Member Info for SG2025

When a stock falls so sharply and without much explanation, it recovers equally fast. Keep your nerves on hold. I have been shuffling my portfolio to timely average down. Fingers crossed.

Have read a few reports over the weekend and some suggest based on institutional feedback that the key sore point for institutions from last week's results were that the VC (variable consideration) was much higher than what institutions expected in the five year forecast (500m guidance vs 350m mkt expectations)! Have done further digging on it, but still can't understand if it should warrant such a sharp decline in SP.

Wow, too many posts over the weekend - get some life guys. And moreover a lot of naive to borderline v stupid comments (comments not questions). Not directing to any individual, but writing out of annoyance, as its been really difficult to filter out sensible/useful comments out of so hundreds of posts. I am making this statement as a subject matter professional with decade of prior experience. To name a few topics (I have lost count), but there are many more...

1. Accelerated bookbuilds - Not happening anytime soon, period. And a sizeable raise (except for funds) never happens over weekend in UK/Europe least didn't in the last 15-20 years.

2. Barclays holding disclosures (not proprietary or held by asset management. these are aggregate holdings by their various smaller (not large IIs) clients

3. "All Cash-offer" - Of course what do you expect from a private company making a takeover bid for a publicly listed company!! A share in their private company which doesn't trade and which no one knows what to value on??

No one knows what is going on with the discussions between WG and Sidara and what they are contemplating. It is quite ludicrous that people writing speculative thoughts as definite forgone conclusions. Just unbelievable!!

@Wishingstar, pls excuse my language, you are the biggest chump I have seen on this forum. You claim to be working with a BB bank in research with bold claims about share price trajectory without any substance. I can tell from over a decade experience with a BB, none of your claims, language without a tangible theory proves you are either a fake or not good at your job or a novice clearly. In any case, give rationale substance / justifications like a decent analyst which actually is helpful than an outlandish comment irrespective of a drop of rise. Furthermore, I can bet a BB research analyst will NEVER EVER write such (or any) posts on a public forum. I am sure you wouldn't believe me, but if you do work with a BB bank, check your compliance team and see what they say. So either you are fake or too naive who will surely not last in his job. BB will fire an analyst making such claims in public forums for very obvious reasons whilst stating to be working with a BB as an analyst!!!! I am saying this for your own good and to be constructive with your opinions.

I agree. It took me a while to understand the financials and the IFRS profits - why they were lower etc. For those who think the profits were lower and disappointed, I suggest look at the report for the line items that impacted IFRS 17 profits - you will find something like CSM reserve which accounted for the difference between operating profits and reported profits. Now I suggest you look at chatgpt or google what this line item means and you will realize the difference. Anyhow, in summary, I think its profit booking in my view today, and the share price will recover back to the levels next week if not higher. This ofcourse subject to broader market remaining stable...

Bought some more at 497.. L2 seems to be improving for the first time today.. now more buyers than sellers.. think it will rise quickly from here - fingers crossed.

Seems like a forced selling by a large institutional holder (perhaps Capital Group) - we should know on Mon/Tues if so from holding disclosures. Could also be a short attack, which again should be clear next week. If its a short attack, it should equally unwind quickly from the bottoms next week. I will continue to drip buy if it drops further below 470 or so. All rhetorics around European defense spending is a big tailwind around it, and should help the company, so seeing it as much as a buying opportunity as much as it hurts seeing existing holding down...

Thanks @Carrington. Interesting question. I will give you my perspective as I see it. Feel free to filter / consider your own context. I like to debate and welcome a counter perspective.

You are right, its 25x is based on reported basis, but on adjusted EPS, its more around 15x. Still, in the UK context it looks rich comparatively for similar margin / growth profiles in the medium term, although it does look cheap in the international comparable. I guess its a matter of perspective.

Also, Rollins is US listed, double operating margins that of RTO, 10%+ EPS growth vs -ve to low single digit for RTO. There seems to be a large valuation gap and it may narrow over time if RTO beats market expectations, but RTO they have posed -ve share price return for each year since 2022, vs significantly positive returns for Rollins for each year. This may justify some discount between RTO and Rollins. If you look at Flutter vs Entain, although different sector, the comparison is pretty similar both in terms of growth/margins as well as valuations.

Keeping this discussion aside, the stock has had a sharp sell-off and can jump in the near term but I am not sold yet on the fundamentals.

I don't really track Spire and haven't analyzed it to comment on it. Broadly, this is not a sector (in UK/Europe) that excites me, as I think the P&L upside is always capped given more socialist fabric of our society (unlike US/Asia), despite obvious long-term sector tailwinds. May be ok for trading given recent declines (again no views), but I don't trade in any security unless I fundamentally believe in it, so even if I get something very wrong, I have comfort knowing it will recover, just like Melrose hopefully from yesterday :(

@ LWHL, fully agree with your thoughts. I see Rentokil as vastly overpriced. Looks cheap if you look historically - which IMO is a classic value trap like many others - B&M, Greggs, JD, etc. Historical multiples were driven by strong organic and inorganic story, which is quite challenged in the near to medium term and hence it really needs a re-rating and possible multiple contraction.. It still trades north of 25x fwd PE for -ve to low single digit growth, not to mention execution risk in America..

Think Rentokil is vastly overpriced. Looks cheap if you look historically (which I think is a classic value trap like many others - B&M, Greggs, JD, etc.). Historically multiples were driven by strong organic and inorganic (M&A/bolt-ons) story, which is quite challenged least in the medium term and hence it really needs a re-rating and further multiple contraction..

Also you are right to say that the fall today shouldn’t have been from index selling. Passive trackers will only sell it when it comes out of Index which only happens on the effective date later this month. Wood still remains within 250 until then and as a mandate trackers are required to hold them to avoid any tracking error.

Thanks James for clarifying and np. Although you are partly wrong. They do have a varying degree of impact. I am saying this as an ex-professional in equities at top European banks. I wouldn’t go in details as people are strongly opinionated on this forum and in their bubbles. But to summarise imo, the impact in Wood’s case should be felt closer to the date when the index change becomes effective.

@jame, care to explain/elaborate?

“Tracker funds do not invest in companies like Wood Group or any other company in the FTSE250.

Tracker funds do just that i.e. TRACK the ups and downs of companies in the FTSE250.”

How do they track if they don’t own the underlying?

My bad. Misread the link. It is actually getting into 250 by virtue of few that are going to exit, like Wood Group.

From the useful link shared by Knot, it looks like CBG is not getting into 250!! It needs to be in the top 325 to get an entry, unless the list is incorrect and the names ahead of CBG (at 328) are incorrect and it gets to the top 325 in the correct list. Here is the link I am referring to..

https://www.stockchallenge.co.uk/ftse.php

Melrose takeover of GKN many years ago is a good example to look at for thr 2nd option I mentioned below.

@Hopin, should also mention that the bidder if makes a firm offer to the company which is rejected by the board has two options.

1) walk away in which case UK rules prohibit the bidder to make another bid for 6 months unless a 3rd party bid or few other situations.

2) go hostile and announce their firm offer publicly and take them directly to shareholders to ask the company for an EGM to vote for the bid. It’s quite common in the US but not so much in Uk/europe, but not unprecedented.

Dave, it’s possible, but the lowered oil price outlook may also reduce capital investments for both oil as well as renewables despite all rhetorics. So works both ways for Woods and I think net negative.

Very good poiny @Britpop101. If I am not wrong, believe Goldman is acting as one of their advisor, in which case, GS will be doing bulk of the work on their behalf from UK, regardless of Ramadan. But take your point that key mgmt at Sidara must be working with reduced availability and without as urgency as they would have been otherwise. And take your point regarding RNS coming out, but it’s the potential leak before, that may come out irrespective at any time.