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LOOT, you could be right, every investment is a risk. There are a few other red flags, a big pension deficit and a forecast reduction in EBIT amongst them.
Debt may not have been an issue in the past but maybe in the current climate.
You say the downside is limited but ultimately any share price can go to zero, you only have to look at the likes of CLLN, TCG, DEB etc.
I must admit, I'm new to shorting so I'm treading cautiously at the moment with a maximum liability of £1k. I plan to hold the short for 2 months.
@OWLS Debt was £2.3bn last year (too high) but the company have recently sold the declining cash handling business to Brink’s for £670m. The company also held back about £150m in dividends this year so leverage is now about 2 times Ebitda. I’d therefore say leverage is not too excessive against its peers.
Debt is also very well serviceable. £56m is scheduled for repayment in 2020; 6 times covered by 2019 pre-tax profits.
You may be right to short G4S but if you base your reasoning on debt alone then I’d be looking to close that short early because I’m not sure the market would consider this excessive. Bare in mind the company carried much higher debt for the last few years yet traded within a narrow range of £2 per share.
You also mention momentum as another reason for your short. With a current PE ratio of 6 the downside is limited from here.
Very brave. Just had a golden cross on the hourly chart, along with a bounce off 30 on the RSI.
I've taken out a small short out here at 95.75p. Negative share price momentum and high debt are the main reasons. I have a terrible record at shorting, we will see.
I share your thoughts. This has to be due a correction in valuation - unless I’m missing something significant here. The company had $7 billion in revenues last year and looks set to maintain the same level of performance, despite the pandemic. Yes the company has debt, but not at a level even close to causing concern. I hope to see a significant move to something resembling a sensible valuation in the next 4-6 weeks.
G4S Secure Solutions (USA) are a subsidiary of G4S with all revenue going to the FTSE listed company. The new employees were hired in US but it demonstrates confidence in ongoing US operations which is good for the whole group.
Events, logistics and ‘Cash Solutions’ parts of the business are affected by the lockdown but these are a relatively small parts of the business, about 20% of revenue. G4S is actually more about technology enabled security (47% revenue) and security consulting (11% revenue).
For me, it was important to hear that there is very little impact from the lockdown. Revenues in March were broadly unchanged year-on-year. From RNS: The company said that so far during the pandemic, it has managed to maintain a high level of business continuity and has only had to furlough employees in "exceptional circumstances".
Yet G4S share price has halved since we were trading around £2 prior to the market wide correction in February. This seems a little overdone and is actually a bigger drop than Wetherspoons, Ryanair or Intercon Hotels to name but a few companies you would expect to be more greatly impacted.
In that period G4S has mostly completed the sale of the cash businesses to Brink's and is now cash rich with liquid resources of £1.3bn (albeit set against £2bn in net debt) as well as identified £100m in cost savings.
On the downside was the one-off impairment charge in March (A non-cash charge related to goodwill on a merger in 2004). This seems over done considering underlying pretax profit rose by 4.3%. Dividend was also withdrawn in that period but this is hardly unique in the current market.
I’m genuinely interested to hear from posters with a bearish view of G4S because I’m just not seeing why the share price has suffered from the recent market correction more than many retail, leisure and travel companies with much greater exposure to the effects of lockdown.
Was that not in the US though? Not sure if that will affect the LSE shares?
Anyway, events are wiped out, gatherings in general where security is required not so much requires either..
Don't expect too much of a change until the European firms start hiring security to enforce social distancing, which should come after lockdown?
This is exactly the update I was hoping for and yet no bounce back to previous levels. Share price has dropped more than many companies that have been materially affected by the virus. Doesn't make sense. Unless the market slowly wake up to the reality here and we see a gap up in the coming days/weeks.
Business as usual, what’s the reason for the 50% drop?
So what are we thinking a reasonable movement in the SP might be come tomorrow then given progress on Brink's transfer and additional opportunities from COVID ?
Good spot, thanks for that. Hopefully tomorrow's update can give the SP a kick up the a*** and a return to more sensible levels.
G4S Hiring 15,000 Employees in Response to COVID-19
https://www.sdmmag.com/articles/97956-g4s-hiring-15000-employees-in-response-to-covid-19
And now the chairman has joined in. Fingers crossed for positive sentiment tomorrow - and it's Friday !!
They have full confidence in the company and so do we!
back to entry point of 110p at least if not higher
The non-cash charge, much of which relates to goodwill on a merger dating back to 2004, overshadowed a relatively upbeat update from the group, which said the impact of the coronavirus outbreak on its business so far had been "immaterial".
The non-cash charge largely related to a "good deal" of goodwill on that merger in 2004, Chief Executive Ashley Almanza said in a media call.
-There is nothing to worry about!!!
Ofcourse it is, look at the fundamentals of the RNS
Even MMs only opened trading slightly down. That's a good indicator as to where this will shortly return
I just hope the upswing is rapid so that as many shorters get burned as possible!
Hold tight, this will bounce!
In at 95.16..
Fingers crossed very oversold
Fingers crossed Sparrowe .... managed to get in at 100p.
Good luck all and DYOR.
This is seriously oversold
A one off impairment charge making everyone panick! When revenue is up..
Should bounce 20% by the end of the day from here
Just bought in...sp still dropping as I write.
Will this market ever stop this lunatic self destruction:(((
Boom in Yield following drop. Nice entry point
Silly drop so I'm in
Bought some more because drop overdone.