The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Aangus1 - I have three "rules" with funds.
Firstly, never trade over a weekend - so don't place an order on Friday that won't trade until the following week. It's a volatile world out there.
Secondly, try to avoid trading either side of an interest rate or jobs data announcement.
Lastly, given that you don't know the price you're buying or selling at then I always trade a specific number of units and not a value. If you ask to sell £20k of a fund and the price drops on you then you'll be selling more units than you intended.
"Wait for ME to stabilise."
Trek, mate, just HOW patient are you...?
20questions - that site isn't incorrect. It's just not correct.
The way that lists companies have to produce their "results" is determined by a set of accounting standards called IFRS. These standards require that companies value all of their investments and holdings at the market price at the time of reporting. (This is called "Mark to market".) Any difference since the last results has to be reported as a profit or loss.
So, if LGEN has £5bn of property assets that, because of market conditions, are now only worth £4bn then they have to knock £1bn off their reported profits REGARDLESS of whether those assets have, or will ever, be sold.
As a result, the "profit" number in the results is the "operating profit" (simplistically, what they charged for their services minus their costs - their "real" profit) PLUS or MINUS any adjustments for the value of the investment holdings (and other accounting standards adjustments for stuff like pensions, etc)
Sites like DividendMax and DividendData take this second, adjusted number to calculate the dividend cover and payout ratio.
Dividend cover and payout ratio pre-date the accounting standards changes that have now fundamentally broken them unless you calculate them yourself.
Hope that helps.
"...would be interested to know other peoples thoughts on this."
I fundamentally agree, and it's been muted in the press that Mondi might stretch to a 400p equivalent offer.
But, issue that Mondi have is that their stock market valuation is based on UK P/E valuation of 14 and IP is trading off a P/E of 45(!).
[Side note is that DS Smith is still only trading on a P/E of 11 compared to Mondi's 14. The reason is that whilst they have similar earnings, DS Smith has more debt and is generally viewed as having poorer capital controls.]
It means that - to offer 400p - Mondi has to "give away" half of the company. To match 415p then it becomes a reverse takeover and risks the ire of their shareholders. The Mondi deal is predicated on releasing synergies.
International paper actually don't need to pull many synergies out of the deal to get a big stock market uplift. If they buy £100m of earnings a year on a 14x basis (£1.4bn) then the US market will price that as £4.5bn (the £100m x 45 PE ratio) - that's effectively £3.1bn of shareholder value created through the acquisition even if they do nothing.
Mondi's problem is that IP can afford to throw another £1bn at the acquisition and still create lots of shareholder value.
[On a similar vein, Mondi DOES have a LITTLE wriggle room in this regard given the P/E difference, but will take a P/E hit on acquisition because of DS Smith's debt.]
The hope has to be that DS Smith's board view the Mondi merger as the better overall proposition for shareholders and employees. (Which is my view.)
Mondi/DS Smith creates a European packaging super-company with lots of synergies. Mondi has better capital management and an excess of paper board and fine paper. DS Smith is way more innovative in its sustainable packaging offering; better at recycling and has a deficit of paper board and client who haven't tended to buy fine paper (as DS Smith tends to do more recycled paper).
IP / DS Smith simply extends the IP back into Europe, which they largely exited a while ago. There really aren't that many synergies.
Which is "better" depends on whether you're a trader here or investor.
So, Mondi has room, but not much. It's best hope is that the board want the better deal than the most money. They have a duty to maximise shareholder value, not necessarily returns.
I've argued before and will do so again that any returns from investments very much depend on when SPECIFICALLY you invested.
My first purchase of LGEN was Sept 2022 and I'm up, dividends reinvested, 27.2% of the initial investment - or around 18.3% a year (I've not compounded that when I worked it out).
Equally, I'm a long term holder of the L&G Technology Fund and was underwater by 30%+ for over 18 months - and only around 8% up on where I was before it tanked. That fund might have a great annualised return, but it didn't feel that great when I was holding it :)
In the round, Zac is correct though.
But/and the whole point of Buffet's success is to buy good companies when they're cheap (largely, when they've suffered a shock). Buying a company when it's down magnifies returns over the investment lifecycle. And I still believe that the whole life/insurance sector in the UK will rerate at some point.
But/and, Zac is still correct in the round.
“Could it be the looming tax year…”
I suspect that it’s also that the end of the tax year has coincided with Easter. Half the City is on holiday, so trading volumes are down and people are selling into a thin market.
“Why such a big drop ?”
Easter. A large part of the City is skiing, so thin trading volumes.
Retail punters are selling end of year to bed-and-ISA into a thinly traded market.
“RBC have estimated a total liability of £16 billion
So 2.4% gives a liability of almost £400 million”
From https://www.which.co.uk/news/article/car-finance-fca-investigation-what-you-need-to-know-a4eXb5u8VeBy
“Analysts at RBC Capital Markets estimate the redress bill could come to £2.5bn for Lloyds, £1.1bn for Santander, £350m for Barclays and £250m for Close Brothers.”
Saying that, Close Brothers are building £400m of immediately accessible capital - so that is probably their worst case estimate.
Personally, I’m punting £160m.
We should probably organise a sweepstake.
"Should I transfer these into the isa after 06/04, before or after ex date?"
It depends on your capital gains position.
Ideally - if you have capital gains allowance left - then sell as many shares up to the capital gains allowance on or before 5 April. This realises the gain in this tax year. If you have any gains in excess of the capital gains allowance then sell the residual on or after 6 April.
Ideally, you're aiming to get the shares in to the ISA the day before ex-dividend date.
Really useful asartara as it gives one way of sizing...
"...Black Horse (includes Jaguar, Land Rover and Suzuki) 16.1%
...
Close Brothers 2.4%
...
Lloyds has already put aside a provision of £450,000,000 towards potential costs and payouts for this."
Very imprecise, but if you scale that £450m then you get around £67m. Not the end of the world.
Lordloadsoflolly - what Beachouse says!
Listed shares are priced every second the market is open and that trading information is public.
Unlisted shares might only change hands once every 6, 12 or 18 months - and prices often aren’t disclosed. If SMT were to sell 1% of their holding then they could choose to disclose the price obtained - more public ally valuing their remaining 99%.
“The Sunday Times: Britain’s biggest investment trust has declared it will resist a push from the activist investor Elliott to sell its prized stakes in the privately owned SpaceX and ByteDance, the owner of TikTok.”
The article is very sloppy on how it presents Elliott as seeking SMT to divest itself completely of SpaceX, etc. my understanding from other articles is a desire to sell enough of a stake to be able to show the value of the holdings.
“… boxing clever…”
Recycling that old joke huh? Delivered, may I say, with panache. I guess I’ll wrap it up before we get carried away.
Me too. Sold at 397, which gave a 32% return since May.
Reading the various bits in the FT, I’d prefer a Mondi merger and - if it happens - then I’ll be back in. IP looks like too thin an investment proposition to me.
GLA.
Very interesting Lex article in the FT - https://www.ft.com/content/cd354951-cb4f-43a6-9120-86dea3ba4424 (paywall).
In summary:
- Both bids are effectively defensive following Smurfit Kappa’s deal with Westrock
- Mondi almost certainly couldn’t afford to up their offer, but International Paper’s offer is effectively only 4% above Mondi’s offer at closing share prices
- The Mondi/DS synergies are obvious and worth at least
- The International Paper/DS synergies are much weaker
The nub is that shareholders should beware of International Paper paying a premium when it is likely to be value destructive to the shares you’d be getting (my words, not theirs). The Mondi offer is much more obviously value creating.
If anyone else has FT access then please feel free to correct my summary.
A previous (non-paywall) article on Mondi/DS synergies - https://www.ft.com/content/55ffcf39-c4ae-404e-84cb-b312b456e48a
£15m buy at 16:35:04
At least 17 other trades at or around £1m+
“…their performance took a hit on the offer.”
Agreed. But/and in principle the impact on International’s share price is pricing out a proportion of the premium being offered. Acquirer shares invariably drop on announcement.
IMV rather than focusing on the “money” that isn’t changing hands, you need to view that you’re swapping an undervalued asset for another undervalued asset. The more interesting question is which of Mondi or International are more undervalued.
I can’t see this being much of a fight.
Mondi’s proposal gave Mondi owners 54% and DS Smith owners 46%. I can’t be bothered to do the maths right now, but matching or beating International Paper would effectively result in a reverse takeover - and likely decimate Mondi’s share price.
Mondi doesn’t appear to have enough market capitalisation to counter without moving to a share and cash basis - and taking on debt to do so.
International Paper’s offer gives a 75:25(ish) split and offers room for improvement given their higher market capitalisation.
Thoughts?
“SP must have been affected DLGs retrace today though ?”
The whole market seems to be in reverse today.