Member Info for londoner7

Does anyone know Berenberg's 2018 forecast for EBIT and EPS numbers? Or any other updated 2018 broker forecast. Berenberg updated their price target on the 18th April following the Lagan acquisition. They normally issue a detailed report alongside any update. While I'm happy with my own forecast's I also like to see what the market is predicting. Londoner7

cabman, I trust you went to the trouble. The offer has now closed. At the current price the discount is worth 7%. While the fixed entitlement might not "fund a Maccy Dee", whatever that is, I suspect the additional offer may prove more rewarding than most PIs expect . We'll know on Friday. Londoner7

no doubt tickling the algorithms of the bots.

Don't worry, you'll get the value of your nil paid rights. The recent posts will give you some idea of the amount you can expect. Check the rights RNS - it might have a timeline for payment, otherwise sit tight.

Whatever the medium term prospects of Cairn it's difficult to not have the near term impact of a ruling very much in mind if you an invested here. If the ruling goes in Cairn's favour I think it would be very difficult for the Modi government not to accept it and pay up. This has been costing Cairn $5-$8m pa for the last four years so the lawyers on both sides have done well. Perhaps they'll find away to keep their gravy train running beyond August. But it wouldn't say much for the tibunal process it was delayed further. Londoner7

Clyde Lewis, an analyst at Peel Hunt, said that with Lagan on a deal multiple of more than 22 times after tax earnings, the assets �aren't a steal but it gives the group more scale�. Graham Kyle, at Shore Group, quoted Warren Buffett, the famed investor: �Price is what you pay, value is what you get. Strategically, this looks an excellent fit.� Londoner7 said, �We have a boat! �455m is chump change when it comes to a decent floating gin palace. Take a look at these� http://www.businessinsider.com/most-expensive-yachts-in-the-world-2017-6#19-billion-the-eclipse-yacht-is-the-second-largest-yacht-in-the-world-and-is-owned-by-russian-billionaire-roman-abramovich-the-yacht-comes-with-two-helicopter-pads-24-guest-cabins-a-disco-hall-two-swimming-pools-and-several-hot-tubs-10 Londoner7 went on to say, "I'll bet none of them can transport bitumen. Eat your heart out Sheikh Mohammed bin Rashid Al Maktoum!"

correction According to the BBC new site the Lagan Group has a homes division which Kevin Lagan has retained. Breedon has acquired the building materials divisions. But that still includes bricks!!!

Trent700, the delivery may be blunt but there is a lesson here. A misunderstanding of the UT trade appears frequently across these boards. It's one thing to misunderstand, it's another to pass on that misunderstanding. A correction is sometimes necessary. Although I'm not sure you were the primary target. Best, Londoner7

The open offer is for one share for every 261 held. Not a high proportion, however, much improved if I'm correctly interpreting the comment below: "Cenkos has received commitments to not participate in the Open Offer from certain institutional Shareholders who participated in the Placing in relation to, in aggregate, 4,677,002 Open Offer Shares, representing approximately 84.4 per cent. of the Ordinary Shares subject to the Open Offer." If the remaining 15.6 per cent of shares are entitled to all of the open offer shares then by my math I make that 261/(84.4/15.6)= 48.24. That�s one open offer share for each 49 held, assuming a full take up. Apologies if I have this wrong. Does anyone interpret this differently? Londoner7

correction "In 2010, with �150-�200m of cash being thrown off p.a." I mean't 2020. ps spindok, if you're waiting to see what comes out of the oven you might want to take a look at the restaurant sector rather than construction materials. I hear Dominos do a good pizza ;-)

Spindok, I'm not one to rah-rah any stock, but as you�ve been in Breedon for two years I think holding on for another year could be a good move. For the benefit of clarity I think it's worth highlighting the difference between a company and the stock. The company has been a consistently excellent performer for many years, including the last two. EPS growth over the last 5 years has been a compound 44% p.a. During the last two years growth has been 30% in 2016 and 19% last year - short of the compound number but not pedestrian. For what it's worth my forecast for 2018 was +19% EPS growth (pre Lagan), and as my predictions over recent years have been considerably better than broker consensus I think my predictions are worth something. I haven't looked at numbers for 2019 but with some improvement in the construction market adding revenue and a continued move towards the 15% 2020 EBIT target, my rough guess would be 15% on EPS. With the Lagan I see an easy 5% on my number for this year and Breedon say double digit earnings enhancing next year - that�s another +10% on the base line at least. So now we could be looking at 24% for 2018 and 25% for 2019. Now to the stock. With fantastic compound growth numbers over many years it isn't surprising that the stock was highly rated by the market with prospective PE numbers in the mid 20s up until a year or two ago. As growth has slowed alongside the anxiety of Brexit impacts on construction the stock is now rated on a more modest mid teen multiple. If you listened to the analysts call on the 2017 finals you might have picked up on our CEO's excitement at the prospect of HS2's positive impact on the market - when do shovels go in the ground? 12-18 months from now? When it happens, and it might not happen until shovel hits dirt, the ratings of stock like Breedon's are likely to improve. In 2010, with �150-�200m of cash being thrown off p.a. in the absence of another, even bigger acquisition, the prospects of a dividend look strong - that would also add to the markets appreciation of the stock. Yes Sir, I'd hold for another year unless of course you have the inside handle on the next small oil stock that's going to strike it rich for its investors. Look across the boards and you'll see loads offering the prospect, but I struggle to think of many that have achieved a result for shareholders in recent decades - a very small percentage. Trade them by all means, but buy and hold? Londoner7

including the bricks, which answered one question overhanging the proposed acquisition. In my stab at the numbers I used a Times quote of �350m on revenue - wrong! I used Hope for comparable financials - wrong! Cost of Lagan sales is a 56% premium to Hope. However, the two numbers do go some way to cancelling each other out with a result that isn't too far adrift of my estimate, barring my forlorn hope for no equity dilution. The bankers have stumped up an extra �100m and the leverage is 2.6, between my 2.5 - 3 range of acceptability. In addition Breedon expect leverage to be below 1.0 by 2020. Okay I'd have gone closer to the 3 to limit the share placing, but hey, I jumped out of planes in my younger day so perhaps my risk tolerance is higher than the Breedon CFO's. On a first pass I don't see anything I don't like. The cost of sales pricing is much higher than for the Hope acquisition but the Lagan business has higher margins with a comparable cost for EBITDA and EBIT to the price of Hope. The placing is 13.3% on enlarged capital at a 2.3% discount to the prevailing mid price 78.3p - not too generous. Breedon expect double digit earnings appreciation in the first full year - very doable on the basis that running the pro forma 2017 numbers for the group, higher interest charge for the debt and higher capital base, my calculation produces 4.39p EPS, 6% ahead of Breedon's number for 2017. With the current market price 8% above the placing price I suspect the clawback shares will be selling like hot cakes, which widens the investor base and might limit any selling. Although it has to be said that the existing institutional investors have held their Breedon shares very firmly over the last few years. Very pleased to see that Breedon didn;t repeat the unconditional share placing they conducted under the Hope deal. At least not in the same blatantly favoured manner. Perhaps they heard the disquiet of smaller share holders. A small open offer to us PIs. Only a token one but to be fair about as close to the maximum as they can do under the circumstances. Interims put back to the 5th Sept to integrate the numbers. So much for the clean interim numbers of volumes I was hoping for. My spreadsheet will require a few tweaks, not least a new column for bricks. Finally, I love the speed to completion - no CMA involvement. Londoner7

568! Don't worry, nobody will be picking them up at 568p. The rump of the rights issue, approx 2% of stock, will be placed with institutional investors at a discount to the market price. The early dip (1%) may be a reflection of this placing. My guess is that the placing has been completed and we'll get an RNS this morning confirming the placing. The rights issue is essemtially complete. Investors who didn't take up their rights will get the difference between the placing price and 568p, less the pacing costs. Londoner7

Foxglove999, I hope you're right about sticking to the core assets of Lagan, I saw a �350m revenue number for the Lagan Group. Hope revenue was �286m, about 80% of the Lagan Group. Based on Breedon's comment that they are looking at a "possible acquisition of a substantial part of the Lagan business", I used the Hope numbers as a worst case comparison. I say worst case because while I'd like to see a large acquisition (assuming the price is right) I don't want to see equity dilution. At the rate Breedon is currently generating cash and the relatively conservative nature of the business (economic moats etc) I'd be happy to see gearing in the 2.5-3 range. I have no basis for giving an equal valuation to the Hope and Lagan busuness' but I figure they wouldn't be far apart for the purpose of my calculation. Londoner7

http://www.daviscofferlyons.co.uk/

I missed this article from last week https://www.investorschronicle.co.uk/share-tips/2018/04/05/breedon-is-still-aggregating/ It includes an erroneous forecast by Numis, which I've commented on below the article. Numis have form in this area. I commented on this last year but the update to IC's web page removed previous comments. Londoner7

Cacher, thanks for the post. My takeaway from this is that Langton have had (rightly) a negative view on GNK (and presumably the sector in general). But in spite of GNK appearing to meet the revised expectations from last January, (post xmas but before the beastie from the eastie) they say 2019 may be tough and add the comment, " Uncertainty is unavoidable and this will extend to 2019 forecasts. These may be trimmed back." I'm unclear on what their basis is for this comment. We know the headwinds the sector has faced: Cost inflation, due to minimum wage increase, apprentice levy and food pricing. Consumer sentiment due negative real wages and subdued house price growth (Brits hate the latter) Bad weather due to? Global warming? Wrong latitude? Unless the forecasts for these have worsened into 2019 why would you reduce previous forecasts for the company in question, GNK, when it has just met the 2018 forecast. Langton may be following an all too common behaviour of following the trend, worse, worse, worse, until it changes then flipping to better, better, better, again until the change occurs. The market typically looks ahead. Time will tell. The following two comments are from a Langton assessment last Jan - cut and pasted into today's update. � GNK is prima facie cheap at these levels. It is one of the UK�s better-positioned pub companies and, with its shares now trading at a single-digit multiple, this may be an attractive entry point. � However, the direction of travel is negative and the group has to execute on its strategy. There have been some signs of indigestion recently and cautionary comments may put off would-be buyers in the short term. But I'm intrigued by this point on GNK, "It is one of the UK�s better-positioned pub companies". Without explaination that sound like an estate agent selling a house. What makes it "better-positioned"? I would hope that a client paying a fee for 'sell side analyst research' gets some detail behind that comment. Londoner7

Lfl presure on the food led destination pub side but otherwise looks okay. A strong Easter. I still wonder why they came out with the update on 49 weeks rather than after the full 52. Perhaps they felt the market needed reassurance. "As a result, we expect full year profit before tax and exceptionals to be in the range of �240-245m." On a 20% charge this is bang in line with broker concensus of �194 post tax, and perhaps a beat on a lower tax charge depending on the exceptionals. Looks like a relief rally in the price. Well done GNK. I hope the strong Easter was reflective of the sector generally. Londoner7

Dinoken, thanks for the clarification. I can understand your scepticism of broker forecasts, but they do serve a purpose. I derive my own estimates for all of my investments - I have better insight on some than others - and I like to monitor broker updates etc for insight or clues on areas I might have missed. (Hence my interest in your source) I focus on mid to small cap investments as I feel I can get an edge with good analysis. I don't touch the big boys like Vodafone, Tesco etc - analysts know them better than I ever good. Specifically on MARS this BB brought a monthly market update to my attention called the 'Coffer Peach tracker', found here for anybody not aware of it. It adds some insight to MARS market. http://www.daviscofferlyons.co.uk/ Londoner7

Dinoken, perhaps it was the sharecast report that impacted - I'll come back to that later - but I want to query your 'other brokers' number of �105m. What is your reference? My reference is Barclays broker views page. It has a concensus figure of �90 for profit, which if I back out using MARS guided 18% tax for 2018 is �110m pre tax. In the context of a business like MARS that's a big difference from the �105m you quote. Back to the sharecast report. The only point of distinction between MARs and GNK is the Barclays comment, "a preference still for names where greater balance sheet strength is perceived, namely JD Wetherspoon and Greene King, rather than Marston's and Mitchells and Butlers." but also, "But they stressed this did not change their fundamental view on any stock". So sounds like no change. Anyway, IMO today's market activity is noise. The point I want to bring out is the comment, "where greater balance sheet strength is perceived". I believe that is an insightful comment by Barclays which I may have a handle on. When I was looking at this sector for a possible investment my shortlist was MARS, GNK and MAB. Picking MARS was a close call, but swung by their scale in the ale market and distribution opportunites. I assessed MARS and GNK has having similar balance sheet strengths. On the standard measure of Net debt/EBITDA MARS on 6.0 looks high against GNK on 4.0. However, as MARS made clear in a recent presentation the difference is in large part due to their preference for propery leasing to increase the proportion of freehold in their estate, 94% versus 84% for GNK. If MARS hadn't conducted property leasing their Net debt/EBITDA would be 4.7, still above GNK, but MARS would still have a higher FH at 87%. So not much in it. Let's look at other measures of debt. Fixed Charge Cover (FCC) is quoted by both companies. MARS 2.6 v GNK on 2.3. MARS beats but I don't put much stock in this because I can't be sure the are comparing like with like and I don't have access to the detail to work my own numbers. NAV, expressed as a book value ratio, less intangibles. MARS 1.0 versus GNK on 2.2. GNK has a large chunk of intangibles, but even including them MARS beat again with 0.68 versus GNK on 0.75. Perhaps this is why Barclays hedge a comparison with their comment, "where greater balance sheet strength is perceived". Londoner7