George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
Note these broker targets are a 1-year target and dependent on AA hitting all objectives including refinancing, cost-cutting, growth in membership and FCF. And possibly a post-brexit-certainty boost as the UK index lags the global index driven by the US.
Putting a significant amount of money into a single stock for retirement can be reckless despite our bullishness. No individual stock takes up 5% of my portfolio. When the shares become available I would place the funds into a SIPP to get a further government bonus to be taxed further down the road, but once in the SIPP I would then diversify. If you are under 40 then instead of a SIPP open a LISA.
Deemule, I apologise as I was insensitive. I hope your wife will be able to find perhaps an alternative job perhaps as a method to negotiate. My comment regarding increasing the dividend was also insensitive. If the company would like to continue to pay down debt faster (a debt-free AA would be worth 500-700p) then the dividend should perhaps not increase like I wrote but be removed all together. The AA should also look to go green as green trackers have outperformed the global index.
This is excellent news because effectively this is a very large pay cut in real terms to 1/3 of AA staff as the contribution rate from the AA into the pension pot drops massively. With all the cost-cutting and increase in membership, FCF should support a growing dividend and I am confident refinancing is on track. 12-months to go for my target of 200p, this is still within the realms of possibility but I may need to give a bit more time!
Article here:
https://www.pensionsage.com/pa/AA-proposals-could-cut-member-pensions-in-half-GMB.php
"The SP then went up from about 60p to 76p and then fell right back down to 41p ish and who knows why.!!!!"
- It was because of the General insurance pricing practices Interim Report by FCA. This report sets out the worst-case scenarios and it would be damaging to The AA and all insurance companies, however, expect something in the middle next year that *could* send the share price back to 150p levels or back down to these levels. I am a buyer at 55-60p levels with a 12-14 month view.
- 45p is 5 year low?
Yes
- Senior management turnstiles and now Chairman leaving business after 2 years?
I believe the punch up was unfortunate and Simon Breakwell (ex-Uber) is doing the best he can. From what I understand the staff are all working really hard.
- 100's Redundancies all over front line staff, fuel, recovery, key and driving school?
Quite the opposite for front line staff. The AA have blown away the competitors for service.
- Smart breakdown technology promised last year and delayed because of problems?
Not sure what this is but I don't think it is part of the core proposition.
- FCF good, but won't cover future interest repayments on debt?
That's the bet you take.
- Is this stock, high risk with the potential for high reward or?
or trading sideways? This won't trade sideways due to the risk-reward ratio. I wish I shorted this at 400p but at these levels and because of the FCF I am a buyer and maintain a speculative target 200p within 18 months within a balanced portfolio.
But Smarllcapjoy's timing is always impeccable and he refers to us as retail investors, and so that makes him what? Someone affiliated with an investment bank who enjoys being right or is coming on here because he is uncertain? The drop from 70p to today's price is more than the FCA interim report on dual pricing. What is it Smarllcapjoy actually knows because it is not the EBITDA or FCF as this is known since the days this stock hit 400p. More likly he has access to who is selling. Look at the energy companies and how they abuse the regulators by now saying to customers they don't need to switch because they only have one tariff not to mention the bs over smart meters with the cost past onto consumers. The current share price drop has kicked me in the balls but from the information that is out in the market a placing is not required for the next refinancing at a higher rate as there is sufficient FCF now and potential EBITDA growth to come.
Aromas, thank you for reminding us of the bear case. But please stick to the facts and not make wild speculative claims that the AA insurance will be sold to Admiral to pay Jan 22 bond repayment. You wrote some time ago that if you believe there is money to be made from this stock, the shorters and debt would have to disappear. Well, the AA have dropped out of the top 5 shorted companies as you know. As for the "debt would have to disappear"... well many would disagree (including Parvus and bondholders), this is because there is sufficient FCF to cover the debt, but a bull is under no dilution that growth is required and we are seeing evidence of this (hence Blackrock short reduction). There are two ways of valuing this stock and while the risks are extremely high like you point out so are the rewards.
A rights issue, what on earth for 2reincarnated? Why swap bonds for expensive equity? Interest rates are getting lower and OK it is harder for junk bonds like Metro's and Aston Martin, but the AA bonds are rated above junk. Granted right now they are just a little expensive but things change... don't you see the long picture and why Blackrock are closing their short? The next lot of debt maturity is 31/01/2022 and before that date, they will refinance and I am sure the AA will submit for a rating review with S&P to be in line with any growth in membership in the final year report in April. This could speculatively result in a better rating.
https://www.theaaplc.com/investors/bonds/rating
26th Sep 2019 - This is significant as Woodford was the second biggest holder. He also managed St James place another forced seller and together overall contributed to the downward trend of the share price.
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AA./14243624.html
So much has happened it is worth taking a step back and look at the recent news especially as the Blackrock short closing on the 24th was only reported on the 26/27th, Berenberg may not have known when releasing the 50p price target:
27th Sept - Blackrock reducing shorts by -3.69% on the day of the results with 2.21% possibly left to close - but this was not reported until Friday. The AA drop out of the top 5 shorted UK companies. https://shorttracker.co.uk/company/GB00BMSKPJ95/
27 Sep Berenberg Sell 50.00p
25 Sep Barclays Capital 100.00p
24 Sep Liberum Capital 130.00p
24 Sep Peel Hunt 160.00p
24 Sept - Good results in line with expectation.
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AA./14238209.html
>>On the debt front out of interest how did they end up with 2bnish of debt. Takeover??<<
Acromas added debt from Saga (to pay for a few crews ship or whatever) onto the AA and then floated the AA at around 250p. The debt was not seen as such a big deal and the share price went over 400p. But then valuation models used by analysts changed not to favour debt, and to compound the issue Blackrock added a massive short. Fair value today is still in the region of 150-200p depending on how you value the markets including the bonds.
The news today that Blackrock is heading for the door with its short is fantastic and now the AA has dropped out of the top 5 shorted companies.
Awesome news, thanks for the heads up. Added 62.87p
This is industry-wide and will impact everyone equally so is not a big issue. If your looking for reason this has not rocketed from a short squeeze, currently, the bond market is not looking good (see MetroBank etc...). But no one knows what the market will be like in the next couple of years and the AA is making progress towards large amounts of FCF to cover eventualities is set to grow.
The institutions are still buying at 70p:
24-Sep-19 16:52:55 69.467p 29,072 Buy* 68.45 69.00 20.20k O
24-Sep-19 16:52:54 69.467p 31,802 Buy* 68.45 69.00 22.09k O
>>Can we make 80p then?<<
Nobody on a forum knows the answer to this. I have had an accountant follow this and all he can say for certain is it won't go bust any time soon. The company continues to grow profits and prepare for refinancing. Good results.
The live presentation has just ended. It has been a good year with an increase in FCF generation and investment in key areas paying off. I got the impression the aim is to grow the revenue so both FCF and investment can be done continuously at the same time... and at this rate, it can be done! We can not predict individual SP directions in the near term especially when there are still short positions that need the AA to fail like Thomas Cook or one day they need to close the position causing a stampede to the door like the volatility at Keir that has seen their share price up 100% from lows. I am holding for the long run. Great business and lots of hard-working staff and I just know there is more news to come before the end of the year.
20-Sep-19 17:28:18 66.20 405,182 Buy* 65.70 66.10 £268.23k O
20-Sep-19 17:25:04 66.20 66,441 Buy* 65.70 66.10 £43.98k O
20-Sep-19 17:24:45 66.20 47,927 Buy* 65.70 66.10 £31.73k O
20-Sep-19 17:10:16 66.20 405,182 Buy* 65.70 66.10 £268.23k
>> So does this mean that any good increase in sales/profit has already been built into the sp or could we be looking at a nice rise to 70p+ ? <<
If you asked a fund manager with high levels of intelligence (or Woodford) and using a team of analysts and computer models, even then only a small percentage get it right, and only because their analysis and stock picking are in fashion. And the fashion for the past few years has been on global growth stocks with a sector bias on technology and not flat revenue value stocks or those in GBP (brexit). Can the AA be a growth company? From what I read on ADVFN forum and others are that the staff have been working incredibly hard. We have seen real progress being made in the last set of updates and also on the website with Smart Breakdown and a superior App that updates you on the progress of the van. The RAC and Green Flag products and service are poor in comparison.
BoA selling has to help to keep the rise at a sensible level. BoA is needing to reduce investment in equity's as they do not want to get into a situation during the financial crisis and is heavily sceptical in their press. On the flipside, we do not know who is buying yet. Can't believe Odey had the cheek to add to their short position on the 16th. @Rou123 keep us posted on the charts. Thanks.