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Re Oi Oi Savaloy.
I think its more like £8.90 in cash is a better way to look at due to it being listed in GBP. its still a big nos
Oi-Oi, keep the faith ! Most good quality company shares have been grinding lower for the past 2yrs because cash / bonds have started to offer an alternate. But when you have a share like PLUS trading on a p/e of 5 you're well positioned for an exceptional performance ... SBB's give you implicit 5% return, div add 3% and cap gains will add 10%+ when the market catches up. For some reason 'tech' is still king in the US ... get rid of the Big 7 techhies and the S&P has gone nowhere in 2023. When the tech reversal happens, and it must, there will be plenty of money looking for quality companies on low p/e.
I've set myself a reminder to top slice at 1800p - whether that's this year or next I'm in no hurry
At the moment I got the share move wrong (but I'm not day trading, just an absolute pessimist when it comes to literally everything in life!!) and that's fine..........I can live with that.
I think one of the key metrics, that sets this company apart is the fact that it's debt free. There are going to be opportunities to expand/purchase going forward and that the old adage will hold true..........fortunes are made in the boom, empires are made in the bust.
With notable achievements in the US, Japan, and the UAE markets this bodes really well for the future. Expects full year ebitda to be about $300m.
Guessing more of a move up might be seen . US Deficit a number of minutes in https://www.ukcolumn.org/ Will this impact markets in the future .
Up 8% so far - no big surprise given half the mcap is covered by cash - should rise a lot further imv.
......and watch the share price sink off the back of that RNS.............(they'll pick up on the declining active customer base i bet - about the only negative element in the whole thing.) There's $10.90 a share in cash ($875,000,000 in the bank divided by the 80,148,269 shares in circulation) as a starter for ten. And no debt.
And they've restated their guidance on the year's performance too. When do they declare a dividend/buyback programme?
RNS - excellent - cash rich profitable and growing.
Odey now Lancaster are v v close to this company - they wouldn't be rebuilding their position one week prior to a terrible Q3 trading update, in my view. They have insights into this business beyond anything we have access to - regular meetings with management where they can understand the granularity of the business and monitor body language, and experts with deep knowledge of the sector. This major holding update is a very strong signal.
As for the board, it is legally obliged to act in the interests of all shareholders and, given it is a sizeable company with big institutions on the shareholder register, any funny business such as unjustified lavish share issuance to management or board itself would result in the board being dismissed before it can even happen. Israeli company law is very strict too, holding directors to account for this sort of thing. As I said, were this a Russian company with a low level listing on the LSE I'd be worried as there is no legal recourse, but this is not the case here.
Very interested to read everyone else's opinion on SBB's vs divi's. I guess I'm just a bit jaded. Plus BOD's have a nasty habit of dropping bombshells and it's always the X factor in any 'I've done my research' - they just have a way of screwing things up unnecessarily. Lots of talk about this being worth £25 a year ago..............and exactly like last time when it hit £20..........died a slow death just like now. That's why I'm just a bit reticent about everything.
MrBB
James Hanbury will take his full investment team from Odey Asset Management subsidiary Brook Asset Management to Lancaster Investment Management, which has signed a binding agreement over the team and funds transfer.
www.investmentweek.co.uk/news/4121216/james-hanbury-investment-team-odey-subsidiary-brook-lancaster-im
And @John - agree with pretty much everything you said. The shares in treasury will most likely stay there unless an attractive M&A opportunity comes up that can't be funded with cash and/or debt.
@testpack - correct, it's not the sole reason that I like the buybacks, just one of the advantages.
They're currently buying back the shares at an implied FCF yield of >20% (accepting that earnings are a bit lumpy) while still able to pay a dividend and make growth investments. If you want a bigger dividend then just sell into the SBBs in appropriate size to maintain your %holding.
I am very much in favour of continuing the buybacks. On face value if the business remains steady then current shareholders will benefit enormously in my opinion. ( our ownership grows by approx 5% each 6 months)
The opportunity to buy a business on this low valuation must be taking advantage of and I cant find a better use of capital.
Also NB James Hanbury from Odey just announced 3% holding in his new fund Lancaster.
The concern around BOD issuing themselves with large amount of shares in my opinion is unlikely and even if they did doesn't this need a shareholder approval?
the last time they did this i didn't think the amounts were that much relative to their performance ( financial that is not share price)
Been analysing this stock for a while, and as far as I can tell it's a deep discount to the long term value and profitability. I use skrnr.com usually to try and filter out value based stocks, this one is at the top of my lists .. it's got long term increasing profitability year on year, and looks like a good long term bet at these prices. As always DYOR etc.
Straightaim
' at no additional cost'
The additional cost is the £M being spent on SBB which could go straight to SH's as cash.
SeaTank.
'illegally gifted'.
No, it is not illegal to convert Treasury to voting shares, and it is normal practice for many cos to award shares to PDMR's. Probably every company on the Exchange has done it. The company generates 'bucket loads' of cash, hence the SBB, and there is no need to convert TS to VS for any future TO. Cancel the shares and be done with it. There is always a suspicion that the BOD may convert. Will you bet your house it wouldn't ?.
@testpack
Assume the current dividend currently costs the company £100m a year. If they reduce the share count by 20% then they only need to pay £80m to maintain the same payout per share. It basically frees them up to increase the dividend in future at no additional cost.
RNS this am announcing that the above increased their holding from 2.5% to 3.03%.
A pretty large holding for what looks like a fairly small hedge fund manager -Odey reincarnate?
I don't agree with the concerns that treasury shares will be somehow and illegally gifted to management or even its own board. This is just a ridiculous suggestion. It's not a Russian or a Chinese company incorporated in Cyprus or Turks and Caicos (!). I believe they are not cancelling the treasury shares in the event they find a value enhancing acquisition, that's my assumption. Ultimately the treasury shares will be cancelled if they don't find a good use for them. The business is diversified now, globally, with UK driving perhaps a third of revenues. It's increasingly a global business, so the stability and longevity of its cash flows is only improving as the quarters pass. I'd be fine with more in dividends, but buybacks make the most sense in terms of returning cash to shareholders from a tax perspective.
Straightaim.
'The other advantage of buybacks is that they reduce the burden of future dividend payments, as there are less shares outstanding that are due the dividend.'
I don't see the logic in this comment. Let us assume that co profitability remains. sbb's reduce the amount of shares in issue to 1 million. The cos metrics remain similar, and hence MC remains similar, at about £1B, The sp would be a £1000 per share. . Investors paying that kind of money would defo be seeking divis. It's an extreme example, but that is the logical conclusion.
And yr comment t'other day, saying if SBB scrapped, increased divis, you would just buy more shares. Excellent. Investors buying in the open market, creates demand, creates higher SP. That is what we want. QED.
There is no optimum number of shares. They'll keep buying them back until there's only yours and mine left!
That's the whole point, eventually the share price has to adjust upwards to reflect the stable / growing earnings against decreasing share count.
The other advantage of buybacks is that they reduce the burden of future dividend payments, as there are less shares outstanding that are due the dividend.
Exactly Savaloy. Pay proper divis. It is in the back of my mind that BOD might 'treat' themselves to treasury shares as a bonus. If investors take shares in lieu of cash, then only buy back that amount. The BOD has never said what is an appropriate amount of shares to buy back. What is the 'objective' number of shares.?
Apendragon. Following on from your comment that the sp might fall below £10, the best policy would be to sell your holding, at least 50%, wait 'till its sub tenner, and buy then. Makes sense of your convictions.
Share buybacks at the current price are a great use of capital, and if they paid a larger dividend I would just be reinvesting it in more shares anyway.
I can appreciate that dividends allow shareholders to decide whether to de-risk their investment or increase their relative shareholding though. Maybe it appeals to a broader base of shareholders, people that rely on dividend income etc.
So............is this the point at which they bring the existing share buyback programme to a close and re-invigorate the share price performance by announcing they're reverting back to paying proper dividends. share buybacks are all well and good but time for a change - they've spent over £200mill on buybacks.........(possibly alot more I've lost count).
They're probably earning in excess of £50mill in interest on the cashbalance - there's enough there to pay a dividend in and of itself. Thoughts?