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I note that, according to the Telegraph and under pressure from the City, Ashtead is scrapping pensions worth upto 40% of bosses' salaries and capping them at 15% for future executive directors.
Good on Brendan Horgan, leading the way.
Yes, I did include interest. However what I overlooked is that debt in the year 2018-19 increased by £1032.9bn, which means that about 220p per share of the discretionary spending was financed with borrowings. Obviously they can't grow debt by £1bn per year for ever, so that 220p has to be excluded from the sums. Discretionary spend not financed by debt was £1275.4bn or 274p per share, so if growth capex halves after 2021 from 348p per share to 174p that leaves 200p for shareholders (ignoring growth and effect of buybacks).
1.2.X.U.
Are you taking the interest on the debt into account?
I see that Trump's wall is back on the cards as the US Supreme Court has said that he can use£2bn of Pentagon funds for a section of wall on the southern border.
Some more musings on where shareholder returns might be after 2021
From the current report discretionary spending looks like this:
Growth capex £1030.6m
Acquisitions £591.3m
Total growth expenditure £1621.9m
With 466m shares that gives growth expenditure per share of £3.48
Then we have current dividend per share of 40p and planned buybacks for 2019/20 of £500m, which is £1.07 per share. So that's £1.47 per share on shareholder returns.
When the 2021 plan completes, let's assume that AHT enter an indefinite period of gradual growth. (By 2021 AHT and URI between them could be servicing about half the north American rental market.)
So if growth capex of £3.48 is halved after 2021, that releases £1.74 per share for shareholder returns giving a total of £1.47 + £1.74 = £3.21 per share.
£3.21 is a 15% return against current SP, so you'd expect the SP by 2021 to rerate upwards to reflect the improved returns.
Also note that the current level of growth spending is intended to deliver low teens annual revenue growth, so sustained over 2 years that might give a 20% increase in earnings per share.
As always with AHT, everything is subject to a supportive cycle.
There you go. If you think i'm talking a load of bobbins, please let me know!
URI results beat expectations however they trimmed their guidance for the full year. Hence the fall in the SP of 12.73% on the week and the consequent fall in the SP of Ashtead back to their results in June.
C' est la vie!
URI post finals on Wednesday 17th. Their share price rose 3.8% yesterday.
According to my calculations (possibly too grand a word for such a simple thing to discover, but still I might have made a mistake somewhere) this is the total number of shares bought so far in the share buy-back scheme.
It just HAS to make a difference to the SP... Meanwhile, let's hope that Trump and his Chinese friends have a nice time together at their forthcoming meeting, and on Monday the SP will further reflect that.
LM
So a decent set of figures, but more postitively, management still talking about a supportive market. EPS of £2 for 2020 looks eminently achievable, and I don't see why this won't be priced at 15x by year end. On this basis, a £30 year end target does not look ridiculous. Cash flow is strong as well, and sharebuybacks will continue to support the price. GLA
£300k buy from a non-exec director. They even had the decency to wait until after results announcement (makes a pleasant change). This company goes from strength to strength and I think the US construction market risks are overplayed. I'll be tucking these away and reviewing again once they've gone up by 20%.
Now there's a turn up for the books.
Ashtead actually rising on good results and what's more pulling URI up as well!
Several analysts' views quoted on FT Alphaville:
https://ftalphaville.ft.com/marketslive/2019-06-18-2/
I wonder what the markey will do to thr sp today.
The ones doing the buying are AHT themselves. Now down to 466M share, which means something like £680M spent on buybacks.. I'm sure they know what they're doing, but somehow I think I'd have preferred to have the cash...
Results tomorrow!
"Buying opportunity at Ashtead, says Numis
Fears of a slowdown in US long-term project spending are overdone and creating a buying opportunity at equipment rental company Ashtead (AHT), says Numis.
Analyst Steve Woolf reiterated his ‘buy’ recommendation and target price of £28 on the shares, which rose 6.5p to £19.66 yesterday.
‘The broader trading environment remains supportive, and we expect Ashtead to continue to demonstrate further market share gains,’ he said.
‘We believe concerns of a rapid decline in its US end-markets are overdone. Trading at a significant discount to historic earnings valuations, the shares present a buying opportunity.’"
Geoff Drabble steps down as CEO today. Let's hope Brendan Horgan can do as well as Geoff over the last 12 years with the share price then being around £1.40.
Agree, SP doubled in 4 years, up 400p in 4 yrs, good business, and fundamentals solid ie steady dividend growth- have taken a few profits ie 10% tranches sold over the years, bought again at dips, what's not to like? Love to see their diggers on muddy building sites everywhere......
United Rentals is expected to report a Q3 increase in EPS from $2,87 to $3.1 when it reports after hours on Wednesday.
Both URI and AHT shares have risen in anticipation this week. It remains to be seen what happens on Thursday.
On one of the investor presentations on the AHT website an American analyst asks if the company is being too CONSERVATIVE with its leverage!
For AHT to suspend or reduce shareholder returns in order to pay down debt might not be a popular move.
I'm no fan of the buybacks either, but seems we're stuck with them. If you want the cash you'll just have to sell some of your shares. When I last bought AHT there were 500m shares in issue and now there are 470m, so in theory if I sell off 6% of my holding I've got the equivalent to a dividend (I think). Not that I'm going to sell, AHT still seems to have very bright prospects, ups and downs of the US economy allowed for.
LoveMusic
If owning individual shares causes you sleepless nights perhaps you would be better off with investment trusts where the risks are spread.
You know what they say: "if you can't stand the heat get out of the kitchen".
"Can AHT service its debt comfortably?
Since total debt levels have outpaced equities, AHT is a highly leveraged company. This is not unusual for mid-caps as debt tends to be a cheaper and faster source of funding for some businesses. We can check to see whether AHT is able to meet its debt obligations by looking at the net interest coverage ratio. A company generating earnings before interest and tax (EBIT) at least three times its net interest payments is considered financially sound. In AHT’s, case, the ratio of 8.85x suggests that interest is appropriately covered, which means that debtors may be willing to loan the company more money, giving AHT ample headroom to grow its debt facilities."
Debt not all bad?
I guess I shouldn't be trading, since I understand so little about how things work in the stock market.
The Ashtead share buyback, for example. Today Ashtead spent 1.5m on buying back shares. Yet it has massive debt. How does that work? Shouldn't they be aiming to be debt-free, before they start throwing their money around?
Oh well. Not understanding nonetheless, it seems to me that the brokers agree that Ashtead should be in the mid 20s, i.e. £25.00 per share, so all I can do is wait for it to correct itself.
Meanwhile, at least there is the dividend, albeit rather small because of Ashtead trying to satisfy both the Americans (who like buybacks) and the UK (who like dividends). Holding the shares is still better than money in the bank - so long as the shares don't keep going down! I hope the last few days of recovery continue.
With a bit of luck, the pound will plummet!
LoveMusic
OK, for "yield" substitute Free Cash Flow Yield:
Free Cash Flow yield (FCF yield) is a measure of the amount of cash left over at a company after it has paid its operating expenses and capital expenditures. FCF yield tries to capture how much cash is left over for investors. For the middle of the road company in the S&P 500, the FCF yield is about 4%. Google has a FCF yield of 2.53%. Facebook is 3.59%. Amazon is 0.95%. Apple is 5.21%. When you look at tobacco, Altria is 5.70%, British American Tobacco is 6.59% and Phillip Morris is 6.65%.
https://www.forbes.com/sites/jordanwaldrep/2018/09/28/why-you-should-not-ignore-tobacco-stocks-anymore/
At 7% AHT is still out ahead even while posting double-digit growth. And I still think the interesting times start in 2021 when AHT should emerge from its current empire-building phase with a spare £2 per share of growth capex in its pocket.
Of course, as we all know AHT is a highly-leveraged house of cards that is built on debt and an obliging North American economy and could collapse at any time! That's why I happened on the above article while researching non-cyclical stocks that are not particularly exposed to the USA.
I would never add a share BB into the yield, but as far as how much capital AHT is returning to shareholders annually (at present) it's appoint well made and makes interesting reading!
AHT yield is over 7%
The dividend is about 40p per share
The buyback commitment is £500m per year. With about 480m shares in circulation that's £1 per share or so.
Total £1.40, yield is therefore a little over 7%
Personally I'd rather have the full £1.40 paid out as dividends. Three possible reasons why buybacks are getting most of the money:
1. US shareholders prefer buybacks
2. AHT say the current dividend is intended to sustainable through the cycle, ie it's being kept low in the hope it won't need cutting in the downturn.
3. On current numbers, £500m spent on buybacks saves £10m from the cost of the following year's dividend.
Note that AHT is combining a 7% yield with annual growth of 15-20% under the 2021 plan.
It's interesting to think ahead to where AHT will be when the 2021 plan completes. Growth capex is about £2 per share (new stores + acquisitions) so assuming that they don't immediately launch another five-year plan to double in size again by 2026 (fingers crossed they don't do that!) there could easily be scope to add another £1 to the current payout of £1.40 per share.
Is their debt ratio so unusual for the type of business?
When is the downturn likely to occur? I guess the US trade figures might have spooked some people but generally AHT looks sound enough in the absence of panic selling. A bit of volatility is sometimes an opportunity is it not?