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Strictly,
For me, the question that you posed depends on whether you focus on absolute return or return relative to a particular benchmark. Personally, I focus on absolute return. I would therefore prefer to underperform the market and grow my wealth than outperform the market but lose wealth. A significant holding of cash, at all times, is a must for an absolute return investor. As share prices rise the absolute return investor's wealth rises in the short term. As share prices fall, the absolute return investor's wealth rises in the long term, as shares are purchased at lower prices. With this in mind, cash generates a higher return than any other asset class, hands down.
Bamps,
You have got the short term and long term borrowings the wrong way round. It is the long term borrowing of £100m that Bovis will inherit. Galliford Try also have more than sufficient cash (£591m) to cover borrowing due within the year (£450m). This is laid out in Note 14 within the recent financial results.
For completeness,
the additional £98m of short term borrowing refers to bank overdrafts , there is also £150m tied up in working capital
Londoner7,
Based on your assumptions, your maths are correct.
My assumptions, however, are different. Specifically, your £610m implies that Bovis' market cap will increase by £675m* (as per the RNS). I don't think this is reasonable given that Bovis has a market cap of £1.4bn and yet Galliford Try's housing business has a larger land bank and generates more profit.
*0.293x(1,401m + 675m) = £610m
**29.3% already allows for the £60m bonus share issue to Bovis shareholders and the 10% placing
Keep it simple!
What Galliford Try's shareholders are giving up:
2/3 of Galliford Try's housing business
What are Galliford Try's shareholders receiving:
1/3 of Bovis Homes existing business
For a Galliford Try shareholder, everything else can be ignored as the net position remains unchanged.
Effectively, Galliford Try's housing business generates roughly £160m profit after tax, yet its being valued at £675m (P/E ratio = 4.2)
Board need sacked!
Mental accounting garbage. You would think Galliford Try were laden with debt. Its like me transferring cash from one of my bank accounts to another of my bank accounts and thinking Im better off. Not to mention being given shares of a company whose shares are to be diluted in order to raise the cash.
I cannot understand why Metro Bank continues to expand its branch network at the current time. With external pressure on income from a competitive mortgage market, why create additional internal pressure on income via higher operating costs (currently increasing at £40m a year). The £350m capital raise affords them an additional £7bn of lending before a further capital raise is required. The focus must therefore be on getting the share price much higher before this next capital raise, otherwise major dilution. Hence the focus needs to be on profit. Rolling out the new fee income services without further expanding the branch network, in the short term, would have made this a strong buy. As it stands however, non interest income will need to grow significantly to avoid a loss both this year and the next.
Yes, all banks would very quickly become loss making and would remain so until confidence returned. Around 70% of most banks lending book is 2 year fixed mortgages. Consequently profitable books can quickly become unprofitable.
Yes, they have a decent capital buffer at the moment. However, they have a cost:income ratio of 92% (Lloyds: 46%, CYBG: 77%). So they will become loss making quicker and consequently for longer than any other bank.
Here is how I see a no-deal Brexit playing out. Personal and Business lending dries up. Banks then focus on mortgages. The already very competitive mortgage market becomes loss making. All banks eventually report losses. All banks continue to report losses until personal and business lending recovers. The million dollar question for me is whether Metro Bank have sufficient capital to ride out this period.
I foresee the half year results being pretty dire. The recent sale of a 12month term deposit at a market leading 2% was clearly an attempt to reduce the liquidity risk following the spike in the loan to deposit ratio. This 2% will certainly attract a lot of deposits. However with the capital ratio being so low, there will be limited ability to lend. Hence the lower profits are soon to become much lower.
Given the deterioration in the share price, a placing of shares is now no longer the best way forward. Plenty of alternative options would achieve the same result without destroying shareholder value. The loans (assets) could be sold to another retail bank or private company. Alternatively the loans could be packaged via a securitisation. Money would be well spent consulting with an investment bank to get the company out of this mess.
Pearls, Im just about to set up my own house building company. No debt, just cash. More than happy to bring on board additional investors. You may even wish to play an active role. Email me: colinco83@hotmail.co.uk. The more the merrier.
It seems strange to me that you can have a CVA after a pre-pack. With a CVA in place, this company would have continued on. The lack of CVA is ultimately what stops MA making a formal offer. The leases are simply too onerous.
MA needs our help! If you have not already done so then get your letter sent off to Debenhams now:
https://www.sportsdirectplc.com/media-centre/news-releases-and-press-kit/2019.aspx
If you hold physical share certificates, then the shares will be in your name and so you should sign the letter as follows: Joe Bloggs, Shareholder with x shares. If you hold shares electronically via an online broker eg. interactive investor, your shares will be registered not in your name but in the name of the nominee account holder eg, interactive investor nominee services limited. You should then sign the letter as follows: Joe Bloggs, Beneficial Owner with x shares. Investment registered in the name of Interactive Investor Nominee Services Limited. Remember to include SPD in your email: investor.relations@sportsdirect.com. Act now!
MA needs our help! If you have not already done so then get your letter sent off to Debenhams now:
https://www.sportsdirectplc.com/media-centre/news-releases-and-press-kit/2019.aspx
If you hold physical share certificates, then the shares will be in your name and so you should sign the letter as follows: Joe Bloggs, Shareholder with x shares. If you hold shares electronically via an online broker eg. interactive investor, your shares will be registered not in your name but in the name of the nominee account holder eg, interactive investor nominee services limited. You should then sign the letter as follows: Joe Bloggs, Beneficial Owner with x shares. Investment registered in the name of Interactive Investor Nominee Services Limited. Remember to include SPD in your email: investor.relations@sportsdirect.com. Act now!
I do not believe MA can make a firm offer of 5p by the 8th April 2019. His last purchase of shares was 18th April 2018 around 23p. Im thinking a 5p firm offer can only be made after 18th April 2019. Hence the significance of the 22nd April 2019.
Did anyone else spot the half a million shares sold 2 days ago then repurchased after the results today? Neither were uncrossing trades. Only a handful of people hold that many shares most of whom, if not all, are privy to inside knowledge.
Although the figures look good for this company, only 40% of net profit is attributable to the non-controlling interest. I'm not saying that the operating profit cannot increase from the current level, I'm sure it will, just that the distribution of net profit is a major put off, and probably what is holding back the share price. All else equal, a company which reported 50% of the operating profit reported by XCH but where 100% of net profit was attributable to the non-controlling interest would have a higher share price.
I have a couple of reservations..... (1) the company has constantly updated the market with good news yet the SP has fallen dramatically and (2) the majority of the companies assets are in the form of intangible goodwill. Any thoughts?
Yeah they phoned me too and I got offered the same patter, holding shares for me @ 28p. But ask yourself one question, do you think slimey would allow me to buy his shares off him for 11p? Btw their address is in Switzerland.