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Ps
Hedge fund. Calc your loss on psn assuming sp goes down to 2200 then calc no of shares in nano to cover that (assuming 10* increase). Worst possible case nano goes bust, but news there is getting better all the time, so think no chance of that.
Hi TMT
Sorry, I shouldn't hope the Sp goes down, and yes it would be good if I can buy back at 3000 and still be up cos of ggp and nano profits.
Incidentally nano sp 17.7 and hoping for a settlement with Samsung before 1st Sep (otherwise IP case goes to Court). Sp up from 10.42, 27/05 so consensus of opinion is +ve. If settlement for £500m + contract, I calc sp should be 180+ or over 10* current Sp. Bet that would make Mrs TMT happy!
My current thinking is desperate times need desperate measures, until Covid-19, Brexit and Recession sorted, then move back to Port of about 50% HB's, 50% specials, 15% Cash - did say about! Then get my Builders float system working again.
BoL
The no furlough is one of tmts red herring PR positives. Someone already said that most workers self employed so it would have been up to them if (a) applied on time (b) got it
Bearing in mind that the directors wrote themselves share bonus schemes after they realised their share price and sector was going to be completely rescued by austerity taxes on the rest of the population I want to discuss here how many of us could have done the same thing? Would we not have felt guilty? If the answer is no after fair discussion and not TMT slurs then I will accept it and recalibrate completely to extent that tax payer should be milked and as big bonus as possible should be pocketed (often reducing any shareholder. bonuses or dividends). Just so we know for the future. And I will also accept what I now believe to be crooked bonuses self paid following bailout by bankers, other builders,builders supply, crown estate, property management co.s , property lawyers, property consultants AS infact being normal business practice. I will forget about solving global warming or scientists or inventing engineers in general because all that matters are the landlords. They must survive above anything else and are superior in every way
Nige, I personally hope PSN never sees 2212 again! LOL. Hope you have to buy in at 3000, but that you do so well on your GGP and NANO that you don't mind!
If the stamp duty cut does what it was intended to do, PSN should sell lots of houses in coming months and pay a div before the end of the year. If they do, can't imagine the SP will drop from here. But we shall see.
Hi TMT
Glad you increased holding in ggp. I am sure you won't regret it.
I hold 54% of port in ggp and 31% in nano so 2 horses. If one goes down the other should cover it, can't believe they both go down. Much happier like that than 100% in ggp like Tom and a few others.
Average price of my sell off of psn was 2212, so hoping to buy back lower than that next year. Most of that in ggp av price 5.3 = 114% profit.
Both ggp and nano could be taken over in which case shares turned to cash and I will be able to buy much more than double my old HB's holdings, else I will hold some ggp and nano shares but probably still be able to buy back about double HB's holdings. At least that is my plan.
BoL
Thanks, Nige. As always, the logic of your view is clear. I guess we'll find out which of us was more correct in time.
BoL
Great post TMT.
Having failed to bail out of HB's during Brexit, Covid-19 (neither of which are over), I am anticipating further drop in SP's due to Recession and No Deal Brexit. Not going to make that mistake again, and done really well out of ggp.
I agree with you that Recession, No Deal will have little affect on Builders and Imho already built into the Sp (see Per's), but it doesn't matter what I think. If No Deal and/or Recession the Sp will probably tumble even more.
Also agree Sp Aug 19 was probably silly but I don't think it justifies a 45% shift in relative price. According to my tables bdev Per 6.4, psn 8.2 and no reason for that difference, given no guarantee psn issues are over.
Last point share dealing is so cheap now (and fast) money can be made out of short term Deals, particularly due to volatility, and don't think it is a good idea to be in HB's now.
BoL
Hi, Nige. No doubt that PSN has outperformed relative to BDEV in the last year.
Your benchmark of 4/1/19 is when PSN was going through the bonus fallout. So it was already undervalued relative to other HB at that point in time. I hadn't bought in yet because I wasn't convinced they were going to fix their problems.
The pricing in August 2019 was silly. It was based on Liam Halligan's hit jobs after they had already taken huge action to rectify the problems, and on Brexit fears and political uncertainty. You've said yourself that sentiment is hugely divorced from value/reality sometimes. The sentiment around the share was at an incredible low. The Brexit fears and political uncertainty certainly applied to all HB, but it was multiplied with PSN because of the bad press.
I said back then the sentiment around that would turn, that there would start to be articles saying that they'd turned it around and had become good corporate citizens. I didn't expect the Guardian to be the first paper to say that, but they were. How many bad reports about PSN build quality have there been since the turn of the year? And the "no furlough" policy is a huge plus on the PR front.
Have PSN solved all their problems? Probably not. But they've swung the narrative 100%. They are headed for a five star rating, and the retention policy is out in front of everyone else.
So in my view, your analysis has merit but it's overblown because of specific market aberrations around the dates you are using. PSN was undervalued relative to other builders on your benchmark date (4/1/19) because of a specific event (stupid bonuses). It was hugely undervalued relative to other builders on its low date due to a media campaign over historic, not current, problems, which were being resolved. Those problems are mostly resolved now and the market sentiment around them is certainly resolved.
Your analysis shows that PSN currently has a significantly higher SP relative to BDEV than it did in August, but August was silly. That doesn't change the fact that there's been a very significant swing. I don't think it is really 45%, that was a temporary aberration. But it's significant, you are correct about that. That tells us the market is valuing PSN much higher now, relative to BDEV, than it was a year ago.
It doesn't tell us, though, whether one or both valuations are too high. It just tells us there's been a shift. I think it's largely explained by the news/sentiment surrounding PSN. I don't think it's anything negative about BDEV.
I don't think anyone is really going to lose long term with either share. And, as we've discussed before, I don't much care about short term on this one.
Hi TMT
Performance of psn over last few weeks has been great and long term they should do well. Much more worried about short term for HB's.
Without even looking at numbers in detail - just from my Relative Strength graph and comparing psn to bdev bearing in mind psn quality issues, bdev none:
If sp 04/01/19 = 100 when bdev 474, psn 2006
30/08/19, Low point for psn
bdev Sp 631, RS 122.7, psn Sp 1893, RS 83.9, so down 38.8% compared to bdev.
now 10/07/20
bdev Sp 544, RS 106.4, psn Sp 2635, RS 122.6, so up 16.2% compared to bdev.
Swing 45%. The numbers don't matter very much, easy to say the market overreacted to psn troubles (which also made bdev look better than perhaps they were), but a 45% swing is excessive. It assumes all psn issues are over and bdev going backwards quickly. Both have performed better than my others (bwy, rdw and tw), but makes me think psn overvalued compared to the rest.
See Bamps post below. As I said psn a great long term investment, but Imho not til next year.
BoL and think a good time to top up ggp before drilling results around 23/07.
Good luck, LEVIS. If I had uninvested funds, I think I'd be adding here today, too.
@Nige, haven't read him for a good while, but just did as you did.
We've done pretty well here in recent days, almost 20% in the last two weeks. Was nice to get the stamp duty boost. My view -- lots of companies are going to come out with results showing losses this year. PSN is going to show a profit. Lots of companies are going to keep their dividends cancelled for a while. PSN is going to restore it's dividend by next year at the latest and still may pay a dividend this year. And other builders are more exposed to London / South East, and more exposed to higher priced housing, than PSN. In a downturn, which I expect, the housing shortage means people will still need houses, but will be more likely to buy PSN houses than some others.
So, I'm staying put here. I get your logic, I just see it differently.
@LEVIS
GGP is an exploration company. The value of the company is not in its earnings but in the value of its assets. They've found gold, a lot of it. How much, no one knows, of course. In my view, the evidence indicates that the current SP significantly undervalues the asset. Others may of course interpret the evidence differently. But I'd say it is a mistake to look at what a company like this produces. It's akin to disregarding PSN's land bank and cash holdings because those assets aren't producing anything right now. But those assets are a huge factor in valuing the company, IMO.
No doubt GGP bears some risk, and if that doesn't fit your investment profile / strategy, by all means give it a miss. But don't do so simply because it produces nothing -- they've found something very valuable!
GLA!
Hi TMT
No doubt psn a great company and builders still massively undervalued, but I still expect things to get worse before a recovery next year, so HB's just 7.5% Port now. Expecting a surge in ggp next week on new drilling reports, top up there?
Just unfiltered exstatex, reported his post and filtered him again. If enough people do that we might get rid of him!
BoL
Quite happy that PSN didn't take any furlough payments and kept everyone on salary.
Primark is getting good press for not taking the furlough bonus payments. Presumably, when some politician decides to rant about builders, Help to Buy, and other incentives to try and get the economy rolling again, PSN will be able to say, 'Look, companies like ABF / Primark didn't take the bonus payment but we didn't even take furlough payments.'
That, the better governance on executive compensation, the retention policy, and the improved HBF survey ratings, all convinces me that they know what they need to do. They messed up badly with the stupid bonuses but there's a clear awareness of the need to be good corporate citizens. These are substantive things that cost actual money, it's not just fancy words. And yet, it's proving to be the case that they can still be profitable -- none of this had to be expensive, it just needed a changed mindset.
Very happy with my investment here. Corporate culture seems to have done a course correction from the mistakes of the past, and trading update was really quite good, all things considered.