Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Just to illustrate the scale of UK mobilisation coming up as restrictions lift, the SSP jobs site:
https://www.sspcareers.com/uk/job-search/
Filter by Store Operations - as of this post 205 vacancies compared to barely anything last month.
I won't invest in WHSmith personally but definitely a great comparison to make, and SSP have a lot more business to recapture moving forward as they tend to operate multiple stores per location. I would say SSP SP is similarly undervalued - although their full estate will not reopen they will keep the high revenue sites and potential is massive. From next week UK train station stores will be opening again and revenue will climb rapidly.
Not a plug for WH Smith, post the article because there are similarities with SSPG in terms of its exposure to the travel market:
Peel Hunt: WH Smith is ‘undervalued’
Peel Hunt is not that interested in interim numbers from WH Smith (SMWH) but the broker is excited by the outlook and says the post-lockdown restart of travel will boost the undervalued newsagent.
Analyst Jonathan Pritchard retained his ‘buy’ recommendation and increased his target price from £20.00 to £25.00 on the stock, which closed down 0.3%, or 5p, at £18.10 on Friday.
He said interim numbers were ‘of limited interest but the outlook is very exciting’ as the newsagent embarks on a major store opening programme. The company is planning 100 new stores, two thirds of which will be in the US.
‘It is clear that WH Smith sees the prospects for its travel business in a much more rosy light than its competitors do,’ said Pritchard.
‘Short-term fluctuations are out of its hands but long-term, this is a strong business that is getting stronger. The shares are undervalued, as WH Smith continues to take global market share and grows earnings beyond previous group highs.’
Pritchard added that WH Smith will continue to ‘get stronger and is a must for growth funds’.
I would add that the rights issue has given them a war chest, they are in a much stronger position with landlords who are now left with empty units and they have been able to exit from loss making stores. Yes business travel and commuting will be lower the pre covid but leisure travel will bounce back strongly.
17 May- Friends and family will see big domestic market (relatively) when boris announces the RAG list for July expect a stampede particularly if the Green countries are our european cousins with a lat flow test as the barometer (free) i expected the price dip today as shares flipped from the placing.
tommy15 - yes totally agree with you about the recovery....we need a bit more clarity or the return of some sort of airport use as well....see how the next few weeks pan out with more news etc...
So to answer the various queries- Air travel- most of the income in UK and Europe is driven by leisure travel. Most business and long haul has the advantage of lounge business and spend is materially lower for business traveller than the leisure brigade. Dont discount airlines who have the holy trinity of lots of capactity (all added to the fleet in 2019) hedged low fuel and aggressive deals with airports to guarantee passenger volumes. This will inevitably lead to a price bonanza for consumers as they offer lots of cheap deals to get people confident in travel again and ultimately to maintain load factors.
Growth in rail is going to be leisure driven and put bluntly there are lots of brand casualties in the market who will simply withdraw from the travel channel as the traditional high st landlord entices them back with great property deals ( no base rents, rent free periods, capital contribution and longer leases than the travel market has offered.)
This year will be unique in the UK which is SSPs core market - rail will be huge as we have no where to travel so whilst i agree the reduction in commuters will hurt certain stations, others will be buoyant. im sure you saw the pictures in the height of the pandemic of over crowded trains on SWT taking "commuters" to Bournemouth.
I'm bullish on this as the rights issue gives the company cash to grow at a time when there will be market opportunities in existing and new markets. structurally growth will return and that's without the US market that SSP were just starting to gain traction in.
schjmh you're absolutely right, apologies. But the crux of my point still stands - I'm still not sure it's reasonoable to expect that degree of recovery for quite some time.
tommy15, I don't know where you are looking or where you get the figure of "a little under 600p before the pandemic" but the share price above 700p in August 2019s andfloating around the 680p in January 2020 and then dropped sharply once the pandemic hit?
Mary out of interest where does 700p come from?
This share was a little under 600p before the pandemic; since then it's been through a year of basically no rervenue, significant dilution, and the prospect of real long-term changes in commuter patterns meaning less footfall and, ultimately, less revenue.
I'm curious whether I've missed something that could take this share to a new all-time-high despite all of the above?
Shore Capital: SSP recovery could surprise
The recovery of food-on-the-go group SSP (SSP) could come later in the year than expected, but Shore Capital says there is reason to think that it will be strong.
Analyst Greg Johnson retained his ‘buy’ recommendation and a ‘fair value’ price target of 390p on the owner of Upper Crust, which closed down 2.6%, or 9.1p, at 336p on Monday.
The analyst said the business’s recovery is now expected to begin ‘from the summer rather than the spring’ but this is ‘more than offset by a greater than previously expected contribution from net new contracts over the medium term’.
‘Our…fair value…stands at 390p per share, a c.15% upside opportunity,’ said Johnson.
‘With just a 12% share of the estimated £23bn travel food service market, potentially some £400m of debt headroom, and a highly fragmented but dislocated competitor base to target, such assumptions could prove highly conservative.’
No buts here, going one way but not necessarily in a straight line.
I see a £7+ at a future point.
DYOR
I agree. Pret is a good example - it’s cheaper and higher quality, and also had a strong high street presence and has remained open to a far higher degree, so many may have “made the switch”.
While I think all the “the office is dead” talk overblown, I do agree that some people will take the opportunity to wfh a day or two a week - and it seems likely that the group of people with the freedom to do that will likely be a similar group to those with £5 to blow on a sandwich every morning.
My suspicion is that air travel for business will take a proportionately bigger hit - while I know many people who miss the human interaction in the office, I know very few who miss business travel, especially regular travel. Plus the high cost will be harder to justify now that we know remote meetings are “good enough”.
All of that said - I do wonder if SSP has further to go as a “recovery play”. In general the recovery move has been fairly muted in the UK, particularly when compared to the US where many lockdown-affected shares are at an ATH. Investors here seem to be more cautious - which is commendable - and I believe that the continuing uncertainty around variants, vaccine uptake and safety etc is still weighing down these recovery stocks; I’m bullish on the recovery and hope that this weight will be lifted over the next couple of months as lockdown continues to ease up.
So I agree that I won’t be holding these long term... but not quite ready to give up on them yet!
...would it be time to take some profits?
Pre-pandemic, this was trading well above 600p. Under the circumstances, the current value of about 345p looks great, bearing in mind that I've just added the rights issue shares.
I can see a long-term potential but, equally, I can see a few constraints.
Inevitably, there will be less business travel. More people will be working from home, some maybe two days a week or so. Trend of having meetings on Microsoft Teams or similar has been increasing for a while, well before the pandemic. This is likely to increase.
One of the main problems with SSP is that they are quite good at pricing their food out of the market. Why would you pay a fiver for a sandwich when you can get one for half a price at Greggs just outside the station, and still £1+ cheaper at Pret a Manger (which is of better quality anyway)?
Getting air travel back in action will be crucial for this company as that's where most of their profits are likely to come.
Thanks guys! I had a wobble moment where I thought by taking no action I was somehow going to lose out completely!
The broker should sell the shares accordingly and deposit the fund made into your account... or at least HL are offering this.
From p65 of the Prospectus:
(b) If you do not want to take up your rights at all
If you do not want to take up your rights, you do not need to do anything. If you do not return
your Provisional Allotment Letter to acquire the New Shares to which you are entitled by
11.00 a.m. on 21 April 2021, the Company has made arrangements under which the
Underwriters will try to find investors to take up your rights and the rights of others who have
not taken them up on your or their behalf. If the Underwriters find investors who agree to pay a
premium over the Rights Issue Price and the related expenses of procuring those investors
(including any applicable brokerage and commissions and amounts in respect of VAT which
are not recoverable), you will be sent a cheque for your share of the amount of that premium,
provided that this is £5.00 or more. Cheques are expected to be dispatched by 29 April 2021
and will be sent to your existing address appearing on the Company’s register of members (or
to the first-named holder if you hold your Existing Shares jointly)...
I have let the rights issue lapse, am I right in thinking once the company sells these I will be paid? If so any idea how long I should expect this to take? Thanks!
and the rump placed this morning.
Well done., all concerned!
Freetrade doesn't offer this rights issue. Can we transfer it some other broker or any other suggestion?
For example I have 25 shares
Current price ; 320
Total money : 320 *25 = 8000
I get 12 shares * 185 = 2220
After rights buy if I sell (25+12)*320 = 11840
Is this how it works or people can't sell the 12 shares at all?
If you sell your rights shares at the price offered now, it means you sell them below their value to the underwriters (banks) Normally, people who do it are those who don't have money to buy them. So instead of loosing the rights completely they get something for them. If you have money, then you're better of buying your rights, not selling. That's of course if you believe that the company is going to do better after rights issue than before it. But I guess you wouldn't buy shares in the first place if thought different)
Yes noticed the 2 word reasoning on 10 shares that counts as Daily Mail financial analysis. Bit useless for DM. There are plenty of buy notes too from analysts but that would not suit the DM needs to put a neg slant on a daily drop.
The Daily Mail has put the reason for the fall down to an Analyst note...
This is going to fly when the airport reopen and passengers increase from the current small %.
Fwiw the Fri fall was probably due the uncertainty / reopening delay, the TUI bond news, profit taking, most travel stocks went down.
A top up opportunity. For me, the ups and downs are great for trading and I welcome the chance to get into recovery stocks at lower prices.
The update will be positive, RI secures future, soin on reopening Jun Jul Sep but this year.
Imho the travel sector is taxiing and about to take off.
DYOR.