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Mobico share price is sensitive to the news on inflation since it has a lot of debt and interest payments. Simply, its profit has been negative because of large interest payments due to high interest rate.
The share price increased by 50% (from 60 to 90) in only 2 months, hoping for a lower inflation rate and then a decrease in interest rate. It now decreased by 10% in only 2 days because the reported inflation rate (4.0%) was higher than expected inflation rate (3.8%).
The main point is: What is the long-term inflation rate? Earlier or later, it will be between 2% and 3%, and then the Bank of England has to decrease the interest rate step by step. I guess the inflation will be 3% in April and below 2.5% by August 2024. Can we expect a share price of 150 or more in the summer of 2024? It is very probable.
I bought around 40k shares of Mobico at £0.98. I see two points about the price of this company.
A. Before COVID, it used to pay 15p of dividends per year per share. For its price at that time (around £4.00), this means around 4% dividend payment per share, which is normal. But for the current price (£1.00), we can consider three scenarios:
1. Given the dividend payment of 15p, dividend yields can be 15%, which is insane.
2. Given the dividend payment of 10p, the dividend yield will be 10%, which is still high.
3. Given the dividend payment of 5p, the dividend yield will be 5%, which is normal.
Now the question is: will Mobico have the same revenue, earnings, generated cash, and dividends as before? To me, it can reach that position. Hence, its price must go up to decrease the dividend yields to a normal range. To me, £1.50 can be a target price in 1–2 years.
B. If the above argument is correct, why is the current price so low? Why has the price declined to £0.92? The main reason is the negative earnings Mobico reported in the previous annual report. We know markets are risk averse. To me, the return of the price depends on the next mid-year report, which will be released by the end of July. If the report is positive, then the price will return to 120 or above. If it is not positive, to me, it is not a big issue because the inflation and interest rate will finally go down by the next summer and so Mobico interest payment will be lower.
I have lots of Hyve stock, and at the moment I am making a small profit. But the offered price of 108 pence for each share is low. There are three complementary reasons for it: 1. Given that many shareholders bought Hyve stocks at a price of around 110 (the theoretical ex-right price) after the rights offer in June 2020, and some could buy at prices between 90p to 110p, the price of 108p does not compensate shareholders patience. I guess many major shareholders won't accept the offer.
2. The COVID-19 pandemic is over and the Russian-Ukrainian war has no effect on Hyve as Hyve is reshaped . Now, this company is financially healthy and seems to have a solid earnings in 2023, even stronger than before the pandemic. The forecasted price is something between 125 and 175 made by Financial Times for the end of 2023. The investors have not yet made up for the risks they have taken.
3. The overall market has not been good in the last year; interest rates are high, and prices are lower than a year ago. This high interest rate regime is not going to last a long time and will finish in 2024.
I hope that the offer would be rejected and I am willing to keep Hyve stocks for 1-2 years. To me, expecting the price of 150 is realistic. 200 is optimistic.
Your calculation is wrong. I have done the calculation one year ago while google and all other websites miscalculated it (I proud myself for it). I remember google for a long time misrepresent the price (at Dec 2019 was around 300) and in march after 9 month, google had found the right way to calculate it and it now fully matches with my calculations (check my pld posts in Nov 2020).
Just to have an idea about Hyve price (new prices):
Dec 2015: 540p
Dec 2016: 525p
Dec 2017: 600p
Dec 2018: 350p
Dec 2019: 575p
Dec 2020: 130p
Mar 2021: 125p
Jun 2021: 145p
Sep 2021: ??
Dec 2021: ?
The problem of calculation leading to 300 or 340 is ignoring the capital proceeds by using the rights issue. This capital has decreased the debt and increased the cash (deposit) and so the market value of the company in the numerator has changed as well.
Here is the correct calculations:
The pre-dilution price (adjusted only for consolidation) is in the London stock exchange or Yahoo finance that was 1080 at Dec 2019. Then due to COVID-19, the price fall down to very low levels. The price of each share before rights issue was 215 (price at 6 May 2020) and the theoretical ex-right price was 114.2 (price at 12 June). The decrease in the price (215 to 114) was because of the dilution due to rights issue. So we have the dilution rate (53%) to convert old price to new prices (adjusted prices for rights issue).
The key is calculation of the theoretical ex-right price that is 113 in the announcement and 114 based on my calculations. I calculated it a year ago and if I find time to investigate my old paper will post it here.
If somebody wants a much simpler (naive but still correct) approximation can argue that the price was 1080 and fall to 215 due to covid-19 (one fifth). So if the price after rights issue is around 114 that is the price in 12 June, we can expect recovery of the price to around 570 (multiple to five).
Your explanation is absolutely wrong. You neglected the stock consolidation 1 for 10 took place before rights issue in May 2020, meaning that every 10 old stocks consolidated into 1 new stock. Every price in the platforms are adjusted for this because it is simple (just multiply old prices to 10). Thus, price in December 2019 was 1080 for each new stock (or 108 for each old stocks where every 10 old stock construct one new share). Because we want to compare current price and old prices we specify all prices in term of new stocks. Again, Hyve shares never traded at 100p or 108p per share in Dec 2019. It was traded at 1080 per share (Or you can say 108 per old share where every 10 old share constructed one new share). Imagine before Pandemic, the price of Hyve was 108 and at the middle of pandemic still is between 70 and 140. Does it make sense?
Just for your information, I bought Hyve at May 2020 at 15 per old share (150 per new share) and got rights issus at 69p per new share and sold all of my Hyve stocks at 162p per each stock in June. So the price of 16p you are saying is absolutely wrong because I muself sold them at 162. The price was 160 in the start of June 2020 for just one-two days and then gradually decresead to 120p and then more decrease to even a very cheap price of 70p (the rights issue price).
So the price of Hyve before pandemic was 575p per new share (If you like you can say 57.5p per old shares but this 57.5 is no longer comparable with current price).
For the second round, I bough Hyve at a cheap price from 70 to 110 and so I am in a strong position and no reason to psychologically overestimate Hyve price. This is the typical problem in mergers, consolidation and rights issue.
Also, the pre-dilution price is in the London stock exchange or Yahoo finance. It was 1080 at Dec 2019. I remember google for a long time misrepresent the price and now I see the price of Hyve in google matches with my estimation (575 in Dec 2019).
The problem of calculation leading to 300 or 340 is ignoring the capital proceeds by using the rights issue. This capital has decreased the debt and increased the cash (deposit) and so the market value of the company in the numerator has changed as well.
And here is the Price adjustment:
1. The price of each share before rights issue was 215 (price at 6 May 2020) and the theoretical ex-right price is 114.2 (price at 12 June). The decrease in the price was because of the dilution due to rights issue. So we have the dilution rate (53%) to convert old price to new prices (adjusted prices for rights issue).
The information for calculation of ex-right price is inside the rights issue announcement released by Hyve at 7 May 2020 (they calculated ex-right price equals to 113.1 close to my estimation. Note that net gross proceed was 116.8 million and 9 new shares were issued for 4 possesed shares).
I get back and calculate theoretical ex-right price. I don't remmeber the number of shares before and after.
The mistake of your calculation is that you ignore the capital proceed by rights issue. The main part were into the bank deposit and so the numerator should be changes. The calculation of the theoretical ex-right price is inside the rights issue announcement. I did out the here3-4 month ago as well.
Note that 575p is the real price (adjusted for dilution due to the rights issue). The pre-dilution price was 1080p in Dec 2020 and the dilution rate was 53%. Many platform still are using old price without adjustment for rights issue. Thus the adjusted price in Dec 2020 is ~575p that you need to multiply 1080 to 53% to get 575p.
In the last December, when the price was around 110, I have written here that the Hyve price should go up to around 145. Now the price is 130 and given ongoing vaccination and high probability of removing the lockdown in the UK and US and then other countries, the timeframe is too tight to expect a deep dip. It might decrease to 120 for a while but the momentum is upward. I would say the price will soar to somewhere between 175 to 200 by the end of summer. I bought Hyve at price around 90-100 and my target price is 200.
Just to have an idea about Hyve price:
Dec 2015: 540p
Dec 2016: 525p
Dec 2017: 600p
Dec 2018: 350p
Dec 2019: 575p
Dec 2020: 130p
Mar 2021: 125p
Jun 2021: ???
Sep 2021: ??
Dec 2021: ?
The price of many stocks such as cineworld, national express, first group, etc. already is fully or partially recovered. For example, the price of cineworld, national express, first group, easyjet was 40, 140, and 45 in the last September and their prices now are 120, 310, and 92. The prices are multiplied by 3, 2.5 and 2. The price of Hyve was 85 in the September. So there is a gap and delay in the recovery of the Hyve comparing to its peer companies. I believe, right now, the price of Hyve should be around 170. It reached to 150 around 4 weeks ago. I think the price will increase again in the next 1-2 month to fill the gap. 120 is cheap. I remeber it was 120 in July 2020 while cineworld was 70 in the July 2020. Now, the price of both are around 120! I guess the price of cine, national express, first group and many others has no potential for further big increase.
If you mean market capitalization, then, the calculation should be same. because price is MCap divide to number of shares and so for both you need to consider rights issue (the money raised that is 116.8 million and change in the number of shares). So both should be the same if you consider rights issue.
6. I bought my stocks in prices between 69p to 110p in average ~100p. I didn't experience dilution because Hyve entitlement date was later than announcement date. So provide the oppurtunity to buy much lower than 215 (at ~110 to ~150 and get entitlement and discount on it to buy new shares at 69 but not 115).
Please read carefully to have a deep understanting about the current Hyve price and its future price. Because there are so much misunderstanding (underestimation) about Hyve price due to rights issue. The part 1 specifies my recommendation and part 2 give you valuable information about the accurate price of hyve.
Part 1 (recommendation): hold Hyve stock at least until summer 2021 since there is a reasonable potential for the price to be between 200 and 300. It is likely to go down in short episode when some investors want to take profits.
Part 2: Price adjustment:
1. The price of each share before rights issue was 215 (price at 6 May 2020) and the theoretical ex-right price is 114.2 (price at 12 June). The decrease in the price was because of the dilution due to rights issue. . So we have the dilution rate (53%) to convert old price to new prices (adjusted prices for rights issue).
The information for calculation of ex-right price is inside the rights issue announcement released by Hyve at 7 May 2020 (they calculated ex-right price equals to 113.1 close to my estimation. Note that net gross proceed was 116.8 million and 9 new shares were issued for 4 possesed shares).
2. The price in different episode would be as follows:
Dec 2015: 540p
Dec 2016: 525p
Dec 2017: 600p
Dec 2018: 350p
Dec 2019: 575p
Dec 2020: 130p
Mar 2021: ????
Jun 2021: ???
Sep 2021: ??
Dec 2021: ?
Note: You can find the accurate price in the london stock exchange website or either you can calculate by yourself by multiplying old prices to 53%. Many platform still are using old price without adjustment for rights issue. For example in my platform the price in Dec 2020 is ~1080p that you need to multiply it to 53% to get ~575p)
3. Hyve similar to many other stocks such as cine, RR. IAG, etc. hugely has been affected by Covid- 19 pandemic. However, Hyve is much more underpriced at this moment although has a good financial position in term of cash. The reason is more exposure of Hyve to Covid-19. Considering the notion that the deeper the crach, the stronger the recovery, we can expect stronger recovery of Hyve. The below are showing the ratio of previous peak to current price for different stocks:
Hyve: 4.35
cineworld: 3.25
IAG: 2.05
Easyjet: 1.55
Carnival: 2.0
National Express: 1.75
First group: 1.75
4. Based on my calculation (given the ratio of pre-crisis to post-crisis of other similar stocks and the uncertainty about effectiveness of the vaccine and pandemic) the Hyve price at this moment should be between 145p to 175p.
5. When the effectiveness of the vaccines are confirmed, then, along with other shares, the Hyve should soar to 200p and when the government actually removes the lockdown and opens the economy, and Hyve starts conducting conferences without any limitation, the expected Hyve price is much more 200p that will gradually increase more up to 300p. So the 300p by the end of summer is a very very reasonable price for Hyve
2-3 weeks ago before release of the new announcement, when the Hyve price was 90, I stated that the Hyve price is underestimated w.r.t its peers such as Cine or IAG. Then, I said the price at least should be 125. Based on the new information in new announcement, final reault, I recalculated the price based on two methods (future cash flows and covid 19 risk exposure). Now, given the current condition and keeping other stock prices constant , the Hyve price should be between 145 to 175. I mean if the price of other Covid stocks (cine, iag, nex) freeze, the Hyve price is 145 to 175. Of course if there is a common increase in prices due to vaccine, the Hyve price should be much more than 145 to 175.
i would like to mention that if you check the chart for Hyve price in google, LSE, different platforms, Hyve website, etc. you will find that they are different and the main reason is rights issue. I mentioned that the correct chart is london stock exchange but not google or platforms that are misleading.
I bought Hyve in many different prices (69 to 110) from June to now. Hyve similar to many other stocks such as Cine, RR. IAG, etc. hugely has been affected by Covid- 19 pandemic. All of these stocks has potential to be double prices in 3-6 months. However, I think Hyve is more underpriced at this moment although has a good financial position in term of cash. Just I want to mention about the adjusted price (that consider market capitalization as well as rights issue) again:
Dec 2015: 540p
Dec 2016: 525p
Dec 2017: 600p
Dec 2018: 350p
Dec 2019: 575p
Dec 2020: ?
Dec 2021: ??
Based on my calculation (given the ratio of pre-crisis to post-crisis of other similar stocks and the uncertainty about effectiveness of the vaccine and pandemic) the Hyve price at this moment should be at least 120 p.
When the effectiveness of the vaccines are confirmed, then, along with other shares, the Hyve should soar to 150 p and when the government actually removes the lockdown and opens the economy, and Hyve starts conducting conferences without any limitation, the expected Hyve price is 200p that will gradually increase more up to 300p. So the 300p by the end of summer is a reasonable price for Hyve.
You can see the correct chart in the website london stock exchange or Hyve.group
Here is the link for the plot of Hyve price (adjusted for rights issue)
https://www.londonstockexchange.com/stock/HYVE/hyve-group-plc/company-page
I just wanted to clarify the price of Hyve stocks. Because of rights issue and shares consolidation, we need to use adjusted price as the real price that is available in the london stock exchange website. Many trading platform or websites, unfortunately has not updated the price after rights issue.
The adjusted (for rights issue) price are:
Dec 2017: 610 p
Dec 2018: 380 p
Dec 2019: 580 p
Mar 2020: 92 p
Jun 2020: 130 p
July 2020: 69 p
Sep 2020: 81 p (Current price is one fifth of pre crisis level)
If the covid-19 pandemic ends (with vaccine in short term or without vaccine in long term), the price gradually will incline to its pre crisis level (around 500 p). Based on my investigation although there is a second peak for number of cases in the US, UK, Italy, etc. there is no proportional second peak for the number of death and in many countries number of death are decreasing monotonically. I think the pandemic passed the half of its way and will be finished by May 2021. Expecting the price around 200 p by May 2021 or even eralier is very reasonable. The similar story for many other shares in FTSE.