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Peaky, at the current fall rate it will break a tenner next week.
I really don’t buy into this buy when everyone’s selling and vice versa. You just end up catching a falling knife. It will go flat for several months before it returns to growth, which will probably be the back end of next year.
Yes the divi was a mistake, and realistically they can’t pay another one for a few years.
These interest rises are fuelling inflation imo. Prices are having to go up just so firms can service their debt. Workers demanding pay rises to pay their increased mortgage payments. I wouldn’t touch this share until it’s clear the downward trend has reversed.
Sale on with a further 25% off. Stock is going seriously cheap.
PSN was massively overbought because of the divi, trading at 3x the NAV which is unheard of for a HB. Yes, it has fallen more than other HB’s and will continue to do so as it is still overpriced compared to the others. PSN fell from £15 to under £2 in the last crash so I think £7 will easily be seen this time. Based on what fundamentals should this be £15? You’re comparing this to modified cars and tins of baked beans and you reckon Im the one who doesn’t know what I’m talking about? 😂
Even if they can afford it, they will be negotiating hard, there’s no denying it’s a buyers market. PSN should currently be around £8.60 per share if it was valued in line with all other HB’s (80% of nav). Give it a couple of months when there’s no divi announced and PSN will be valued in line with the other HB’s which will have also fallen back. I dare say PSN will be around the £7 mark this year.
Your comparison with a 60p tin of baked beans doesn’t make sense- Heinz can put the price up and people can still afford to pay it. People can’t afford to pay the house prices now mortgages have gone up, so housebuilders either have to reduce prices/add incentives or they don’t sell them, so the margin is squeezed at both ends.
I never said 10% inflation takes away 10% of profit. It takes away much more than that. In simple terms let’s say you sell something for £100, it costs you £90 to make. £10 profit. Say your production costs increase 10%. It now costs £99 to produce, you make £1 profit. That 10% cost rise reduced your profit by 90%.
Do share your methodology. I’m not sure how I could work it out per plot when each plot will vary massively depending on size and locality. Looking at the margin and how cost pressure and revenue decline eats into that is the only way I can see.
Whether they’re giving incentives or reducing prices, it all comes out of the same pot. My point is that when the margin is only 14.7% and it’s been squeezed at both ends, it soon ends up in a loss.
They may not be reducing asking prices just yet but they will have to start. Just look at their website. I don’t see any reserved properties- all still available.
With a profit margin of 14.7% and cost inflation at say 10%, house prices down say 5% that’s the margin wiped out. As costs continue to increase, and house prices continue to come down then we get into loss territory.
From a HB perspective this is worse than 2008 because not only have you got house prices sliding for the reasons you mention, but building costs have soared as well, so the margin is being squeezed at both ends. It’s a dead cert that HB’s will make a loss this year, and possibly the next. PSN will suffer the worst because it is trading at a premium compared to other housebuilders because of the divi, but no profit will equal no divi.
Who wants to live in a camper? You can’t get anything decent for less than £40k. Where would you park it? Where would you empty your own sh*t out? You’d have no fixed address. Where does someone who can’t raise a house deposit find the money for a camper? Berkshire has performed well, plenty of other stocks haven’t. Watch what happens to the sentiment of Berkshire when buffet kicks the bucket. It won’t be long.
Paddy, what’s bizarre is that when I mention MARS you immediately say “quite a risky one due to large debt burden”. The debt burden is 50% higher here, and without all the property backing it at yet you “can’t understand what all the fuss it about” when nex debt is mentioned. I’m confused.
Anyway, I’m done here. It caught my eye as it was in the top gainers list on Friday, but having done a bit of research I won’t be investing. But best of luck to those that have.
I didn’t say all intangibles are worthless, I said goodwill is worthless. It’s nothing, hence why it can be written off so easily- it just sits on the balance sheet to show excess capex. Sure, other intangibles have value such as IP, software, contracts etc.
PC, this is why I’m specifically looking at underlying assets, which are the collateral to my investment. I don’t see any value in goodwill whatsoever. It all gets written off eventually, cash and property doesn’t.
Having done a bit of research I’m going to hold off all companies with high debt for now, and jump in when inflation starts coming down.
In the meantime, I’ll go mostly into housebuilders, which I think are massively oversold (specifically PSN) considering there’s been no house price crash as was feared. Should be “safe as houses” we shall see.
Hindy, I always write off goodwill. It can easily be massaged either way. It just represents how much a company has overpaid for something. MARS wrote all its goodwill off in the latest accounts. Nex wrote some off too.
PC, yes sorry I mean priced at 3x more when on the face of it, MARS is worth more in terms of book value and profitability.
The reason I compare with MARS is the SP has suffered for the same reason- debt. I thought it was great value at 50p. It’s now 30p but it will probably get cheaper still. So what’s cheap and what’s not? It’s really hard to tell these days.
Personally, I think both nex and Mars will rally at any hint of interest rate cuts, otherwise I can’t see any reason for them to stop falling.
Give me some numbers Hindy. I’m not sure what you mean.
The equity figures I’ve given are the bottom line on the balance sheet. I.e assets- debt. Nex goodwill is listed in the notes as being £1356m, the total equity being just over that at 1390m so about 34m book value exc goodwill. I just put the Mcap next to it to show how the market values it compared to the book value.
Marstons- 648m equity- no goodwill. £201m Mcap
Nex- £34.5m equity excl goodwill. £687 Mcap
The mind boggles. The chart suggests nex is cheap, the fundamentals suggest it’s overpriced.
PC, your comments regarding return on debt. Doesn’t that issue apply here?
Personally I am more interested in book value than profit. I see it as collateral, which also helps for capital raising. Most businesses will have a bad year at some point, so buying based on good income that turns bad will tank the investment, and the business will be more vulnerable to such events without assets backing it up.
Having had my fingers burnt in marstons for its debt, and nobody able to tell me why nex is worth 3x more, I think I’ll pass on this one. Thanks to whoever mentioned housebuilders though, will probably spread across a few of them.
I noticed the former CEO of nex (Dean Finch) when it was doing well is now the PSN CEO.
Paddy, are you invested in nex? Interesting that you say Mars debt burden is high when it’s around a billion less than nex, and is property backed.
Re the housebuilders, I can’t see them getting to those levels unless something bombs the whole market, they already look oversold with all the doom in the media, but time will tell I guess.