Member Info for fleccy

I need to correct something in my last post, I said RR's price has nearly tripled since last year, I should have said it's more than quadrupled since it was 70p last year.

"However for anyone who has an average above 100p… not so much."

Why do you assume that? There's no reason why Vodafone wont go up to 160p, or £2, when sentiment reverses.

I'll keep using Rolls Royce as an example, because I think it reflects Vodafone's situation. Rolls Royce currently has a P/E of around 17 and is still being pumped, last year it was around 70p and the price has nearly tripled since then. Vodafone's downward trajectory has been more steady than RR's, but that's more about the ongoing negative narrative directed toward the Telecom sector in general. Telecoms has been under attack for years, with financial media persistently attacking the individual players and aiding the market in driving prices down, yet private equity has been mopping assets across Europe as they come up for sale. The media pushes the debt narrative around established Telecom players, but it isn't the players who generate repeating revenue who are at risk it's the new entrants who've been financed with free money. I believe at some point the market will decide to pump the sector, probably when the vested interests have built up a nice chunk of the assets at knock down valuations.

Why would they need to short a stock to push the price down? There are other possible ways to do it. As I've mentioned before, they could encourage brokers to direct buys Off Exchange while directing sells On Exchange and also use algo's to drive the price down On Exchange, when the Exchange volume dips; I'm not saying they could do that in Vodafone's case and I'm not sure it'd be legal, but it's a possible way to manipulate prices either way and doesn't involve shorting. I have a big problem with Off Book trading, It distorts the price discovery mechanism since Off Book trades aren't used in setting the On Exchange price. Off Book trading should be banned in my opinion.

I don't count Islands like Malta and Gibraltar as countries, since they are much smaller and not in the main group of European countries.

Monaco isn't a country, it's a Principality, England is however a country and has a population density of 434 people per sq Km. England has a higher population density than both the Netherland and Belgium, so England is the most densely populated country in Europe.

I know I seem like a stuck record on this point, but people need to remember that the working capital deducted from the H1 FCF will be added back into the FCF for H2.

https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=498591&format=interactive

Not only that, who'd be idiotic enough to have a rights issue when the share price is in the doldrums? If Vodafone were getting desperate, they'd just drop the dividend and save €2.48 Billion a year. I've seen this dilutive rights issue nonsense before, it's a line used to scare the nervous into selling their stock.

I agree that the dividend is an issue for the market, but the debt is manageable even at current levels. The interest on the debt is currently around €1 billion a year and that will come down if the company embarks on a debt reduction program. The biggest outlay is capital additions (capex) of around €8 Billion a year. If they can reduce capex and Net Debt in line with disposals then cash flow shouldn't drop too much and may even increase.

For anyone feeling down, just look at the Rolls Royce 5 year chart. Rolls Royce dipped to 39p in October 2020, and touching 70p in October 2022, now over 300p. The market is designed to psychologically test retail investors to breaking point, I'll just keep holding and waiting.

https://www.google.com/finance/quote/RR:LON?window=5Y

It isn't just the regulators bashing UK stocks. It wasn't so long ago that Harriett Baldwin, chair of the Treasury Select Committee, was bashing Banks over interest rates and driving stock prices down. The UK appears to have fallen down a socialism rabbit hole where business is something to bash and shareholders in UK stocks aren't worth bothering about. Politicians have collectively destroyed the UK business and investment climate, they've turned the UK into a shorters paradise while doing their upmost to aid the market in driving a stake through the heart of UK stocks.

Indeed LTI, in Vodafone's case share buybacks would be better than dividends.

"Fleccy I agree will potentially impact BT and VMO2 because they need to invest, although VM is seeing growth."

That's quite an optimistic outlook for VMO2, since O2 and Virgin Media are exposed to the same competitive pressures as BT. VMO2 have to replace the DOCSIS network and are exposed to competition from CityFibre and other Altnets who've been targeting and overbuilding the VMO2 franchise areas. NexFibre are utilising Openreach/BT ducts and poles to provide service, so are feeding into Openreach coffers and still have the problem of attracting CP's off the Openreach network, no easy feat as Altnets are finding out.

It affects VMO2 exactly the same as BT, but it'll make little difference in the scheme of things. I suppose the Telecom companies will do one of two things; They might move to 12 month contracts, with large hikes for customers who don't renew. alternatively they might use something like an assumed inflation figure plus 3.9%. I don't see this making much difference, people will do what they'll do.

I'm actually surprised OFCOM are pushing this, since it's a contractual clause OFCOM previously agreed to. I suspect it's headlining political pressure driving this, in reality it should make very little difference to the Telecom companies. Obviously the regulators have decided that the average UK customer is too stupid to understand simple math's. maybe they should have a word with OFSTED

That was from June, today's drop is down to OFCOM.

We can thank OFCOM for today's fall. Pretty meaningless really, all it'll do is push all the Telecom companies into offering 12 month contracts rather than 24 month contracts. BT has really took a hammering today, I don't think it'll happen before the next inflationary price increase.

"These days SP seems to be valued by sentiment not logic."

If that's the case then it's an opportunity to top up now, since sentiment doesn't determine the future success of a company generating profits. Sentiment can destroy a company operating at a loss and dependent on issuing new shares to raise funds, like a startup, but Vodafone and other depressed Telecom stocks aren't in that position. The biggest risk with Vodafone is a dividend cut leading to a short term drop in the share price; Rolls Royce's recent stock rally is a possible example of the effect on Voda's share price down the road, RR stopped their dividend in 2019 and look where they are now. When I made my last top up I did it in the knowledge that the dividend may be dropped, with the intention of holding as long as necessary until I see a capital profit, however long that may take.

You should have gone to School Gutter.

Who needs to understand the financials when you can look at a picture?

https://docs.google.com/spreadsheets/d/e/2PACX-1vSNxkKmgR2PzSL1NH5uvhJAIl6TyUm-PpH2hChEFWELeB8mLB-V562E7qRdDL0lOSa8NyAUBbokBjVp/pubchart?oid=498591&format=interactive

There'll likely be a Net debt adjustment in the H2/FY figures with working capital swinging positive in H2 and adding back into Free Cash Flow, if I'm understanding it correctly, although it's very confusing.