Member Info for Commonsense5

Further wise words Mr Alas Smith & Jones

For what it is worth Mr UBS could have easily sat on a hold rec and moved to a neutral price target around current price thus sitting on the fence but instead he bit the bullet which he did and changed rec to a buy and put out a much revised up price target of 575p, let bygones be bygones, we are through the worst, onwards and upwards to 600p + as a city guy respect to mr UBS for seeing the light and having a strong view

That is 5.3% on this divi alone and 8% on the full year including special - when the bonds trade at 0.5% yield I must be missing something. A disappointing close but long term game.

Thanks Mr Ponty, great to hear you are busy. The read across is that hopefully RMG has a shot at an upgrade current year to that £1bn level.

A very fair comment. There is a new catalyst as to why RMG is more attractive which is UBS’s catalyst for a change of view.

And a BUY Recomendation !!!

Well done mr UBS for reacting positively to the statement - 575p target I am told but not seen yet

My thoughts on next week … in no certain order …

1. Investors especially income funds have 3 days to get into the register for a 20p dividend on 506p share price which is a very big slug of income - who would sell ahead of that ? Expect buyers to easily outweigh sellers

2. Fuel prices, finally a pull back ! This was one of the major headwinds for the likes of RMG. Of course it needs to stick to make a difference but the market trades on sentiment … which is another positive …

3. RMG delivered Covid tests … surely this latest issue prolongs these contracts - again a positive point …

4. Friday was a great reminder when we touched 416p yay Rmg is fundamentally even even better in a Covid environment

5. THE biggest point however which will be the next point analysts will be considering …. A point I have said before … if last years H2 profits were £700m … how much worse than last year can this H2 possibly be ? The market is currently predicting £450m in H2 operating profits v the £700m last year SO a serious reduction. Or …will this H2 even be better than last years H2 ? Given revenue year on year will be up 5% +?!! Hence we have £400m operating profit in H1 under our belt - i predict H2 operating profit current year will NOT be down by £250m. I predict being conservative that H2 won’t be worse than £600m HENCE Full year operating profit WILL BE £1bn for the full year. At this point the market penny will drop and 600p + will be delivered in share price easily. Every postman I ask says they are as busy this year as last year, the £100m reduction in H2 profits from £700m to 600m will cover the higher lorry driver costs but that is being very very conservative

I think 8x rough PE current year and near 8% yield - a no brainer buy for structural growth. I hope that the JPM and Deutsche etc positive analysts sing from the rooftops to show they were right and MR UBS was hopelessly wrong on pure fundamentals. All they are saying with their 600p ++ targets is this is a 10x pe business - and cheap even then !!

550p sooner rather later - keep the faith

Mr C

No it closed at 505.6p - that is an old delayed print

Immediately cancelled post being bought

A random one on a subject I have mentioned before around the RMG bonds - the two bonds which total €900m ish are due to be repaid 2024 and 2026. The actual cash just reported is £1.6bn !! The net cash ex leases at £650m is good but the real situation is even better really and £400m is v v affordable on RMG’s balance sheet. Anyway my point is usually a low yield on bonds means a high quality company and usually an associated HIGH price to earnings ratio on the equity. Bond investors are usually a different bread of investor who understand balance sheets properly (Mr UBS!) …

So I believe the two bonds trade at 0.3% and 0.2% yield to maturity which is very low suggesting a high quality company. The coupon or cost to RMG is 2.5% but they trade much better than that.

My point being that this is quite a disconnect with the P/E ratio of RMG of 7.5x when the ftse trades on 13x + and Deutsche post is on 14x and last I looked UPS is on 17x.

Hence why this share price could have a long way to go and why those analysts targeting a share price of 750p + will be right

Love that me Alas Smith. I was topping up today and yesterday. I think with the company sat back a bit with a £200m order we have decent downside protection and a 27p payment looming. The price needs to just consolidate above 500p for a bit to allow it to leg up to the next level as and when.

A. Let’s always value add on the board not he said she said and me Beatlejuice - we get the message !!!

B. Simon Thomson would readily accept that the service is not up to scratch - I hope everyone has done their prep and listened to the 90 minute analyst meeting ? Simon is nothing saying life is perfect - from an investment perspective I am investing because it is not perfect !! In the meantime with all these imperfections this most amazing business makes £850m operating profit and trust me is globally valued at diddly squat !! Min 50% wrong. I bought more yesterday at 520p and more this am.

C. If anyone can do this the current team can - listen again to the union boss who spoke before Simon spoke - the future is very bright !!

Thx

John

Correct the special IS on the number of shares day before so min 20p poss a fraction more dependent on how many gets bought

A question to any specialists …. There is a fascinating piece in the results where Royal Mail talks of ‘revisions’ - I think it might be simply a change to a postman’s journey to make it hopefully more efficient BUT I don’t know - does it include all operational changes or improvements to say sorting or delivery offices or just route changes ?

What is interesting is that the best annual previous ever was 132 in 2018/2019 but this year it will be 1725 ! Whatever it is change is a happening !!!

My hope is that the company is using more science to improve delivery routes for the postmen and women thus making RMg more efficient but I don’t know

Any help gratefully received

Thx mr anger - missed both of those - nice Re Deutsche

Just interesting - current valuation is roughly 8x current year pe multiple with yield of 8% (including special). With a strong balance sheet of net cash this valuation is quite compelling - ftse 100 on forward rating of c14x, UPS 17x, Deutsche post 14x

Just FYI - pretty factual working off consensus

Average price target of the 15 analysts of 650p but feels like that is increasing

Mr Boeing, will try and help … these points are factual

You need to be a shareholder on 2nd Dec 21 to get 27p paid to you in January 2022. The final dividend of 13p for the current year to end March 22 gets actually paid to you in early September 2022 (well that was last years date). So the total by end September 22 is 40p - all for the current financial year to March 22.

To mr hudson - 26.7p paid in Jan if on the register 2nd Dec and a further 13p year end divi so 40p in total - hence yield 8% including special

Very kind mr casperdog thank you - as I said before we are all better collectively to help each other from front line to operations to finance guys.

This will only sound too self congratulatory but I took a moment this am to reread my post from 15th November 8.27am ‘3 days to go’ when I talked of the potential for a £200m buy back and extra divies and finishing the week at 500p. I apologise again.

As a city guy it is shocking that Mr UBS in 12 pages of intellectual comment never mentioned anything about the very cash fat balance sheet and only refereed to ‘net debt’ - a bad missed trick. That sort of research does my industry no favours. He will learn with time how to ‘fully’ analyse a company.

What we have now is a real cash flow situation - on Dec 3rd 27p of divies will accrue to shareholders so 5.4% a share return at 500p. In theory the price will drop 27p BUT it won’t as the value is supported by a very low PE ratio of say 7x now versus average ftse 100 of 12x. THEN you get the final current year divi of 13p next year (20p overall) so a further 2.6% return on 500p so 8% overall just for this year to March. Going forward you can only assume 20p ordinary divies BUT the extra earned cash flow in theory should be nailed on to be paid out so not crazy to assume 40p a share at least going forward with regular big special divies. If 8% yield goes to 4%, the share price doubles - to 1000p. It will get their faster for the fact that the company are buying £200m by end May 22 they said. That is a big order when they are competing with many other buyers who want that 40p a year.

It is very exciting