The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
All a bit baffling, looks like MS mostly using compound options, so derivatives of derivatives. Can't see this moving the share price much, poor results/CMA outcome another matter though. Doesn't seem to indicate whether puts/calls, an options trader might know.
MS have been overweight, wouldn't stop them from doing a volte face for profit, their reputation already goes before them.
Not sure if this has been posted before, looks like a fair assessment of BT atm. Seems consistent with most analysts opinions (not UBS, although their price target now looks right), and sets out more detail than I've seen elsewhere.
https://www.fitchratings.com/research/corporate-finance/fitch-rates-bt-group-hybrid-bb-25-03-2024
There's a Federal Reserve meeting this week, interest rates are unlikely to be cut, although if they are looking at cuts in June it should help. BT's likely return probably isn't high enough relative to justify the risk relative to gilts atm.
Not sure why vod would go for a RI when it has significant cash & hasn't (yet) reduced the dividend; takeover seems equally unlikely. The erosion of value is being addressed, could ultimately fail, but I've not seen anyone unhappy with the streamling/cost saving/ service improvement approach suggest anything which
@15:18 It's the ROC in an oversaturated market that's the problem for Vod & 3, and the reason for the share price decline, if the merger is blocked it's not clear that the expected cost cutting exercise is going to improve the situation.
Price increases are already factored in, the bumpy ride looks set to continue until there's a change catalyst of some sort.
https://www.proactiveinvestors.co.uk/companies/news/1019806/don-t-expect-fireworks-in-vodafone-s-first-quarter-results-1019806.html
EZ has been consistently good at publicising the resource at WK, which is an asset for Kenya and any partners. But Kenya remains a low producer of gold and other minerals despite its proven reserves. If EZ is looking at other "opportunities", I wonder if production plans may be difficult to implement, for the same reasons others have found. I may be wrong, but fund managers & analysts don't seem to be pushing up the price for anticipated WK production either. Perhaps some obstacles have been smoothed over?
Anyway, I'm happy to hold SHG as I think it's been well managed and moving into a new phase as things stand.
Thanks for your input Viable. WK has been sold on at a loss several times after $50 million or so drilling costs which successfully proved large reserves. With political problems, relocation problems, flooding, is it going to prove too difficult for SHG too? Investment costs may to be at some risk from Govt seizing assets once a mine is established. I'm wondering because there seems to be a shift in emphasis to other possible areas of development.
The analysts seem to forecast quarterly results pretty accurately iirc. Berenberg are looking at “0.4% EBITDA growth yoy….to then hit its guided £7.9bn EBITDA for 2022/23, BT will have to grow Q4 EBITDA by +5.5%, this despite the additional headwind of BT putting through an early £1,500 pay increase for employees from January 2023”.
Longer term is less clear, it’d be good to see progress on costs, a decent FTTP take up rate, Ofcom not interfering too much, the altnets kept at bay as far as reasonable. The share price has been hit by perceived risk problems since Drahi’s involvement seems to have faded. BT looks to have a difficult balancing act to not over or under build, and is doubly vulnerable to recession as it could lose income and see its pension fund deficit increase at the same time, which then becomes harder to fund. The price fall last year was disappointing for a supposedly stable utility. I’d rather see debt paid down than a divi increase, which may quickly become a millstone, it should improve resilience.
BT is a hold for me, more likely than not imo that the share price will fall when the results shock the market with the same perennial problems it was shocked by last quarter, in which case I’ll buy more shares with divi.
"More people are selling than buying gilts, so BT is going to be sold off too." Sorry, obviously badly phrased. I meant that the BT share price would go lower, as risk based assets have to provide a higher return than risk free gilts. It’s about how BT is affected by a sea-change in UK markets. Easy to agree that a takeover of BT not currently likely.
“Being a member of the EU wasn't doing much for the UK either, with predatory German and French companies moving in and taking over many utility companies. When the utilities were taken over, the companies made sure they took a good chunk of dividends to recoup their purchase costs. I'm talking companies like RWE, EDF, Veolia, etc.” UK Gov could have stopped takeovers from the EU if it was thought to be against UK interests, it wouldn’t infringe EU principles; or it can re-nationalise as France is doing. Privatisation was initiated by the red tape bonfire people. Haven’t heard anyone complaining that BT takes money from its overseas companies, such as BT Belgium.
BT Belgium was given a 1.2 bn contract by the European Commission this year, causing outrage in the EU as UK is not a member (or trustworthy), objections have been lodged. It also upset some brexit fans who believe that anything with ‘European’ in the title is evil. So that’s probably 1.2 billion and becoming a more significant player in Europe lost.
All the EU countries have a strong sense of identity, will always squabble, and won’t go far with integration. We’ve lost trade, reputation and inward investment for nothing. If the EU breaks up, a possibility in a prolonged recession and rise of populism, fine. But brexit costs are far in excess of our net contribution, and we've isolated ourselves. BT has lost out too.
The entire FTSE market cap is probably below Apple's again now; always surprising to me, but there are reasons. There's going to be a significant hike in interest rates in Nov (temporary?), UK economy is shrinking, govt is a fiasco, BoE has an impossible task and looks zugzwanged, £ looks vulnerable, UK still self-imposing a trade barrier on its biggest export market and breaking an international agreement touted as brilliant when signed. Confidence needs to be restored to make any progress. More people are selling than buying gilts, so BT is going to be sold off too.
BT should recover at some point, there has to be a comment in the Q2 results next month to let us know how the changing situation is being addressed. Ever present risks of increased debt/interest and lost revenue are going to be more unstable.
I suspect you'd need an actuary who's involved in the scheme valuation, knows what assumptions they'd make, and even he/she probably wouldn't be able to accurately estimate the outcome. As surplus/deficit is the difference between two huge numbers (just under £60bn ?) which are both changing constantly according to volatile markets, there must be an attempt to smooth the outcome so that the company has some stability.
Assets have lost value, inflation linked liabilities increased, but the discount rate used has increased significantly. Most UK pension schemes probably haven't perfectly matched their liabilities using LDIs, so will have a higher reduction in liabilities than assets. FWIW my guess is that the scheme has improved its position.
Hi Fleccy, Most people would agree that markets get things wrong and that it's better to focus on more than just the (chaotic) short term, but Truss & Kwarteng are problematic in so many ways. They're ideologues who do not willingly communicate, admit to error, or will reverse tack in the light of experience. Kwarteng says he will announce his fiscal plan on....Nov 23rd, causing another £ drop. There's a lot in the press about BoE having it's foot on the brake, govt on the accelerator,, but they don't care about the consequences. As their 'Britannia Unchained' book sets out, they favour small state, libertarian policies at the expense of everything else. There's some support for this, but the consequences are damaging the £, going to cause a deep recession, impact every form of public spending (scrapping the NHS for the US system), reduce wages and standards. We need a govt which can balance the state and private sector, not would be revolutionaries who think they are instigating creative destruction and just deliver destruction.
Could go below £1, 5 year gilts today yield 4.5%, a week ago it was 3.2%., beginning August 1.5% BT always needs to yield more, to compensate for the additional risk. Hopefully it's a short term crisis which will be fixed. Truss & Kwarteng need to be kicked out of office, they're not up to the job, replaced by Sunak without the 2 months rudderless govt, and have a GE to elect someone who isn't a sociopath. Not sure the UK electorate is up to this though.
Hi Adam, I’m looking at the 23/11/22 interim in your poll; recent events will have affected 2023 forecasts made at the time of buy recommendations in the 180’s. At 130 I’m not sure it’s being priced for growth.
The economic background seems important to me as well as the company. Larry Summers, Obama’s top advisor, thinks the UK govt is naive and may become a submerging market. Other economists share his concerns. BT may be one of the better placed FTSE companies to deal with this, but the risks are there.
Thanks for your reply Erik, very helpful information.
I do remember the 2008 crash, and Gordon Brown's sticking plaster which has been lauded as solving the problem. But the banking system is unchanged, and it's likely that we'll have a deeper, more severe recession than many are anticipating, from a combination of high debt levels and interest rates in a shrinking economy. This affects BT too.
Investment analysts may have missed some of BT's technical strengths which you are well aware of, but issues remain. The altnets may be basket cases from the FT (a few months old, free to read, I think I have registered): https://www.ft.com/content/e630a3a1-03ac-4526-83ac-16ff851067cc
The fibre remains in the ground though, and I'd take a guess that Ofcom won't let BT buy from failed companies, so it would be rebooted from a much lower cost base. Better for BT that they struggle on than go bust?
If BT achieve the Q1 2023 forecast, the dividend stays, debt doesn't go up, and the share price should go up significantly.
The UK economy is going through major changes, Friday was alarming, the short term future is very uncertain. BT has to adapt to survive. Building 'regardless of recession' makes no sense if demand is muted, costs higher, and debt becomes unsustainable. The Q2 results will hopefully indicate how BT will respond, and show strong results to justify its plans, or a good strategy for harder times. Ignoring these events is the wrong response. Building for the future may otherwise just become BT's tombstone and the altnets windfall. The network will survive longer than me!
'Build like fury' made sense in a ZIRP+QE, growing economy. But in a recession with high interest rates and low uptake, who would it be building for?
BT is not TBTF, and would be broken up for a pittance if it gets this wrong.