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A lot of chat here on the seemingly irrational swings in the SP. If ever there was a stock that summed up Benjamin Graham's famous saying "In the short run the market is a voting machine, in the long run a weighing machine" IAG is it. In the short run any good micro economic story for the stock gets outweighed by macro factors (oil, global growth outlook) which IAG, with its high operational and financial gearing is exposed to. Still, not enough to put me off, have just purchased at 163p. Like many I am overpaying mortgage debt in the current climate, but I don't want to lose out if the macro doomsters are wrong (they are out in force today with S and P futures negative). IAG is a good hedge on that, will get buffeted by market sentiment in the short run but in the medium turn the well executed turnaround from management should start to show through.
Today's announcement on postponing the AGM and possibly the final divi is a class act in how NOT to make an announcement. Very little detail and strategic rationale given. Look at Serco for a class act on how to announce a divi shelving. This has reduced my faith in management so whilst previously I have been adding to my position I will no longer do that. That said, I won't sell down as Regent Gas's position building (takeover?) is helping support the share price and at account for the fairly muted share price reaction this morning.
Government has just confirmed that construction work can continue, so long as social distancing is practiced, in an announcement by minister Robert Jenrick. Short term forecasts for T Clarke financials are impossible, as the trading statement said last week, but have added to my position at 78p. Strong balance sheet will see T Clarke through (in 3-6 months, looking at China's experience with CV19) and allow it to pick up work where firms with weaker finances are unable to bid or are no longer in business.
The change in Chancellor yesterday will mean a loosening in the purse strings as Number 10 gains more control of policy making. History indicates that this may not end well (the last time Number 10 had such control over Number 11 was the notorious Barber Boom of the early 70's) but for now, enjoy the ride with domestic stocks like T Clarke.
Marstons did not explicitly comment on trading since the year end but the fact that they expect PBT and sales growth for the full year despite a flat first half implies a pick up in trade. This seems realistic given that a. Weather good so far in H2 and long range weather forecasts for the next 30 days fairly good. B. World Cup then kicks in mid June, giving at least a boost in trade until near the end of the month, even if England dissapoints. With those tailwinds in place trade would have to be pretty bad from July on for MARS not to deliver PBT growth over the full year. However, this growth is currently not reflected in the share price.
T Clarke will be hit in the short term by Carillon's collapse. It claims £100K directly, but this could be higher indirectly if subcontractors T Clarke deals with go bust as a result of Carillon's collapse. That said, it may benefit in the medium term if it then buys those contractors out of administration.
The fall out from Carillon May well benefit Serco. The Government will not want to take on loss-making contracts (a gift to Labour, fitting into their nationalisation narrative) so they may well look to other firms to take on contracts where possible, but these firms will demand attractive terms. Serco's balance sheet repair plus efforts to fix it's reputation with the Government since 2014 will leave it well placed to take on UK work. Carillon also has some Middle Eastern contracts which Serco may be able to take on as well. The above May explain why Serco's SP has held up in recent days despite some negative broker notes.
Destination and Premium sales have appeared to slow no further since July, own brewing sales have accelerated, sensible trimming of capex and cost base. Solid statement overall underlining the value in the shares at this level
Not convinced the implications are obvious if expansion capex is not covered after the divi and maintenance capex are taken into account. It makes sense if you are an expanding pubco (or indeed a property company) to fund some of that expansion with debt, for both tax reasons and the fact you are buying an asset which generates income and can be liquidated fairly easily (Punch's estate has been gradually sold off for prices significantly ahead of book value - worth remembering given that MARS is trading at less than book value)
On the issue of if institutional investors are happy with a placing at 137p, I can guess that they are not. However, by funding that acquisition by shares, that does reduce the debt to Ebitda ratio, somewhat undermining the "this thing is leveraged to the nines and is going to the dogs" used by bears on this and other chat boards. Recent M&A activity in the sector (by C&C and Heineken) at levels well above those baked into the current SP lend support and the estate is not so big that it would present competition issues to most buyers.
The 2.8%/7% declines inbreeding that GNK quoted for the market were for the 3 months to the end of July. MARS quoted 4% growth in brewing over a similar time period when they reported at the end of July. Shows that MARS performed well in a tough market, but the SP is not giving them credit for this.
Agree mostly with Londoner7's excellent assessment of the trading statement. However, for a group like Marstons, with an estate based mostly outside London and the South East (Punch contract will reinforce that), the living wage also has upside. Outside of London/SE, c30% of jobs are at living wage, compared to 10% in London/SE. Together with the increase in the tax free allowance on income this is a notable boost for the lower paid. This may help to explain the switch in good performers in Marstons from premium/destination to more wet led taverns and less classy leased pubs, plus home drinks. The less well off still want a drink, but their buying habits benefit premium/destination less.
Trading statement is on 26th July and should be good, if Young's and Spoon's very recent statements are anything to go by. Spending data from Visa also suggests strong spending recently on bars and restaurants. Hold your nerve, sentiment in this stock doesn't reflect positive data elsewhere in the sector, so the stock should bounce soon.