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Private investors only own a small part of kier, approx 28% pre-equity raise and possibly 100m of the new combined total shares in issue. PIs are likely to be the main sellers imo and have possibly sold about 20% of their holding in KIE this week. The sellers are running out of shares. Many ppl see this share as a triple bagger. Kier is the market leader for regional construction, is on most suppler frameworks, is larger than most construction firms and one of its biggest competitors has been removed from the market (Carillion) and another is much diminished (Interserve). Those two failures have given the entire sector a mandate for slightly higher profits to avoid another collapse, at least for a few years. (Amey might be dragging Ferrovial into trouble tho). Forecast profits for KIE are 3.5% on £4bn-£4.5bn, which is £140m to £157m. Kier management has increased margin over the last three quarters so 3.5% seems achievable. A p/e of just 8 on £140m puts the shares over £2.50 and incidentally, would put the firm back into the ftse250 with index funds picking up the shares, adding more momentum to the shareprice. Newsflow is good for Kier; key dates are end of year 30 June, trading update soon after, full results published probably in July, annual report in September. First half profit was only £9m with the remaining covid costs and restructure exceptionals bringing it down, but a corner turned and the first profit in two years. If second half is as promised (anything over £40m) this will be a surprise to the market after two years of disappointments, but long-view investors can see it coming, hence the demand for the shares at 120p, even with the new shares becoming tradeable Friday. If Kier has found a long-term new investor for the 'firm placing' (120m shares) there will be little selling on Friday and likelihood is that all sales will be mopped up by long-termers.
Rtd Bnkr; if your excess application only delivers 10% of what you've requested (ie one twentieth of the 7-for-8 new shares) will you be a buyer, and if so, at what price?
hansthedude: yes, you are correct. Some people might cash in for a quick profit. However, a great many shareholders have applied for the maximum shares via the 'excess application facility'. These are the 85p shares which have not been taken up by the existing holders. My guess is that there will be very few of these, so a lot of shareholders will have unused money in their accounts and they will be on the look-out for cheap Kier shares. How cheap is cheap, if you were willing to buy at 85p and see the shareprice reaching £2 in a few weeks time? My view is that they aren't expensive even now at 112p. Also many people who are not current Kier shareholders are waiting to buy Kier shares now that the business has been recapitalised. They are simply waiting for the 'dust to settle'. I have no idea whether any selling will actually cause a drop in price. We might actually gain. You will notice that the hedge funds who often short a rights issue have avoided doing so with Kier. Only blackrock has ventured 0.51% short and they are also a major shareholder with over 5% of the business. Maybe it's a small hedge or some component of a more complex trade. Seems these open offer type cash raises reduce the potential for short profits.
hansthedude: The shareprice has already been rebased to take account of the 85p shares. On the 13th last month the sp went up to 122p on the day of the new equity launch. The following day the shares went 'ex-entitlement' and opened nominally at 102p, but such was demand that the sp rose throughout the day and finished around 120p. So the sp has already been repriced to show 'dilution'.
Some of the rest of your post is correct. The cash will be in the accounts in time for yr-end. But 30th June is the actual year end date. There will be no report. There might be a short preview in the days following. We can probably expect something within a fortnight, though Davies did rush out an update the day after, last year, from memory. That is unusual.
Profit margin might hit 3.5%. That was what was being forecast in the prospectus, and you are correct in saying that the new management have managed to progressively increase margin. In four out of the last five quarters they have managed to wipe out profits with write downs and exceptional costs. The ceo is saying that exceptional costs are largely done with now. If that's the case and we see a £50m profit for H2, there will be jubilation on the share chart!
Something else worth keeping in mind that I've seen discussed on another board - Kier could re-enter the FTSE 250 in September. If the market rates the shares at 15 times earnings, the sp could be 180-200p. That would be enough to put Kier back into the FTSE 250 for September (which is the next 'reshuffle'). All the index trackers will then buy Kier and there'll be some big price momentum. The annual report is usually published mid-September, so that will cause a re-evaluation by brokers. More momentum is it's good. Four months later we will have a first half trading update (mid-January). If Kier lives up to its promises in the prospectus (3.5% margin on £4bn min annual turnover) and shows a £70m profit with 90% cash conversion, the business will be have net monthly cash (no debt at all) and the CEO will probably lay out the path to dividends from there. If he anticpates a dividend payment for the full year later in 2022, there is the potential for big buying in January and beyond. My guess on prices is £2 by end June and £3 by mid-September if H2 profit is £45m+ (full yr profit £54m+).
Hoopoe, are you seriously saying that Steve72 should breed? I think he would struggle to find a woman who isn't put off by his unrelenting negativity.
On the subject of Kier, I think there could be some big gains now. It'll be interesting to see how many shareholders took up the full open offer options. What is the most you've ever seen? Year end is coming up fast. Could be a very positive earnings report.
It is underwritten, but the share issue has been OVERSUBSCRIBED. The underwriters do not need to pick up any of the shares. Shareholders can buy 7 for 8 and apply for 'excess entitlement' which is equal to the 7. I'm not expecting to get any excess entitlement filled. All of the shares are spoken for, but as I understand it, shareholders get priority for their basic 7 for 8, and these are 'clawedback' from the placing. This is very different to Kier's last RI which took several weeks and the majority of the shares ended up with the underwriters. This cash raise was over in NINE HOURS (everyone is keen to get the shares).
djframboise - is that French for strawberry yoghurt? Anyway, I thought today's price action was very interesting - 10 million shares snapped up eagerly hence a constantly rising price. I have a feeling the price could get to £2 if the market is in a good mood next week. De La Rue had a similar kind of cash raise (half in a placing which was agreed at the start) and the shareprice rose spectacularly, even though this was after the frantic trebling of the price on the good trading news which set the stage for the cash raise. An important aspect of Kier's equity raise is the fact that it's NOT a rights issue. There are no rights to trade. You can buy your shares at a discount or let them lapse. I think that will limit selling ahead of the date at which the new shares are tradeable. Also, that date is quite a long time from now. I've not been in a cash raise quite like this one before, but the dynamic certainly feels very different. When the discounted shares become tradeable, I think there'll be another big exchange of chips from small investors to larger ones, but ultimately, I think we will get to £3 or £4. I'm not sure how long it will take though. I'm looking forward to seeing what the finance press makes of it before Monday though.
tradertaz, evidently you are new to Kier. The management did face the consequences, though arguably the punishment was light - they all got the boot. Andrew Davies was brought in to sort it out. He has replaced the entire board. The new management are definitely NOT incompetent and have just pulled off a spectacularly successful cash raise - it is oversubscribed! The last team left 60% with the underwriters. Not only that, but Davies and his team have managed to maintain Kier's position as the largest construction business in the UK winning more contracts than its peers, even though it has, until yesterday, been short of cash. Regarding press coverage, when you say that it will only be in passing and not a hot tip, are you saying that Kier is not priced very cheaply? I think most people would disagree. A forward p/e of just 3.5 and projected profits of £140m makes this business quite a bargain in many people's eyes, especially now that it has zero net debt. Kier's shareprice has been priced as though the business were about to go bust. Now that it is finally well financed, it will be re-rated. I will be very surprised if it isn't featured prominently in the finance press. Enjoy your weekend and read a newspaper! We can swap notes on Monday.
Well done for banking a profit. Maybe you will be right about later. I have a hunch Kier will feature prominently in the weekend press and Monday might be another big day, so perhaps you won't get the opportunity Monday, but it will certainly be interesting to see.
Perhaps you haven't noticed the volume, but it's about ten times the usual daily average. People have already started taking profits. In fact, they've very nearly FINISHED taking profits. A quarter of all the private investor shares in Kier have changed hands today. They've been bought with a smile by larger investors. If you've handed yours over expecting to get them back cheaper, I think you will be disappointed.
Which people will start to take profits tradertaz?
I get it snowboots - you've gotta work with what you've got! Good luck. I hope you make plenty.
Institutional holders own almost three quarters of kier's shares. They are not sellers today. 7 million in trading volume this morning. If that continues, it'll be 14m today, a third of all the kie shares held privately, most probably, handed over cheap. No one goes hungry booking a profit, but now watch them treble in the lead up to year end and the full yr trading update. GLA.
snowboots, you are wrong in almost every respect. It doesn't matter that there are more shares. The important metrics are the p/e ratio and ultimately future dividends. At 110p today the market cap is about £480m, barely 3 times forecast earnings (a p/e of 3). Kier has made these kinds of profits in the past , and Andrew Davies is a cautious ceo, so there's every reason to believe it's achievable. Recent margin is about 3% and AD thinks 3.5% is realistic on £4.5bn turnover. p/e for Kie should be nearer 15 - five times todays price.
So lots of people are selling this cheaply today. A holder with £10k this morning does NOT need £14k for the full allocation. The full allocation is 7 eighths of the current holding but priced at 85p, so nearer £7k. No one will be buying the 'excess entitlement' because the equity issue is already oversubscribed. AD said so in his video to staff put on youtube last night.
The closing price last night combined with the 7/8 at 85p created a net price of about 105p. But yesterday no one knew for certain that the equity raise would be a success - last time underwriters picked up 60% of it and then sold off cheaply, driving the shareprice down post-RI. This time it's oversubscribed. So this morning I know it's a success and can buy with confidence - no gamble. I bought a few more at 110p today. Only a small premium.
Huge volume. A lot of people giving up their Kier shares cheaply this morning. They are being snapped up by eager buyers, judging by the chart. This share has had an enormous weight lifted from its shoulders - debt is no longer an issue. Risks are removed. Profits are predicted to be around £150m pa. That gives a forward price earnings of 3 this morning. I would expect a p/e of 15 at least for Kier, the biggest UK construction firm. I reckon this share is heading for £5 inside 12 months. A lot of people have had a diamond dropped into their laps this morning, but they're giving it away anyway. I'm buying as much Kie as I can get my hands on. GLA.
Thanks for this Baz. A fantastically detailed account.
Am new to this site. Just joined on the strength of two posts - thanks Peter for the Algy Hall link. I found that an interesting read. I've opened a small position in Kier. Have been watching for a while. Also the post from Bazthewonderdog I found very useful. GLA.