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Should Bounce Back
I have been watching the share price movement over the past few months and wondering why it is falling almost every day – the trend, assuming it continues, will make the price Zero- as if the company is going to put shutters. The decline started since 2/07/2018 – the day of publication of the PRA Consultation paper. Now what this consultation is all about? I am no technical expert but in my understanding it is about strengthening the company’s Balance Sheet by mandatorily setting aside certain amount of reserves. The method of raising the capital was not mentioned – several options have been discussed and the least option is only a Rights Issue. Even then what is wrong with that when you are putting in place a stronger company with a long term view? Isn’t that good for the shareholders?
Has this proposals damaged the company’s finances, reputation , image or any other aspect which may result in the company’s ability to continue in business is dented as would have been the case of FCA, SFO investigations for fraud or money laundering etc. In fact there is not going to be any Cash outgoings or Charges to the profitability or anything of that type. So why this drop?
Look at some numbers. The share price was around 140p beginning of July – the MKT Cap was £1.3bn and today it is half of that £665mn. Does the PRA proposal warrant wiping out a colossal £650mn? What is more the company has been doing extremely well and the Half year results published on 6th Sept indicates results improving by 85% but the market didn’t react positively because of the PRA hang over. Otherwise, theoricaly the share price should have increased by what? 85% or 50% If this results are also taken into account, the real damage to the company’s valuation could easily be more than £ 1 bn.This is absolutely crazy.
My only consolation was that I found in a market where everybody else seems to be selling, only one institution added to their existing stake. I noticed Standard Life Aberdeen has increased their position by 2% ( from 8% to 10%) on 11th July – after the publication of the PRA document and at prices in the region of 130 p. They know a thing or two about insurance. Now I know my investment is safe.
The link is below
https://www.justgroupplc.co.uk/investors/results-and-presentations
Have anyone read the transcript - chat with city pundits- attached to the six months accounts? Under the topic PRA they are talking about a shortfall of £69mn. If that is the estimation then it is not a material amount and all they need to do, in my view, is to set aside this amount from the distributable reserves.
As always, I feel the market has over reacted.
The announcement didnt say anything about the shareholding Standard Life Aberdeen will have in Phoenix. It would be 144mn shares plus existing 8.71% or 50mn. In all in the enhanced capital of Phoenix SLA will have a 27% stake which may be valued @£1.3bn at current market price.Add to this the cash receipt of £1.75 bn & also add the value of Indian Investment of £4.5bn. Deduct this total of £7.55bn from the mkt cap of SLA of £9.5bn, and you get just £1.95 bn for the rest of the business with an EBIT of £291mn in the H1 in 2018.It is really a puzzle to have such a low price attached to this share. Hope the market awakens.
https://otp.tools.investis.com/clients/uk/standard_life/rns/regulatory-story.aspx?cid=65&newsid=1164628
Witl this have any effect on share price. Currently ridiculously under valued.
How about the tax relief on the US operations?? Most of the companies informed the market.
Honestly I didnt expect this turn around in the SP so fast, from 519p on the 7th to 600p now. Good for all.Now my gut feel is that it will breach 650p soon or before the Rights issue announcement and the rights priced @ 600pa share in the ratio of one share for each share held giving that £1.7bn. Why I was bullish when the price was around the 500p s is due to the nature of this business some features are: 1) 90% sales ( other than adverts etc) done on cash. You dont buy cinema tickets for credit. Other businesses have huge debts in relation to their revenue and recovery issues. 2) you dont pay suppliers anything until sale of their products are concluded. You wait till the films are run and collections counted to pay a share to the producers/distributors,So you are not in a Gross loss situation at any time. 3) So very little working capital requirement. 4) Operationally simple Only issue is Box Office collections . But stats have shown both in the UK and US they( box office collections) are very steady over the years despite the disruptions such as VHS, DVDs and the present Internet streaming. See this year how Star Wars just released compensates all the shortfalls earlier in the year for both Cineworld and Regal Why now Regal acquisition has become more attractive is because of the huge savings Regal is going to have because of the Tax reductions. See the link. below https://www.bloomberg.com/news/articles/2017-12-19/tax-bill-s-corporate-benefits-come-early-then-fade-study-says Suffice to say this is a very defensive and steady income generating stock.
Yeah, Brush was reportedly doing badly but with the recovery of oil, things should look better. But anyway brush is due for disposal by the goings of Melrose. and the sale ( say £600 mn) should happen sooner than later giving some seed capital for next acquisition or distribution to the shareholders I do not know the exact amount of tax liabilities of Nortek but savings if any would be substantial and according to the link below the rate would be 9% from 2018 as opposed to 35% in the past. https://www.bloomberg.com/news/articles/2017-12-19/tax-bill-s-corporate-benefits-come-early-then-fade-study-says
ttps://uk.reuters.com/article/centrica-rough-gas/centrica-aiming-to-produce-56-bcf-of-gas-from-uk-rough-site-in-2018-idUKL8N1OI4KY
With the Tax reforms approved in the US, corporate tax is slated to reduce to 21% from 35% earlier and the companies are going to benefit a lot from 2018 onwards. The share prices of US focused companies have gone up as a result. Here Melrose's operating subsidiary Nortek is based and domiciled in the US but I fail to understand why there is no reaction to the SP.
FH/OT Yeah, it is difficult to get this info from DC;s annual report. Also they may be marketing Mobiles through various channels, including their own mobile phone brand. But the Carphone Warehouse alone had a Turnover of £2.1bn in 2016April year ensd with operating profit of £88mn.You can check this in the Companies House website. By the way, the SP is steady and moving up and hopefully reach the target all are expectring soon.GLA
Apologies if anyone has read it already. http://www.iii.co.uk/articles/468458/dixons-carphone-worth-66-more
Please see the detailed notes under Uk % Ireland in the Results announcement for explanation for the drop in EBIT.Quote " Excluding these items, EBIT was down £38 million year-on-year." About the mobile business I got some numbers from CWS accounts before merger. So the percentage was a ballpark figure Further positive things in the report - Net debt down to 206mn from 285mn, Free Cash Flow 169mn from 64mn. For the second half, iphone X, and the usual festival activities.so things are looking good.
In the context of the prevailing market sentiments on this stock,and the share price the results were extremely good.Soon after the profit warning in August most of the commentators highlighted only one issue - prospects of the mobile phone operations - and made negative sensational headlines and made this stock look like worthless. They said the same to Tesco sometime back. Today's results dispel all those concerns. After all mobile business contributes only 20 to 25 % of the topline reflecting the depth of the other business segments. So you have a number of options to strategize or remodel the business if you are really desperate. Based on the numbers released Dividend @ 11.25 % same level maintained shows the confidence of the Directors to deliver. This alone should give a share price of 225p on a 5% cash return basis.They are targeting around £400m PBt which is only 25 % less than last year but mkt cap fallen by 60% which is over done. Share price should move up.
and demand for its assets in the US https://www.bloombergquint.com/china/2017/12/06/amc-approached-by-six-investors-for-stake-or-theaters-ceo-says
I posted this link just to show the confidence an outside institutional investor has on the future of the combined entity as I felt the fall in the share price since the announcement was overdone. In fact their assessment was made when the share price was in the region of 700p or earning multiples of 20.If majority of the investors felt the deal was bad, then in a company where other than the major shareholder of 28%, rest owning less than 5% - large number with small holdings - selling would have been severe with a higher percentage of the overall holding traded. On the day of announcement ( 29th)only 2.2% traded and upto now not even 10% traded.Though you dont always go by the Broker recommendations, there is unanimity among the brokers in their price forecast - all above 780p other than one at 600p- after the deal was announced. What I like in this business as I have some involvement, is that it is very simple and straight forward . So post acquisition consolidation is much easier than other businesses. Savings proposed are much easier to achieve as they have done at Cineworld. On top of it, have any one thought about the Tax reform proposed in the US - company taxes falling from about 35% - 40% to 20%. In fact I saw in the Regal Annual report the percentage was 40 % and the reduction might give a tax saving of about $55mn.in 2016.This translates the purchase price of $23 per share to a earning multiple of 16 as opposed to the published figure of 21.Considering all the above I feel Regal is really a good acquisition for Cineworld. On pricing the Right Issue I dont think the majority shareholder would like to have too much of a dilution as they would want to maintain the present dividend payout policy. We will have to wait and see. I reckon the share price will gradually increase to pre announcement levels, at least, if not to the broker recommendation levels.
• In the second half of 2015/16 ( between January and June 2016) Finkit recorded a revenue of £500k for what they called “paid testing of the platform”. In their review for 1st Half 2016/17 nothing was mentioned about the follow up – how many clients, results of the tests etc and ironically no revenue was reported. However the company has been spending more on Finkit,recruiting software engineers for their Wales and London offices in 2017. • Actually the candidate profile goes like this “Here at Monitise we’re a team of inventors. Every day, from our office in Soho, we help change the way financial institutions engage with their customers using our ground-breaking digital platform FINkit®. We’re passionate about creating opportunities for financial institutions, our technology partners and the Fintech community, and helping the industry to scale up new secure and compliant innovative solutions for our financial services clients. FINkit® is built using Cloud Native (continuous delivery, DevOps and microservices) and agile design, and is supported by a new and innovative continuous delivery, toolchain and architecture. Our financial services clients use Finkit® to drive innovation using industry partner and new start-up technologies from Fintech. These innovative solutions drive new revenues for our clients and partners and create a better experience for their customers. Are you ambitious? Stuck in the innovation theatre and want to work on the bleeding edge then Software Development Manager” See this also http://www.monitise.com/what-we-think/2017/06/02/wales-from-coal-mining-to-digital-tech-hub/ Extract from the above article: “Led by Anouska Streets, head of engineering at FINkit, and an alumni University of South Wales, FINkit has assembled a world class team of software engineers, who are at any one time building and testing platform services to provide the best support in helping Retail Banks, both in the UK and across the world, with their digital strategy and helping them to truly embrace technology.” Did the above statements not mean that their clients are using FinKit and if so on what terms they use? Or are they following the popular slogans of retailers “ Buy now pay later” but adapted like “ Try and use now, sign and pay later – after Fiserve takeover” Fiserve and Monitise have been working on this deal since January 2017, soon after the partner program was completed. Is Monitise working according to Fiserve agenda and spending money on further developing Finkit to suit Fiserve requirements at the expense of existing Monitise shareholders? In the 1st Half 2016/17 they spent £2.7mn. Dont know how much they would have spent during the second half – a period of discussions with Fiserve.