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No one has said that negative posters are responsible for driving the sp down. The issue is negative posters ATTEMPT to drive the sp down, which is why I will never understand the rational for doing so. We all agree that its the rumour of funding that is driving the sp down but when people post blatant lies to try and influence the sp then that needs addressing.
The problem with waiting for funding news is that it may not happen. The sp could recover to £1.80 next week and the following week we could get news that funding is not required or will be done without dilution or even a placing at a premium to the sp. Nobody knows and more importantly we all have our own strategy and each strategy comes with its own specific risks.
lets say a rights issue is announced next month at £1 and 2.5bn shares are issued. That then removes the financial uncertainty and also means the crown jewels don't need to be sold in the near future. This would also give RR a liquidity position of almost £9bn so no need for future placings for at least 2 years.
The mcap then wouldn't be £2.5bn it would be closer to £10bn so at least £2.20 a share with 4.5bn shares issue. Long term the mcap would have a target price of £20bn once the pandemic is over so thats £4.40 a share.
Whichever way you look at, Right issue or not, RR will not be going under nor will the sp remain at these levels for long. You need to ask yourself why certain posters continually post dozens of times each day trying to talk the sp down. Is it because they think the company is doomed or is it because they know eventually the sp will recover so are trying their hardest to get in as low as possible. We all have our motives but to be honest some of the posters on here are 2 faced. Deep down they know what they are doing but will still try and spread fear amongst others to suit their own agenda.
@Casajaluma- ITP Aero is not the jewel in the crown for RR nor has it ever been. Its a small part of RR's portfolio that brings in around one fifteenth of the annual revenue but is still worth around £2bn. It does not smack of desperation. The crown jewels are the civil aerospace and the Defence business's.
I get you are trying to talk the sp down but at least talk sense if for nothing else then for my sanity. It gets frustrating reading some of the stuff posted on here especially when its just clearly made up stuff
The question isn't what price a rights issue offer will be, it's whetever it will happen or not. At the moment the official line of communication is that the bod are looking into various options but nothing has been decided yet. IMHO if there was going to be a rights issue it would have been announced by now.
RR has over £6bn in liquidity so its not like they are strapped for cash. They could just be waiting for air travel to improve a bit more before announcing they dont need any funding or they could announce a sale of ITP. Nothing is for certain but the market does not like this hence the drop. The fundamentals have not changed though. If a rights issue is announced then at least we will have closure but again i'm inclined to believe that it is more likely a sovereign fund will provide the debt without any dilution. This is from the FT:-
"Rolls-Royce is in talks with sovereign wealth funds, including Singapore’s GIC, as part of a plan to raise around £2.5bn from investors next month, according to three people with direct knowledge of the matter. "
Also from the same artice-
"However discussions over the equity raise are ongoing and one person cautioned that the board has been determined to push the decision to the last minute. "
This indicates that the bod are hoping for business to continue its gradual recovery so funding is not required. But everyone will have their own opinion on this.
is if there is world wide lockdown again and 90%+ of flights are grounded as what happened in april/may. This wont happen again, at worse there will be a few national lockdowns but overall air travel will be at a level that will still generate billions for RR in service revenue. As long as air travel is close to the 70% level then there will be no need for funding. This is from the latest half-year report:-
Near-term liquidity position
Following rapid management actions to reduce costs and secure additional liquidity, we started the second half with liquidity of £6.1bn (comprising £4.2bn cash at end H1 and a £1.9bn undrawn RCF) compared to £6.9bn at 31 December 2019. In addition, we now have a £2bn undrawn term loan, partly backed by the UK Export Finance (UKEF), announced in early July and finalised in August.
There is an inherent uncertainty over the severity, extent and duration of the disruption caused by the COVID-19 pandemic and therefore the timing of the recovery in our key markets, particularly in the civil aviation sector. In our base case scenario (further details on page 24), where there is assumed to be no second wave and we see a gradual recovery with Civil Aerospace returning to around 70% of the 2019 level in 2021 we consider that we will continue to operate within our current available committed borrowing facilities for the next 18 months. In this scenario, in order to provide sufficient liquidity headroom, we would replace the £1.9bn RCF following its expiry in October 2021, with replacement funding of a similar amount.
Based on our base case scenario we expect the following significant cash movements over the next 18 months:
· Anticipated H2 2020 free cash outflow of approximately £(1)bn and £(400)m further cash costs related to the restructuring programme;
· Targeted return to positive free cash generation during H2 2021. However, for the full year 2021 we still anticipate a free cash outflow, albeit at a significantly reduced level year-on-year;
· Expected additional cash costs in 2021 outside of FCF, including restructuring costs as well as the final DPA payment of £(148)m due to be settled in January 2021; and
· Debt maturities of approximately £3.2bn will take place between now and the end of 2021 comprising: £1.9bn additional RCF (currently undrawn), £0.3bn COVID-19 Corporate Financing Facility (CCFF) commercial paper, and two bonds of $500m and €750m respectively.
The biggest markets for RR in terms of jet engines are the A350's, A330's and the 787's and these are currently the first choice for most airlines when restarting air travel as they offer the best fuel efficiency as well as passenger capacity.
£1.40 is the bottom for this share as just ITP Aero alone is worth almost £1 a share and that is worth less than 10% of RR's total mcap.
As long as air travel is over 50% of 2019 levels then there is nothing to worry about. In RR's base case scenario they are assuming air travel will reach 70% by 2021. If this happens then no further funding is required. At the current rate of about 1% increase every 2/3 weeks then 70% will be hit by the end of 2020.
There is an article of flight tracker that states that out of the 3 major engines the Trent 7000 is being utilized the most on the A330 as that is the engine that most carriers in Asia Pacific use.
As everyone know air travel in that region is near enough back to 2019 levels and guess which aerospace company is the market leader over there when it comes to supplying jet engines....
From fr24news.com
At present, the outlook for the civilian aerospace division of Rolls-Royce is very uncertain. Fortunately, Rolls has several other valuable businesses. The one that interests me the most in today’s environment is the defence sector, which manufactures engines for military aircraft, helicopters and nuclear submarines.
Defence activities last year generated underlying operating profit of £ 415 million and turnover of £ 3,546 million. New orders totalled £ 5.3 billion, a record performance. The company says the outlook for 2020 is unchanged, suggesting a stable result.
With the Rolls-Royce share price hovering around 300p, the market capitalization of the entire group is only £ 5.5 billion. In my view, the value of the defence firm alone should cover most of this assessment.
In my opinion, anyone who buys the stocks today receives the Rolls’ civil, maritime and research aerospace companies at extremely low prices. Although these operations are facing cyclical downturns, I see no reason why they will not recover.
Rolls-Royce share price: the right time to buy?
Will Rolls Need a Rescue Plan? The group does great engineering, but its financial history is mixed. Fortunately, I don’t think shareholders should be too worried this time.
When the coronavirus crisis started hitting airlines, CEO Warren East acted quickly to cut spending. In May, East said saving measures had freed up an additional £ 1 billion this year. In total, Rolls has access to more than £ 6.5 billion and unused credit facilities. I think that should be enough.
Indeed, I think the company’s stocks offer decent value at current levels. Rolls has a large market share in several key sectors, each of which, I believe, will gradually recover."
IMHO people will look back and regret not buying at these levels. Tomorrow RR could give their civil aerospace business away for free and still be worth more than twice the current mcap. Just need to get this news of funding put to rest one way or the other and then we can all relax.
IAG's problems are due to Boris "the knob" Johnson. The idiot can't see that we need to introduce airport testing asap. All other major countries like Japan, Germany and France have got some sort of testing in place. This has led to an increase in air travel in those countries as people are more confident of travelling. For some reason despite the air travel industry pleading for this he has refused to implement it.
That is the main reason why IAG is as bad as it is now as its main base is Heathrow. RR on the other hand is not just dependent on UK air travel. Worldwide the number of flights are steadily increasing and that is what counts. There is still a long way to recovery yet but that is exactly what this is, a recovery. At the height of the pandemic when all flights were grounded and there was no idea when they would resume RR's price was at the £2.50 level. Now air travel is at over the 50% level at a world wide level and RR's price is £1.50. If this isnt an irrational price then I dont know what is.
If we can get to november with no funding and then we get a trading update saying civil aerospace has recovered to the point where no further funding is required then a rerate is definitely due.
Comparing IAG to RR is like comparing apples to oranges. One is a business limited to air travel and geographically constrained, the other has other businesses that are hugely profitable and has a world wide presence. Its a bit like saying my local newsagents closed due to covid so the tescos down the road will be closing too as it also suffered a downturn in business.
@Casajaluma- so you are saying the sp will be under £1 soon. That will not happen. It is easy to look at the current downtrend and assume this and its also easy to call people dicks for buying in at a higher price and thinking they did so blindly and assuming they were getting a good price. I hate to burst your bubble but you really haven't got a clue especially on your views of other investors. Most of us have done our research and have brought in based on the fundamentals. Fact is we are in an irrational market and as long as the investor can stay solvent and wait for the market to become rational again then there is nothing to worry about.
The issues with Trent were long known. And if you do your research you will find that there have been more other engines from other competitors that have also had teething problems in the past 20-30 years but these companies are still around. Jet engines are complex machines and things can and will go wrong These issues are being resolved and the cash impairment due to this was incorporated into the sp way before the covid situation.
The market is currently fixated on the civil aerospace business and is neglecting the fact that RR has over £6bn revenue and over £700m operating profit from other business's. I agree the funding news is a major issue but this could also be a blessing in disguise. Right now every deramper is harping on about a heavily discounted rights issue that will decimate the share price yet not one person can prove that this will happen other than rumours on click bait sites.
For all we know they could be in talks with a sovereign fund who would provide the money without issuing new shares. Fact is nobody knows. For me personally ive got no worries. I can afford to wait this out for a year or two or more and I can also average down if the sp does go below £1. But in the end the sp will go back over £5, it could take 1 month, 3 months or 5 years.
And just as you say people can come on here saying positive things and trying to affect the price similarly people coming on here posting multiple times the sp will go below £1 are deluding themselves as well if they think they can influence the sp too
https://simpleflying.com/which-aircraft-types-flying-most/
"Modern twinjets such as the A350 and the 787 families are utilized significantly more often than other airframes. More than half of the global A350 fleet has flown at least once during the last week, with the 787 family being utilized at around 45%."
This article was from May so since then the % quoted has gone up. The A350 is powered exclusively by Rolls Royce and close to half of the 787's are as well. In these times when airlines can pick and choose which aircraft to use, they are going for the ones that provide the best fuel efficiency and these are the ones that are powered by the latest Trent engines.
if you look on Flightracker then nearly every A350 is being flown with decent utilization rates. That is close to 700 engines alone that are contributing to the Power by the Hour revenue model. Add another few hundred engines each from the A330, A340, 777 and 787 along with the regional and private jet engines powered by Rolls Royce and it is clear that RR will weather the storm ahead.
Just filter him. Its not like he has anything useful to say. All he does is post personal insults and wishes people to lose money. Probably because he hasnt got a clue how to make any himself so cant stand the thought of others succeeding. Classic definition of an Inferiority complex.
"Inferiority complex is a term used to describe people who compensate for feelings of inferiority (feeling like they're less than other people, not as good as others, worthless, etc.) by acting in ways that make them appear superior. They do this because controlling others may help them feel less personally inadequate.
With his ego he probably thinks he is doing everyone a favour by imparting his so called wisdom. The more you try to converse with him the more egotistical he gets. He has got the mindset of a child. Best to filter the toff. It will make the board a much better place.
Ive filtered that t$at now so don't have to suffer his gibberish delusional posts now. Ive come across many posters who think they are the Warren Buffet of LSE but this guy takes the biscuit. Doesn't back anything he says with any financial or business acumen but thinks he's the equivalent of Ronaldo compared to pub footballers. People like him cant be debated with. What a tool
Id rather be out of the game then have an inferiority complex. But I am better than you so I'm just going to ignore you. You don't have an investing acumen so are not worth my time
Current price is a steal. People are forgetting in this current climate that half of RR's revenue and most of their profits are from business's that are largely immune to COVID pressures. Just the defence part has over £3bn revenue and over £400M operating profit and has per the last update this has not been affected by COVID at all. Governments will always spend money on their military. Power systems has only had a small decrease but that is improving as well especially as Chinese economy rebounds.
Current mcap is just over £3bn BUT should be around £6-8bn just on Defence and PS. Rolls Royce isn't too big to go under but it is too important to go under. This is highly unlikely though as 50% of last years revenue is still there and from the remaining 50% they should still get 20% from that this year so they still have around £10bn of revenue a year.
The current downturn is due to uncertainty regarding funding. People have looked at IAG and are assuming the worst but this is equivalent to comparing apples with oranges. IAG has only one market which is air travel and that too is limited to UK and Spain. RR has Defence, Power Systems and Civil aerospace. More importantly its aerospace business is not limited to any one country. It is a worldwide business with major customers in Asia Pacific, North America, the Middle East and Europe.
The Power by the Hour model used is actually a good system in place. Airlines around the world are ramping up the number of flights. Pre-covid average utilization was around 10-13 hours a day. Currently around 20% of airliners are grounded and the rest are averaging around 6-8 hours a day. Based on this RR should be getting close to 50% of last years service revenue This is a significant decrease but its a marked improvement from april and these numbers will only go up.
The target for air travel is 70% of 2019 levels by 2021 to avoid further funding. At current rate of increase this is doable. This is why I think RR have said there has been no final decision regarding an equity raise. They are most likely waiting to see if the current momentum can be sustained. If it can then no funding will be required.
Current price is a steal. People are forgetting in this current climate that half of RR's revenue and most of their profits are from business's that are largely immune to COVID pressures. Just the defence part has over £3bn revenue and over £400M operating profit and has per the last update this has not been affected by COVID at all. Governments will always spend money on their military. Power systems has only had a small decrease but that is improving as well especially as
UK lockdown will not have a major effect on NEX even though the chances of one are remote. That is a small part of its business. USA, Spain and Morocco is where they mostly earn their bread and butter and from todays update its looking very rosy. Onwards and upwards from here. Should hit £2 before the end of the year if not a lot sooner. Long term this has got a target of £4 IMHO.
The results were as expected. The key thing is that even with being closed for 4 out of 6 months CINE still managed just over $50m EBIDTA and only $1.3M cash outflow from operations. I was expecting it to be worst.
As a responsible company CINE have to make sure they be upfront with any potential risks regardless of unlikely it is. Bottom line is that over 75% of the estate is open and generating cash. December covenants are based on pre IFRS 16 so rolling 12 month EBIDTA needs to be around $400m which is acheievable.
There will be no second nationwide lockdown for either the US or the UK. The economic damage would be too great. Plus the daily deaths are a fraction of what they were in march/april. As long as daily deaths are below 50 in U.K. and 1000 in USA then there is nothing to worry about.
can people stop pushing their shares on this board- if you had followed andy's advice and brought GDR at 150p and GGP at 27p you would be in a similar position or worse then buying into RR AT £2 but will less upside. Please keep the ramping to that shares board instead of peddling it elsewhere
aa111- I've recommended your post even though I am one of the ones you are talking about, Fair enough you have got a point. I'm just going to ignore what is being said by certain posters and just focus on discussing RR.
Hopefully today will be a blue day. With the 2 week mini lockdown in place covid cases should start to fall next week. If it can get to under 1k per day after 2 weeks then this should push the sp up. I still say the current price is a joke. The uncertainty regarding funding is having a negative effect. Once this is addressed the rerate will begin. The timing could actually be perfect as the rumour is news will come in early october just as the 2 week mini lockdown will end