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Exclusive: Hardman & Co Investor Forum - Severn Trent, Calculus Capital, Volta Finance, Residential


Member Info for GabsterX


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Member Since: Tue, 9th Oct 2018

Number of Share Chat Posts (all time): 48
Number of Share Chat Posts (last 30 days): 6

Last Posted: Today 10:59


Post Distribution over the last 30 days




Today 10:59

atalatal, who are you to stand in the way of true love! :)

In my opinion, Woodford is anticipating his shareholders to run for the gates once he reopens his fund and is loading up on cash by dumping shares, might be why IMB is declining faster than it's peers. Will keep dropping for a while until value investors swooping to collect the juicy well covered yield!
Today 07:19

Hey Velo, sure would love to compare data anytime. Been happy most of the time with Sharepad, I particularly like their live data feature where you can link the data into excel and do a live refresh by pressing ctrl+alt+F9. I had a few issues with their FCF calculations that were being underestimated, but support was quite helpful and recognized it then changed the calculation.

Predictions are just that, we'll never get an accurate number and have to do the DD ourselves in order to get the best information possible.

Have you done any DCF analysis on IMB? If so what fair value did you come up with?
Wed 12:56

"I wonder - does anyone out there have a subsciption to "Sharepad"? I'd be interested what they're showing as the current projection for net debt this trading year ending September."

I do, the numbers I gave are from Sharepad itself :)

End 2019 projection for net debt is 11.053.B
Tue 06:45

One thing you can say about the tobacco industry is that it’s spectacularly profitable. That’s because smokers are relatively insensitive to price increases and the price charged by tobacco companies is often only a small percentage of the price paid by consumers.

For example, in the UK, tax typically makes up 80% to 90% of the price of a pack of 20 cigarettes. Under the current tax rules, if Imperial charged £2 for a pack of 20, the retail price would be £9.18 thanks to fixed and variable tobacco duty and VAT. If Imperial increased its price by 10% to £2.20, that would increase the retail price from £9.18 to £9.46. For most companies, a 10% price increase would drive customers away towards cheaper competitors, but most smokers I know would be unlikely to quit or change brands because of a 28p price rise.

This pricing power translates into extreme levels of profitability. By ‘profitability’ I mean free cash flow return on tangible capital employed. While the media and 'analysts' are pulling their hair out pointing at declining volumes, the above should be taken into consideration when evaluating the company on a fundamental basis.
Tue 06:42

Velo, I'm not sure where you saw that debt was projected to increase, can you please share the source with us? I'm genuinely asking because from the consensus forecasts net borrowings is projected to decrease by 0.6% in 2019 and by another 6.6% in 2020.

IMB has a plan to substantially reduce its debts in the years ahead. This debt reduction will be driven to a large extent by a series of large divestments which are expected to generate around £2 billion of cash.

To answer the second question, my answer would be that it doesn't matter. Having a positive earnings payout ratio is a "feel good" metric that some people need to feel safer, if you dig into the business you'll see that it is irrelevant to dividend safety.

Unlike reported earnings which are down over the last decade, Imperial Brands’ free cash flow per share has increased by more than 30%, with an annualized growth rate of 4%. That’s better than the company’s 1.6% annualized revenue growth and reflects increasing margins thanks to the company’s focus on cost cutting and higher margin products.

More importantly, free cash flow has covered the dividend every year, with an average free cash flow dividend cover of 1.9. Free cash flow dividend cover has been decreasing, though, going from around 2.5 a decade ago to 1.5 today. The reason is that management has seen fit to increase the dividend by an average of almost 11% per year for a decade. This makes for happy shareholders, but it isn’t sustainable. I agree that at some point in the next few years the dividend’s growth rate will have to be reduced if it’s to remain well-covered by free cash flows.
Mon 09:47

Irene is right, due to the huge acquisitions done in the past the amortization is massive circa 1B GBP per year. This is a non cash expense and dividends are still paid out from FCF, once the goodwill is completely amortized 'net profits' will start coming up and cover the dividend, but this will make no difference besides pleasing investors looking only at the payout ratio.

Tobacco companies have very little capex requirements, I can see the dividend growing for another decade to come but at a much slower pace than a 10% CAGR.
20 May '19

No love for pizza these past few days.. taking a major beating and will probably continue until we see some profits or at least sales growth from international. Why take on Sweden and ignore Stockholm is still a big mystery to me.
20 May '19

Don't really see the logic in the drop, seems all the sector is affected. Unless they're shorting packaging firms as a whole and throwing the baby out with the bathwater. DS Smith has little to no revenue from China and a small recent stake in the US.

Anyone have any insight on how the fundamentals would be affected by the current events which is scaring away the traders?
14 May '19

Any positive outlook on the shares now that the elephant has been let out of the room? SP looks cheap on a FCF basis, about 20% margin of safety based on my DCF model. Cost saving measures, Tower sales, reduced dividend, increased customer base should help in the medium to long term.

Would buy back in at around 110p when it reaches that level.
13 May '19

Why would VOD massively buy back its shares a few days before they announce a dividend cut? Does not make much sens unless they do not plan on cutting it. Thoughts?

13 May 2019

Vodafone Group Plc ('Vodafone')

ISIN Code: GB00BH4HKS39

Transaction in Own Shares

Vodafone announces that it has purchased the following number of its ordinary shares of 2020/21 US cents on Exchange (as defined in the Rules of the London Stock Exchange) from J.P. Morgan Securities plc ('J.P. Morgan') as part of its buy-back programme announced on 28 January 2019 (the 'Programme').
13 May '19

As per a poll by JP Morgan about 70% of investors agree to a cut and would like it to be by 30%. Does this mean that the SP might FALL in the case the dividend is maintained?

Personally I would rather see a sell off of the NZ masts at 1.3B GBP followed by aggressive cost cutting measures, this coupled with the extra cash flow from the Liberty Global acquisition should be able to maintain the current dividend without having to break the 23 year streak of not cutting the dividend.
3 May '19

IMB had crashed by 47% from Dec 2007 to October 2008 (so before the great financial crisis), it was all doom and gloom and everyone was touting the "end of tobacco".

Stock has increased by 70% since as well as raised their dividend 10% per year. Strong buy at these levels again!
1 May '19

This is good news, and stock is tanking today.. strange
28 Apr '19

Any input on how reducing the construction business will affect cash flow? Are big awarded contracts paid in advance which allows them to get liquidity for Linden and the regeneration businesses?

If so it might make sense for them to do the work at 0% margins to get the cash inflows in and strengthen the balance sheet, again I have no idea on how construction payments are handled so maybe someone with experience in the sector in the UK can comment.
25 Apr '19

Most probably because of Altria earnings and huge volume declines (-14%). Probably spooked tobacco shareholders overall, IMB also down.

Will recover once the short term traders dry their tears.
17 Apr '19

For anyone wondering, here are GFRD's construction margins per year:

2013: 1.6%
2014: 1.0%
2015: 1.2%
2016: 1.1%
2017: 0.0%
2018: 0.9%

And those are PRE exceptional margins, great line of business guys! But what about the integrity of the fine board of directors you ask? Their financial reports are so sugar coated with BS it makes my head spin:

- Profit Warning? Let's call it an 'strategic review' or 'operational update'
- Dividend cut? Too negative, let's declare that we 'increased the dividend cover', sounds nicer
- Dividend already in line with our 2x cover policy? Let's cut it again and say that it is also 'in line'
- Fourth year of 'cautious bidding' in construction, fifth one's the charm!
16 Apr '19

I'm not sure I understand, Queensferry Bridge has been open since September 2017, how can they get hit with additional costs in 2019?

Contructionaegins have been 1.2% or lower for the past 5 years, and that is PRE exceptional. I'm curious to calculate how much money has been losses by the construction division in the last 5 years. But the result would be too depressing so I won't.
10 Feb '19

I've been visiting this thread for the past few days and was also surprised by the lack of discussion. Recent drop was caused by the Publicis earning results, which was a massive overreaction IMO.

D/E ratio is at a reasonable 0.7, current ratio at 1 and interest cover at a comfortable 11. I don't see debt as an issue. Dividend is also well covered by both earnings and FCF. I see the company as heavily undervalued and oversold.

WPP and the industry as a whole has been under a barrage of negative news and fear which has dropped the SP way more than the fundamentals would suggest. In the meantime we're getting a massive 7.5% yield to wait for a reversion to the mean.
6 Feb '19

If you're looking to make a quick buck look elsewhere. In the meantime I believe the current price offers a nice entry point for a 5-10 year outlook.

Domino’s in good health, says Peel Hunt
Domino’s (DOM) has shrugged off the negative sentiment of the past year to show it is in good health, says Peel Hunt.

Analyst Douglas Jack retained his ‘buy’ recommendation and trimmed his target price from 350p to 325p on news UK like-for-like sales rose by 4.5% in the fourth quarter, and by 4.6% over the full year. The shares fell 8.7% to 250.1p yesterday.

He said there was ‘negative sentiment’ over the past year related to the UK franchise model but its latest trading update ‘has shown it to be in good health’, although the business still needed to prove itself overseas.

‘The 15.7x price/earnings rating is not strenuous… it represents a low entry point for investors that believe in the long-term merits of a franchise model with a dominant position in a fast-growing traditional pizza delivery market,’ said Jack.
6 Feb '19

Mostly heard like trend following and short-termism.


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