Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
3+ years waiting to breakeven (it's 184p) and we are so close but yet so far it seems! 178p to 180p appears tough to crack and as ever I'm utterly flabbergasted we still remain at this silly low market cap level despite all markers pointing to a record year for aviation! AA's results on revenue and outlook are strong, Heathrow reporting record Q1 passengers (with BA being their largest carrier), Easyjet, Ryanair suggesting great demand etc etc etc! Analysts raising IAG pricing target (still mostly too low in my blinkered opinion!) and cost of living pressures allegedly easing after decent pay rises.
Debt levels are still clearly holding us back - even though net cashflow is likely to be ~EUR5BN in 2024 so feasibly IAG could pay off all debt if they wished too in about 2.5 years and net debt to EBIT is well within planned targets.
Someone sneezes in Mongolia and the shares seem to be impacted :(
I wish I had factored this in when I went far too long and invested all these years ago!
I hope on May 10th the board update on dividends - ideally announcing one! ~10p per share would be a good start.
Lack of dividends, debt levels (slightly above pre covid), marco factors like rates and world events seem to be an overweight drag on IAG - and I don't really understand why vs. other airlines and related companies - it is unfathomable to me which is why I still remain certain the market is currently wrong and I'll be holding out till 250p+ because even at this SP we would only be worth £12.2BN which will still be £3BN lower than pre covid despite net debt being broadly the same, margins higher, profits and revenues higher and the company having a substantially more modern more fuel efficient fleet!
One day the market will wake up!
Rarely post but keep on eye on this board from time to time - very longstanding and frustrated holder of a massive amount of IAG shares - still ~20% underwater - I went through the very painfull RI's around covid etc. It's a great uplift today and good to see SP holding into the close. Who knows what Monday will bring ?! Probably a profit taking pull back if history is any guide.
Clearly I've a vested interest in saying this but I honestly can't fathom what the City/analysts are thinking - to me this is the biggest no brainer investing opportunity in the FTSE 350 - which other company is worth 3.6x earnings (end of days mcap at £8bn - £2.2 PAT in 2023), has proven robust demand despite horrific macro environment (wars , cost of living etc) remains impacted by strikes, factors outside it's control and yet is still at ~95% capacity! Debt is higher than pre covid but very manageable and net debt is coming down fast - and they are investing EUR3.7BN this year in fleet modernisation and tech etc. If they had to they could pay down all the debt in ~4.5 years - but no large company runs debt free - much cheaper even at these rates vs equity...
Analysts coming out with price targets of 2.10 to 2.60 is still valuing the company between £10.5BN to £12.5BN - still below the high mcap of £14.5Bn in 2019 when they made less profit, had an older fleet and lower operating margins! I don't get it.
To me this has a lot lot more to run - at current shares in issue a price of ~£3 a share should be the absolute min and this would still only equate to ~7 times earnings - much lower than easyjet's 12x earnings currently and they don't have anywhere near the natural hedging IAG has with it's airlines operating globally so less volatile to any UK/Europe specific issues.
The market doesn't like the debt and II's are not ploughing in because they are not yet paying a divi or conducting and share buy backs - this surely will happen soon and I'm hoping any divi announced would be reasonably material - then this should rocket like Rolls Royce! May 20th Q1 numbers would be nice!
Rant nearly over but finally I also don't understand why the market is not more supportive of the mgmt investing in the future and not giving out sweeties like many others do to artificially inflate the SP temporarily only for it and the business to come crashing down - but then as someone in this space I'm not surprised!
You are probably right Aspers!
Cost of living sentiment is clearly dragging on "choice" purchase stocks in travel/leisure etc and this will sadly continue for the foreseeable future - even though in reality demand for travel is remaining much more bullish than market sentiment!!
I've been fortunate to take 4 long haul BA flights in the last 6 weeks and every one absolutely full with not a spare seat - speaking to cabin crew this was not an anomaly and the capacity figures show this.
As a substantial long term investor I remain at a loss why IAG is trading so poorly given latest performance (particularly on NET debt reduction) / decent outlook headlined and the airline is in a structurally far stronger cost position after all the actions (often forgotten) taken during COVID.
Other positives are continued investment in long haul fleet capacity and modernisation / IT infrastructure investment / customer experience investment (7000 new hires!) and how Iberia / Aer Lingus is performing. Fuel costs are also substantially lower than a year ago. They are investing for the future and are clearly confident on demand.
I expect them to start paying dividends assuming this level of profit performance continues at some point in 2024 and I'm sure they'll be equal pressure from long term II's to start share buy backs in order to reduce the ~5BN shares now in issue - post the COVID RI's
Enterprise value or MCAP pre COVID reached a high of ~$18.8BN on July 31st 2018 (although I'm sure it was higher than this but the internet is failing me) so £14.5BN - current MCAP is £7.8BN - so almost halve the previous high. You have to discount given NET debt position is worse, no dividends and clearly macro economic sentiment is worse than 2018 - although we were in the throws of Brexit uncertainty then! My view is a MCAP value of ~£12BN should be reasonable on current trajectory so a SP in the range again of £2.25 to £2.40 in the next 6/9 months or less (assuming no major further macro/political curveballs happen) must be realistic. They've just announced record H1 profits!!
All IMO / DYOR etc.
No - it’s 0.15% of shares in issue - tiny! The daily volume in this stock is a fraction of its shares in issue tbh / hence the wild swings in share price which are currently driven by a good amount of PI sentiment change. The rise to 350p was bonkers. As a long term investor the current price reflects to me the significant challenges facing the company. We all have agendas and I understand why some want the SP down sub 150p - which could happen if we go into a full second lockdown and international travel put even further back on ice. Who can predict but I believe this won’t happen. I tend to think the poor half year results are priced in and hope the market is being overly cautious on these. Let’s see. I’m holding till £4.50+ and this is likely to take 2 to 3 years. I’ve significant opportunity costs of holding like a stubborn person right now but I’m going to stick it out because I see limited other fundamentally well managed and strong businesses with this potential upside.
Not sure about them buying IAG but I get the sentiment.
Two other facts to share which should help my long position! I know I’ve an angle here so obvs!
1 - I’ve been looking to buy a 2 person trip to Faro in August - flights and car for a week were £638 pre last Friday. When I booked on Friday evening they were £1,048 and I booked it because I want to go. Annoying but seen a lot!
2 - Said flight above was then cancelled (Gatwick idiot!) 48 hours later - rebooked on Heathrow - spoke to customer services agent - she’d not experienced anything like the increase in demand in her time - admittedly only 3 years at IAG but quote - last weekend it’s gone absolutely mental busy.
Pent up demand clearly but we love a holiday. Despite everything folks want to get away. 2/3 wont travel but 1/3 will and that’s more than enough. Business will rebound in part too - then it will be a longer slog back to new normal. I don’t and can’t predict a price back to 600+ anytime in ages but 500+ in 2 years is a reasonable balanced view. Let’s see.
Following another investment today I’ve a substantial holding in IAG now. I’ve been reading this board a few weeks and it’s certainty interesting and similar to many other well day traded shares with a good amount of pI interest. Personally I was completed surprised by the rapid rise to 350 a few weeks back and made a big error selling into the rise way too early. I’m now looking to hold this investment as long as it takes to get back north of 500p a share. I do have concerns around a potential rights issue but hope with mgmt and Qatar and other ii’s heavily invested at levels well north of here they will look at other funding options if necessary and a rights issue would be a last resort. I also remain unconvinced IAG do need additional funds at this time / discussions with bankers could also be around other corporate actions (M/A etc). To me the mgmt team is proven to be highly focused on cost / growth and shareholder value and if anything this has been to the detriment of brand / service over the last 10 years or so - luckily they remain dominant with slots (major comp advantage) in most of their key hubs and so assuming this remains ultimately choice isn’t often there despite what some may think!
Why I believe this remains a no brainer at these levels (if you are patient)
Excellent / grizzled / proven mgmt team and board - huge
Europe will be opening up very soon and I don’t see another full scale lockdown (economies can’t take it)
Major network - strong brands in key markets / tourism will return everywhere in time
They are using this crisis as a way to resolve longstanding contract / ops issues with experienced pilots / cabin crew - to bring ops costs more in line with low cost airlines. It’s tough for these staff (I know this first hand as my dad flew for them for 20 years - joined ex Dan Air and then fort them on contracts for about 10 years!)
Oil prices will help go forward profit massively (now they’ve taken the p&l hit on their forward contracts)
Competitors (virgin) may not make it - other national carriers are being bailed out - not helping there systemic issues - IAG can then beat them on price if they want to
So I see a stronger / meaner / more profitable IAG coming out of this crisis - this means smaller initially too
Risks: rights issue and dilution - reasonable and a concern but I hope per above on balance less than 50% chance
Business travel - this will take years to return if it ever does to previous highs - most profitable piece for IAG (particularly BA) - IAG know this hence all the actions they are taking (seen and unseen) - I believe in time business will want to do deals / dinners in person (I do!) but less so vs before and so tourism / cargo will be a bigger focus (as it is already!)
One final point I hadn’t fully realized before - this trades hugely on PI sentiment as most of the shares are tied up (Qatar/long funds etc) so the swings for a FTSE are wild. I expect volatility to remain.
DYOR etc
Thanks for responding Oldfool1939.
I have 25,000 shares in AMI and honestly was lucky vs so many other investors with my entry price. You will see from my posting history I am very Long QPP (I like an interesting share it would appear) and I'm an active member of QPPSAG. I meant to do this sooner but can you or someone please tell me what I need to do to join AMI SAG as I'm keen to keep informed of the action here and help out where I can. I've lobied my MP already a bunch re QPP so I have some connection with him. Timing wise with the election it's not ideal :( Thank you in advance Savory
I've just taken a sizeable position in Sainsbury's - seems I like unloved companies too much! To me they have been dragged down severely by the Tesco disaster (hope they have no skeletons as well) and clearly the market is concerned with their go forward "what do they stand for strategy" - JK leaving can't have helped either. Not to mention supermarkets have just been unloved for a while now - look at their PE's So all the above = not good. So I've taken a punt (and it is a punt) off the back of the fact that I hope the market will soon realise that SBRY is just ripe for a takeover (where are those Qatar's!) - seriously their Mcap (£4.5BN) is now £1.5BN BELOW Net Assets - they have property worth £10BN - strip out some of the other balance sheet items and you could buy them for ~£6bn (~30% above current sp/mcap) - and close them down and walk away with cash of at least ~£2bn (cash at bank is £1.5BN - meaning they are trading on just 3x cash at bank!) - world has gone mad. Obviously most of the property is hardly prime real-estate but I can think of some discount retailers who would snap some of it up and some house-builders still desperate for brownfield land! I'm not saying that a) someone will take them over (I would if I had a spare ~£6bn!) or that b) if they did it wouldn't be as a going concern but to me the fundamentals now scream oversold. Let's see!