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Good things expected going forwards,as problems subside and the business starts to get momentum,in my opinion. I am looking for a 3 bagger within a year. Value cannot be hidden,and this is such obvious value at this s.p. with actions hopefully about to transform the prospects going forward.
The ratings do not concern me so much but the way the shorts are sniffing around makes me think somethings up ... it's not like the OCDOs where they simply play the game because they can on an almost cyclical basis ... this is a short based on analysis in the business which jeopardises the SP. Credit rating downgrades combined with FTSE 250 exit could generate a lot of forced selling ... but would they not be looking at that situation already for those who would need to be exiting?
All companies are a houses of cards, they are social constructs.. They can collapse even in a bull market if the management is crap
Also this
"the low visibility over its financial policy and concession risks in Spain persist."
Moody is making this company seem like a house of cards.. Anyway they might have turned around NEXWM by then so who knows
I'm probably missing something obvious and can't read the original report, but how do moodys conclude negative cash flow in next 2 years?
Then it will go pop with a better stock market.
They (MCG) need to report some good figures .....
This is roughly my feeling too. Not many recovery plays left that offer value as much as this. If this doesn't jump this year, it is looking less likely. Conventional wisdom would suggest the loss of that recovery potential, a while ago. Perhaps around the time of the scrapped dividend. However that's looking at this in a vacuum, at the end of the day, value is value; low cost, less risk and good fundamentals. Bearing that in mind if the wider context look a little more optimistic, I don't see how that market won't recognise the potential here.
UK GDP figures just dropped and smashed estimates big time - soon all UK value stocks will be rerated imo - this is one of them imo
gla dyor etc
Apart from the obvious debt/ bond related factors, the bits about negative cash flows 45-50 over ne t 2 years, and the Alsa concessions retendering in 2027, because let's be honest as they suggest there is a massive over reliance on Alsa to keep the company going this last year, and probably this current year too.
I have copied some extracts from the report below:
Uncertainty with regard to timing and amount of the potential proceeds from the
planned disposal of the North American School Bus business, the impact of the
renewal of the long haul concession in Spain (due in 2027) on the profitability of the
group, as the effect of the potential refinancing of the hybrid notes on its key credit metrics
Moody's review will focus on (i) Mobico's operating performance in the first half of
2024, (ii) the amount of the proceeds and the timing of the planned disposal of the
North American school bus business, iii) the company's plans regards the refinancing
of the hybrid notes, (iv) the sustainability of the revenue and earnings of ALSA in view of the potential retendering of the long haul concession in 2027, and (v) an evaluation of the current and forecasted operating trends and free cash flow generation.
RATINGS RATIONALE
As at 31 December 2023, Mobico's liquidity position is good, with £356 million of cash and equivalents on balance sheet and an unused £600 million revolving credit facility
maturing in July 2028. The rating agency expects that cumulative free cash flow over the next two years will be negative by £45-50 million, assuming no dividends to
shareholders.
The rating agency currently factors in the refinancing of the company's £500
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The Baa3 rating could be downgraded if the company's operating performance and
debt metrics fail to materially improve or if the low visibility over its financial policy and concession risks in Spain persist.
Quantitatively, the following debt metrics could prompt a downgrade: i) retained cash flow/net debt remains below the mid teens percentage terms, or ii) the FFO interest cover below 4x, or iii) leverage, measured as gross debt/EBITDA, failing to reduce towards 4x, iv) free cash flows below mid to high single digits in percentage of debt.
All metrics include Moody's standard adjustments. In addition, in the event of a disposal of the North American School Bus business, the reduced scale and
diversification resulting from the sale would need to be more than offset by improved debt metrics.
Despite some improvement, Mobico's key credit ratios will remain weak for the Baa3
rating over the next 6-12 months in the absence of asset disposals. The rating agency
currently anticipates that leverage, measured in terms of Moody's-adjusted gross debt to EBITDA, will reduce below 5x over the next 6-12 months, from earnings growth and
a lower level of one-offs. However, leverage is likely to remain above pre-pande
Never good to see a short increase but this is quite regular with stocks and sometimes they're looking to make a quick buck out of a 4-5% movement then bail out. With rate cuts hopefully starting next month this should boost the s.p back to the 70s and then it is for the new CFO to deliver. Frustrating that the Cosmens are not buying at these low prices as that would stop any shorts from shorting.
Rightly or wrongly I had attributed the short increases here to the MCG pending/highly probably FTSE250 exclusion. Apart from Cosmen & Callendar where are the director buys?
They are not letting go here
Lets not under estimate crony capitalism . That strike last year would not happen if there was a labour run authority. All the activists and influencers would pipe down :-)
I do agree with the thesis that nobody wants to run the buses and they want to pay someone to do that. But a Tory run bus service in the Midlands was always a red flag . I think a deal will be struck and we will see route "adjustments" and so on
Maybe they anticipate institutional share holder selling because of the downgrade
Problem is Cosmens are the major shareholder and work to a different set of rules. Are they the only people standing between this and a rout? Very strange and doesn't say much for this business model ..
You beat me to it JG68, look like MW increased their short to 1% FFS. Hope the new CFO can work a miracle here.
https://shorttracker.co.uk/company/GB0006215205/
Meanwhile MW keep increasing their short.
Wish they would do one
"yeah, i noticed the different rating, but stumped as to why Google reported it '16 hrs ago'"
that's the first time Google indexed that link . It may have been up much earlier but the Google crawler may have missed it for some reason . Maybe the page was defective or whatever
Even still, doesn't seem to have done much today, which is positive. usually ratings downgrades have a big impact
Yeah, i noticed the different rating, but stumped as to why Google reported it '16 hrs ago'
Ian - think that was last years Eurobond
Found this '16 hours ago' on google, but source link just brings me here
Mobico, rated Baa2/BBB by Moody's and Fitch, wants to sell a €500m no-grow eight year (September 2031) bond via BBVA, Commerzbank, ING, NatWest
Do we know if that was released first thing yesterday or after market close?
I've been checking their website for an update. Probably won't move the SP much since it was sort of expected I suppose.
https://www.moodys.com/research/Moodys-Ratings-downgrades-Mobicos-rating-to-Baa3-ratings-on-review-Rating-Action--PR_489728
Interesting that Moody's is predicting they will refinance the hybrid not before 2025. Makes sense given previous discussion that the hybrid is more pricey than regular bonds, but then it makes the gearing look worse.
The new CFO needs to be all over this and turn round to the government and state either accept the price hikes or find another operator because we're not a charity and we are not going to continue to lose money. Believe the contract is up in January so should be reaching a decision by autumn. Personally I think we're better off axing WM buses, more hassle than it's worth especially if there is another round of strikes.