Member Info for SPMG

Kern, so are you saying that you think the problem with LLOY is that people will no longer be able to buy houses in the UK? Therefore LLOY (and I assume all UK retail focused banks) will not get any new residential mortgage income. Do you have any evidence for this being the case? You said yesterday that you were negative on LLOY because you thought there would be losses on commercial property loans (in spite of average LTVs being sub-70%). Your latest post seems to focus on the retail banking side. Neither of these areas seem to have any substance behind them. So I’m quite happy holding onto LLOY at the current price and using this as a buying opportunity. GLA.

LTI, I have read numerous negative posts about LLOY which focus on what the share price has done over the past 10 years. Kern’s post today was the first I have seen for a while which references an expected fall in profitability based on specific reasons (commercial property losses). I would like to understand why he sees this as a specific risk and I can then take a view as to whether I agree/disagree with that. IMO the entire point of these BBs is to hear contrary views to your own and make sure you have considered these risks.

Kern, that was a helpful post that you put up. I’m long on LLOY and the shares are tucked away in my pension so I’m happy to hold for a 10+ year timeframe if necessary. For that reason, I see dips caused by events similar to that in Italy at present as an opportunity to top up. What is key for me is LLOY’s ability to generate a strong maintainable EBITDA going forward. Where you say “Lloyds are making good profits, commercial property and debt could erode much of that, and what is left will be picked clean by HMG”. I’d be interested to hear your views on what impact you think this is likely to have on EBITDA. My understanding is the exposure to commercial property is nothing like it was back in 2008, with maximum LTVs below 70% (more typically less than 65%). I am bullish on this stock, so I would genuinely appreciate your views on this to try and counter my positivity!

Stagecoach, I’m pretty sure I saw AHO say in the results presentation that it was their intention to wait until the full year results before announcing any further buy-back. So I’d be surprised if there was any announcement in the Autumn. My understanding was that LLOY intend to have a progressive dividend policy, with any excess cash over and above this at the year end being used towards a share buy-back. If trading remains in line with expectations and with no further conduct charges, that could be a c£2bn buy back next year - representing 4-5% of the shares in issue. (A lot of “ifs” in the above statement, and who knows what the next month will bring never mind the next year....)

Jamesroo, do you not think that a return of 8% to shareholders is pretty good for a £45bn market cap business? Of all the things to criticise LLOY for, the current levels of cash generation and returns to shareholders would be low on my list. I appreciate that this stock may not be exciting enough for you if you have generated an average return of 25% per annum over the last 34 years. I wish I’d followed your investments over that period... backing your share picks with £1,000 back in 1984 would now be worth £1,972,000. Remarkable.

Noody, I agree, I must be missing something as well and like you my portfolio is now heavily weighted to LLOY. It would be helpful to hear from someone more negative on this share as to what they see as the main risks and how this impacts on the EBITDA (and ability to cover dividend/extend buyback). The gap between stat profit and underlying profit has closed considerably, so if we were to assume that LLOY is now an £8bn EBITDA business, what are people expecting to happen to the EBITDA going forward? Is it the risk around impairments on unsecured personal debt? Or is it corporate debt impairments? Or future misconduct charges?

Good to see this stock has started to tick up to a more realistic price. It seems to be rising in spite of the negative sentiment around DFS and CPR recently. Still trading at a ridiculously low multiple.

Market Cap of £70m. Net cash of £40m. Makes £17.4m EBITDA. Massively oversimplifying things here, but you could look at that as a multiple of less than 2x EBITDA. That coupled with the c8% dividend yield makes me think these shares are hugely undervalued. Price target of 215p feels very low to me. DYOR.

My guess for tomorrow is a positive statement saying like for like sales up c5% and it has continued in to the New Year. A slight caveat that it's too early to say what the Brexit impact will be. Share price to stay in the 170-180 range.

Wavey, in the half year results it shows that there are 35m shares in issue, but if all the CLNs and options are converted then that will increase to 58m. It is quite a significant dilution to earnings. The last note in the half year report shows this if you want any more detail. I do like the company and I still hold a stake here, but I don't think the fundamentals justify the price increasing much more. That said, AIM stocks with this level of market cap seem to be more driven by sentiment than fundamentals - and this one seems to have momentum now. GLA.

Wavey, if you're looking at P/E ratios on this share, I'd bear in mind that there are £1.5m of convertible loan notes in Petards. These will convert to 20m of shares prior to 2018 and will significantly dilute earnings per share. I've been a holder for the last few years and the conversion of the CLNs is always a bit of a complication when looking at valuations.

I've just started looking at this stock and I was wondering anyone who's studied this stock for longer could let me know roughly what the Net Asset Value of the company is. From the interims, it looks like £1.4b property + £0.1b cash - £0.8b debt. So roughly £0.7b against a market cap of £290m. Is that about right?

There's not a lot of activity on this stock, maybe not a bad thing that it's under the radar. In advance of the trading update in mid-Jan, does anyone have any thoughts on whether the directors should look to use the excess cash for either a share buy back or a special dividend? DFS have been buying back shares for quite a while now and I wonder if it's something the SCS board should look into.

It looks like the market is assuming that one of the parties will up their bid - and you'd think there would be scope for that when it's still a large discount to NAV. I'd be amazed a deal didn't happen as the current shareholders are mainly the old loan note holders who converted at the time of the debt for equity swap. Fingers crossed its at closer to 200p than 180p. I like the look of PPHE. If you're looking to reinvest profits, have a look at SCS. An unloved furniture retailer which has c£20m excess cash on b/s, makes £16m EBITDA and had a mkt cap of £68m (so a 3x EBITDA valuation).

Thanks JVAVFC, I was wondering what caused the price increase today. If the suggested takeover price of 180p a share happens, that would be a market cap of £400m. Still quite some way off the net asset value of £700m+, so possibly good scope to increase the offer from the 180p if it's a competitive process.

Thanks Soleman. I agree that the scale of a DFS should make it a safer stock than SCS, but it is quite a gap in multiples. Particularly if you factor in that SCS has net cash of £20m and DFS has net debt of c£135m (I don't think the PE ratios will necessarily reflect that). I assume the share-buy back has had quite a positive impact on the price here as well. Based on the dividend yield, I think both stocks are better value than leaving your money in the bank. GLA.

Has anyone compared the share price of DFS against SCS? I'm invested in SCS and it has a market cap of £68m with c£20m net cash and an EBITDA of £16m. So it's trading at about 3x EBITDA - which feels very cheap. I know DFS is a much bigger entity and I suspect a far stronger brand, but just wondering if anyone had any views on the comparative values/share prices?

Good call on buying in under £1 AP. Hopefully see the rise continue up to results getting announced.

Good set of interims today - slight concern about the fall in the order book, offset somewhat by the increase in recurring EyeTrain revenue. I'm struggling to understand the fully diluted EV/EBITDA ratio quoted per the WH Ireland note. Any help would be appreciated.... My understanding is current market cap of £6.1m. There are £1.5m of Convertible Loan Notes which convert at 8p per share, so c18m of additional shares which will convert. Once this happens the market cap (at 18p per share) increases to £9.5m. After the £2m of cash on balance sheet, this is an EV of £7.5m with EBITDA of £1.5m, being a multiple of 5x. That multiple feels about right for this sort of company. If the orders slow down, it might be looking like a pretty full multiple though. It's been a good run for the last few months, so I might look at cashing in some profits on this soon....

Thanks for that, I'll have a read and see what their take on it is. Good luck if you've now bought in. As you can see from the lack of posts on this board, it seems to fly under the radar. Hopefully that IC article will breath a bit of life into it. If not, I'll keep topping up the pension if it stays at this level.