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Read the transcript of the Solvay Q3 results Q&A released on 28 Oct. They wax lyrical on Actizone. If this is worthy of mention given their market cap of EUR 11 billion it must be potentially significant to Byotrol, market cap £24m. Royalty receipts typically lag sales by 6 months so I don’t expect this to be obvious in the next TU but the direction of travel longer term appears encouraging. I assume the directors are currently in close period under the rules therefore cannot buy shares even if they wanted to.

Shares were 2420p in May 2019 when AUM were £99 billion, shares are 1470p today with AUM of £135 billion. OK deduct 30p for special dividends paid since May 2019 and the adjusted peak price is 2390p. I understand margins are under pressure and the jury’s out on the CEO but surely this is priced in. Shares down 39% from peak, AUM up 36% since then. US buyers routinely run their slide rules over any listed UK company which has a profits miss. This will be no exception.

Given the magnitude of the recent share price drop, much in the wake of a better than feared Q3 trading update, directors’ buying is conspicuous by its absence. This is a 31 March y/e company so the directors are not currently in close season and can buy if they want to. I’d wait until one or more directors buys a significant number of shares before buying any myself.

This is the 4th consecutive profits warning (Feb, July + Oct last year and now today) from Glaxo which is shocking mis-management of expectations for a company of this size and looks like the BoD is in semi-denial of its problems. On 73p of eps for 2021 (assuming no more downgrades), that's a forward P/E of 17.5x at 1284p - expensive for negative earnings momentum. Market will now adopt a "show me" approach to management who have lost credibility. Ergo, no hurry to buy.

Slightly surprised by today’s share price reaction. Jackson is a good and substantial business but unrelated to the rest of Pru’s operations and Pru has suffered from a conglomerate discount owning it, ergo right to de-merge it as two separate share prices added together should exceed current Pru price. I guess the market was expecting Pru to sell/float Jackson and part distribute the proceeds received to shareholders by way of a special dividend. Proposed de-merger of Jackson brings no cash inflow to the Pru so they need to raise equity in lieu. Pru, shorn of Jackson, becomes a much purer takeover target for somebody like AIA. Pru bid for AIA in 2010 wrongly believing AIA to be contemplating a bid for the Pru: Pru’s shareholders voted against the AIA bid. So there has been a previous attempt to amalgamate the two businesses. Pru is on a sky high P/E even after today’s fall so acquisitions funded by an equity raise should be eps enhancing.

battleja

IMHO there must be a possibility private equity is now looking at this - possibly different PE firms to the PE vendors still on the register. The underlying IRR on new cases is definitely there once the government ends protection from creditors for companies otherwise insolvent, and the lumpiness of the cash flow arguably makes the company inappropriate for a public listing as investors in public companies want smoothed profits. I just fear Manolete as currently structured is under-capitalised for the size of the opportunity available and private equity with plenty of dry powder might make a more logical parent away from the public gaze.

I also did a forensic "deep-dive" into the Annual Report and concluded IMHO that 1/ the IRR on realised investments is impressive but will inevitably attract new competitors longer term which will drive down returns, 2/ unrealised gains are best ignored although there is no evidence that estimates are unduly optimistic, 3/ disclose of underlying investments is transparent, 4/ the business model is well explained and very different to Burford's, ergo it is wrong to tar Manolete with the Burford accounting brush and 5/ cash flow is unavoidably lumpy which makes analysing cash conversion of reported profits difficult. Because of erratic cash conversion, it is unlikely to command a high P/E multiple. The government has temporarily offered all companies unsustainable protection from creditors which means no new cases right now but there are tens of thousands of insolvent companies putting off the inevitable, so there is a pent-up tsunami of opportunities in the pipeline but Manolete may need an equity raise to take full advantage. Sellers at this price will be hard to find (IPO price 175p, opened at 211p in Dec 2018). Cheap, but no hurry, IMHO. AirBnB has an insane market cap and will be cash negative for the foreseeable future.

This could be a great recovery play, alternatively it could be a re-run of Interserve. I suspect share price is a compromise between much upside and much downside as nobody knows. The Govt will not allow Bab**** to be taken over (unless it’s by BAe) so shorters may have a go at it in the next few weeks knowing next news is not until May - which is an eternity in these markets.

Interesting to discover when the Annual Report for year end March is published how much lower the performance targets have become for the new CEO and CFO having trashed the share price so soon after joining. Failure to give guidance is classic kitchen-sinking accounting. The company’s corporate governance is suspect for allowing this to happen. That said, the company looks like it needs a rights issue.

There are hundreds of thousands of businesses on unsustainable life support and vaccine news brings forward the date at which the life support machines will be eventually switched off. This is holding Manolete back in the near term plus Manolete is unhelpfully tarred with the Burford accounting brush, but the IRRs on their underlying "cases" remain very attractive and Manolete can remain very selective. Hundreds of companies have directors currently paying themselves dividends out of insufficient profits, which means unlawful loans.

Worries of a Democrat administration lowering US drug prices. Glaxo has a lot of debt and 41% of Group sales are in the US, so it is exposed.

11%+ yield on an already cut dividend (company guiding to 137p full year dividend going forward), now eps covered, and tobacco sales in general relatively unaffected by covid compared to most other B2C businesses. As the smallest of the world’s tobacco majors in a consolidating industry (only 3.5% global market share, ranked 5th in the world), a larger competitor could navigate a way through the anti-trust laws and make a bid. P/E of only 7x consensus forecast y/e 30 Sep 2020 eps. Blame the ESG “zealots”.

Last year’s audit fee was only £235k, surprisingly low for a company with this market cap. The supply chain issues recently exposed both increase future audit scope and reputational risk for any auditor so I can understand why auditors are wary of the risk/reward ratio without a much bigger fee. I suspect nothing more sinister than this. However, Ed Bonham Carter’s move announced last week, stepping down from the Jupiter board to a new role focusing on Jupiter’s responsible investing, rings alarm bells to me as Jupiter own 10% of Boohoo (acquired through the Merian merger) and have big profits to take, so exiting through a market placing on future share price strength would not surprise me as a high profile display of Jupiter’s ESG credentials.

The critical solvency ratio fell less than I expected and Board is therefore perfectly justified to declare an unchanged dividend. We forget life insurers are routinely stress tested by the PRA to be able to survive financial market dislocation far worse than the effects of covid and they hedge their key risks and sensitivities accordingly. Assuming an unchanged final dividend, 8%+ yield looks like a bargain to me in an equity market bereft of yield and zero to negative interest rates. Few people understand life insurers but the sum of L&G’s underlying parts more than underpins its market cap and gives the Board optionality to unlock hidden shareholder value when the time is right.

I’ve just spoken to a trader who says the big institutions are too “woke” to buy it until Alison Levitt has reported (months away, not weeks) but won’t sell it at this low price. Ergo stalemate. Impossible to know whether directors not buying is because they want to but can’t (in possession of price sensitive information good or bad ) or can but don’t want to (would be worrying). They’ll know the sales figures for the last few days and will already know if this story is impacting them, or not. Despite a big fall, the P/E multiple is still sanguine.

Anybody know why the preliminary results will be published so late, Sep 8th this year compared with July 31st last year ?

I have no position in Boohoo and never have but it’s obvious to me the FCA should be investigating the media for publishing such an inaccurate price sensitive story which began as perpetrating slavery in Leicester then morphed to Boohoo being unwittingly legged over by a Moroccan supplier. A big difference. At worst, Boohoo are guilty of indifferent disregard for what’s going on in their supply chain. I’d be more concerned about the smelly corporate governance with the company appearing to be run as a private fiefdom.

Aviva has an obvious self-help agenda, a conglomerate of insurance businesses with questionable connectivity ripe for unbundling. There are few synergies from having leading market positions in insurance markets in the UK, Canada, France, Italy and Poland and smaller positions in other geographies. The EU regulatory ban on insurance companies paying dividends hit Aviva hard as its subsidiaries cannot pay a dividend to the centre. I hope the new CEO pays the cancelled 2019 final dividend as a catch-up special dividend as soon as possible (the solvency ratio on the most recent update was strong enough to do so) and starts to re-focus the group as there is a lot of value to be unlocked here for shareholders.

That’s why the CEO was defenestrated. The unknown issue is whether or not an equity raise is required. We’ll know with the Prelims at the end of the month.

EZJ share price now within 5% of where it was in June 2019. EZJ only normally makes profits in calendar Q2 and Q3 and loses money in Q1 and Q4. Q2 has obviously been totally sacrificed. Fares for flights being offered in July and August - only a fraction of the usual timetable - are rock bottom. Most planes will still be grounded and those flying struggling to break even in Q3, followed by 6 months of more losses. They would have been unable to hedge the rock bottom fuel prices of recent months, unsure of fuel requirements and seen as a counter party risk by traders. The Board have done well to protect the company’s principal asset - ownership of 45% of Gatwick’s total slots.