Member Info for NoloServileCapis

Toff is full of bluster, but short on facts.

I agree that the market often knows something that PI’s don’t but the information lag is getting shorter all the time. It is probably measured in hours now. Yet, Toff has been bleating about it for ages.

Could it be, just possibly, that this company is in a sector that is out of favour in a period of wider market turmoil.

Fortunately, given the nature of its business, the profit and cash stream is not dependent on short term whim or fad. The company sits on enough cash to cover 6 months or more of operating costs and dividends.

If Toff knew something I have no doubt he would tell us. Otherwise he is the bb equivalent of the guy on the street corner with a sandwich board predicting Armageddon.

As the old joke goes “Armageddon out of here”.

FFObsessed,

My sentiments precisely.

Obvs, the word “if” is doing a lot of work there but given the nature of the business, their financial strength and the size of their deferred profit pot I am very happy to take the risk.

I also think the SP is largely driven by macro issues such as interest rates rather than company specific issues and as I intend to buy and hold I look at the current weakness of the price as an opportunity rather than a threat.

Toff,

I don’t think either HMV or Woolies had deferred profits sitting in their balance sheets to the tune of circa 5 years profits so your comparison is bordering on the absurd.

I’m not a share trader and I’m happy to hold and take my chances for the long term.

Btw, do you have a holding in PHNX (long or short) or are you just enjoying a casual drive-by shootup?

Chairman Circa £40k and CEO connections circa £100k. All we needed was the CFO for a hat trick.

Meaningful sums; encouraging.

Taking a longer term view of PHNX I can see that over the past decade it has paid dividends of 867p and that the price has fallen from 520p to 473p as I write this.

I make that a total return over 10 years of 157% without compounding.

There are plenty of other blue chips that would be delighted with that performance.

Given the size of the deferred profits it is a “dog” that I am happy to continue to hold.

Toff,

Normally, I’d agree re the high dividend being a red flag but in the case of PHNX and LGEN at least 40% of the divs for the next decade are already booked and sitting in their balance sheet as deferred profits. That gives me a lot of confidence in the security of the dividend.

At the current prices I will get my money back via divis within 10 years and still have the shares.

A low SP merely allows me to top up for a better yield.

I have other shares and funds that have proved equally capable of destroying capital over the years without offering me the solace of a secure and regular and chunky dividend.

I did buy some this am at 476p and will buy even more if they hit 450p.

Anyway, here’s hoping….

Agreed. When interest rates start to fall we should see the SP rise.

But, Nicknaim is right when he says this is a great time for div hunters. Provided the div is sufficiently secure, as is the case with PHNX and LGEN, I am happy to buy and hold for the long term. If macro issues (and I believe that they are largely) are depressing the SP then I am happy to keep topping up as funds permit.

Plainly, traders may have a different stance…

I topped up again this morning at 511. With the ex div date tomorrow it means my net cost is 485. Assuming div growth of 5% that means a yield of 11.07% in 2024.

Given the strength of the dividend, that is hard to resist.

If it falls by more than the div tomorrow then I will top up again.

Normal market rules and behaviours appear to be much weaker than in the past.

Puzzling, but I am hoping that the market will ultimately be proved wrong. In the meantime I’ll happily bank 11%.

GLA, DYOR etc

But, is the SP driven by company specific news/sentiment or by the wider macro/market movements?

If it is the latter then, given the security of the dividend, I see the low SP as a buying opportunity. I am happy to collect the dividends and wait for the cycle to turn.

Fwiw I see that City Pub Co have reported a like for like increase of 14% in the 26 weeks to the end of June. The rate of increase fell to 12.4% for the first 38 weeks of the year so the wet summer had a minor impact.

Notwithstanding the differences in the size and quality of their respective estates I suspect this bodes well for MARS.

Hi Strictly,

I’d be interested in your blog if you’d be kind enough to post a link.

I currently hold BDEV only among the builders and am thinking about putting more into the sector but am unclear as to their relative merits.

Many thanks

Nolo

Do we know that they have asked to make a statement or is that just speculation that they might?

Meconopsis,

Thank you.

I have PHNX too. But in a much smaller way.

I think LGEN has greater scope because of it’s potential in the US market (a dream market for a provider of annuities imho) and the breadth of it’s 5 business divisions; which PHNX lacks.

I also suspect that there will come a time when we will be laughing about the number of posts on this board worrying about whether they should wait until the price hits 200 when it was at 212.

Anyway, here’s hoping the SP stays low long enough for me to buy more.

GLA, DYOR etc etc

The new accounting rules are quite complicated but in essence part of what they do (and I have only given this a cursory look) is regulate the reporting of long term contractual profits.

LGEN has as much as its current SP in its balance sheet recorded as deferred profits. These will be released to the p&l over the lifetime of the contracts.

I.e they are shown as a liability but are owed to shareholders.

That is nearly 6 years profits already booked and waiting to be released to the p&l.

I can’t find any other ftse100 company that has anything like this.

As an “overweight” shareholder I find it rather comforting….

Indeed.

It is also worth noting that cga data shows beer sales in Uk on-trade were up 10% in the last 5 weeks on the same weeks last year.

Before you get your hopes up, Stonegate primarily buy from Matthew Clark.

Time will tell whether MARS is just another value trap.

However, I am patient and notwithstanding concerns around debt levels and property valuations I find the 2/3 discount to NAV compelling.

I also think the management are following the right strategy and now that interest rates appear to be nearing their peak I think the potential upsides justify the risk of being long.

I have now consolidated all my pub co investments into MARS as I see the greatest potential here over a 5-10 year horizon.

GLA, DYOR etc

Would be electoral madness to do so. The opposition would say it was robbing people’s pensions and it would harm the tories reputation with business.

I doubt that simply wall st’s algorithms will be able to cope with the complexity of a business like LGEN or the reporting vagaries of the new accounting standards.

Will it be able to differentiate between the various types of liabilities and their timescale? There is a huge difference between deferred profits, trade creditors and annuities due to be paid in the future.

It also doesn’t instil confidence when it says that the company revenue is less than $1m and that the company is loss making.

So, in short, I wouldn’t place too much reliance on its dashboard.

So, it looks like the 4 main points that I don’t recall being raised on this board recently are:

1) lgen liabilities are a massive multiple of equity. A 3% understatement of liabs would wipe the company out.

2) the fall in aum will push the company into a loss.

3) the die/esg agenda appears to have overtaken the desire to make money.

4) the Lti product could end up being financial dynamite and doing to lgen what subprime did to hbos.

Have I missed any?

There is quite a lot to unpick in that but I think that initially the following points should be noted.

1) under the new IFRS rules the co has to include the assets and liabilities of all the funds it manages so this might look rather worse than it is.

2) the asset management division is only one part of the business and the others are doing well.

3) I tend to assume that this is mostly virtue signalling

4) lti was tested pretty convincingly a year ago and impacted some of their clients (reducing aum) but not resulting in losses for lgen.

I am sure that others, better qualified than me will be able to comment in more detail.