Uber. It remains the case that Uber have not had any success in the UK rail market after 3 years and while you believe “a fair few” will make a difference in their 4th year it seems to me just as likely that they’d cut their losses and exit the space to focus on more profitable areas like AV (the CEO of Uber said as much in a recent interview).
OB
Not sure what's going on for you! I go "Home" then "get a train or coach." Then the options are available for me.
Still me and my family have used Trainline so often that it's practically a muscle memory.
OB...I first picked up on TRN about two years ago. Initially, I appeared to have missed the opportunity, but since Jan 2025, TRN has been in a downward spiral. Apart from my local operator through which I can get cheapest tickets on its app and is very convenient, going further afield I always use TRN. It's website is really good and ticket prices are always the lowest. What has surprised me looking the the RNS releases is how well it is developing internationally and I see this as a really big growth opportunity, as it seems to be way ahead of any local (i.e. national) competition. Your report has prompted me to take another look. now its back down around 200p.
Incredibly captivating and well written article, Oak!
Nearly choked on coffee..."Lean IT". Government smoking that Palantir magic beans goodness.