Member Info for TheTrotsky

By my calculations, FTC is currently trading on a forecast 2025 PEG of 0.69 and a forecast 2026 PEG of 0.54; a PEG of less than 1 is usually considered to be a good BUY signal (according to Jim Slater's Zulu Principle). Also, FTC only currently supplies its communications antennae for use in ground-based satellite stations but, subject to the outcome of ongoing customer projects, there is a distinct possibilty that they might soon be approved/supplying for use in satellites too. FTC will never be a high volume business (like its pre-2000 incarnation) but it can carve out a very profitable high end, niche communications business with potential sales in excess of £50m within the next 2-5 years.

Holding huge amounts of surplus cash is never sensible; its not an effective use of investment capital. Investors don't invest to get a worse return (after taking account of operating costs and the lower retunrs paid to companies) than they could get by putting the same cash in a bank account. It's Economics 101.

Bershire Hathaway now has way too much cash on its balance sheet. It means that it's taking bigger and bigger risks and is, questionably, beginning to ignore Buffet's old investment mantras. Berkshire Hathaway has done well recently investing in Apple but it could, just as easily, have gone pear-shaped. Thirty years ago Apple was on the verge of bankruptcy, having only ten years prior been one of the top 50 companies in the US. You can never say never. Apple was brought back from the brink by Steve Jobs but he's gone and Apple is no longer the technology disruptor that it once was. Berkshire Hathaway's stake in Apple was way too large to divest on the QT. Traditionally it has always been a long-term investor; it's Apple acquisition was a departure from its normal modus operandi (a very large, relatively short-term, investment). I suspect that Buffet's control at the helm is now, understandably, waining and it's his lieutenants, with different ideas, who are now beginning to call the shots and who have fallen into the classic "cash trap". Berkshire Hathaway should probably be handing back $100bn+ to its investors now, otherwise it seriously risks becoming just another hedge fund (they'll probably have spectacular good years and equally spectacular bad years). Berkshire Hathaway's existing investments are already highly cash generative, so the cash dilemma is just going to get worse.

67Sam, Perhaps we should instead adopt the French style wealth tax instead and do away with IHT. I can highly recommend "Le Diner de Cons" if you want to see French wealth tax in action ;-)

Lending, I'm saying that businesses shouldn't be exempted from both IHT and capital gains. I'm saying that it's reasonable that businesses and agricultural land should be exempted from IHT on death but I don't think that the gains that have been accrued through the original owner's lifetime should be completely exempted from capital gains if their beneficiaries subsequently sell the business/land after their death.

As the rules currently stand, a business/land that was originally worth (say) £100 at the date of acquisition and worth (say) £1m at the individual's death would be exempt from both IHT and capital gains on the whole £1m following their death. At death the busines/land are currently valued for IHT purposes, exempted from IHT and the IHT valuation effectively becomes the purchase price of the business/land for the beneficiaries for the purposes of any furture sale.

Exempting the gain at death is fair enough (potentially forcing the sale of the business/land to pay the IHT is not desirable) but exempting the gain entirely is, IMHO, unreasonable. IMHO the untaxed capital gain at the date of death should instead be "rolled over" and taxed if the business/land is subsequently sold by the beneficiaries. The business/land could still pass down through several generations without ever being taxed. Obviously the change should not be retrospective; families that have already benefited from tax free uplifts in the base cost of teh assets, and continue to hold the assets, should still benefit from previous uplifts.

BsaBantum, in a word, "Yes", as far as it relates to assets that have not been otherwise taxed during the individual's lifetime. Property and businesses should be subject to tax, either at death or on their subsequent sale. Why should assets that would othewise be liable to tax if sold during the individual's lifetime be exmpted, either in whole or in part, from any tax simply because they have died?

Getting rid of relief for businesses and farmland is unlikely to happen (the last thing governments would want to do is to force families to sell businesses and farms to pay IHT) but the government might want to tighten the rules e.g. weekend farmers (where agricultural land is bought to avoid IHT rather than as a business).

However, it's long overdue that the government changed some of the knock on effects. It's one thing to be exempt from IHT at death but it's quite another to get a tax-free uplift in the value of the assets for subsequent capital disposals; effectively any increase in the value of the assets arising prior to death is exempted from any future capital gains.

You're probably right but you're ignoring the impact of wealth transfer; the rich are getting wealthier (and generally avoid IHT by tax planning) and the middle has been squeezed. IHT is predominantly a South East problem.

Gone ex-div this morning

Rocket, I suggest that you re-read the RNS. It states that he was actually awarded 510,640 nil cost shares (he was awarded the options when he was appointed to replace awards he forfeited when he left Aviva to join DLG) and sold 454,979 shares to cover the costs of exercise including tax and dealing costs. I think that LSE is misreporting his current shareholding (he hasn't sold the remaining shares since).

A BOD lacking action is not necessarily a bad thing; we definitely don't want a BOD taking actions just for the sake of it. OMG operates in fairly niche markets and is unlikely to sign material, mult-£million contracts every day (if at all). Far better a BOD that just gets on with the job quietly and efficiently than a BOD that feels obliged to announce every bit of news, material or not, to keep investors "enthused". For me, the only fly in the ointment from the last results was the relatively poor operating performance (operating margins appeared to be significantly below both historic levels and future target levels); hopefully this was just a periodic blip.

My point is that the BOD have had ~2 years to identify a major acquisition and the risk is that they might now be tempted to do a deal simply to to justify having held onto the surplus cash for so long. If they can't find an acquisition that meets all of their criteria I'd prefer that they'd distribute the surplus cash rather take a "flyer" on an acquisition that only meets some of their investment criteria.

I don't think the BOD has been inactive per se but, IMHO, they've been somewhat indecisive. Personally, I think they've had more that enough time to identify an acquisition and should have made the decision already to distribute the surplus cash; some would argue that that point is only now approaching. I think that in any event they need to make a decision one way or the other by the end of this year, at the latest, and, if they do pursue an acquisition, that they do so for the right reasons, rather than think that any acquisition is better than none.

As regards taking profits, that's difficult when you're now approaching the red ;-)

This share has traded between c80p and c120p for a number of years now and, as long as the BOD does nothing rash and gets results back on target, then I don't see that fundamentally changing. Indeed if the share price does dip towards 80p then I might be tempted to add in expectation of the "normal" rebound.

At some point the market will discount the cash on the balance sheet because history shows us that management more often than not makes bad business decisions when they've got cash burning a hole in their pocket and often end up making unwise investment decisions (they become prey to investment bankers who see an opportunity to make a buck without a care for whether or not it's a good long-term investment for the business).

The fact that this BoD doesn't recognise the risk is not a good indicator. They clearly didn't have an acquistion in mind when they sold Yotta (not even a wish list it would appear) and hoping against hope that something might turn up is not how you run a successful business. The fact that they didn't have a target acquisition in mind when they sold Yotta is perfectly fine (they boldy seized an opportunity to realise value fron Yotta); hoping that one will materialise if they wait long enough isn't. Good management makes bold, decisive decisions (repeatedly); it doesn't sit on its laurels.

Nothing happening here. They are trading within their historic range.

They've too much cash on their balance sheet and it's now becoming not only ridiculous but high risk. Individual investors can get a better return on the cash than OMG can and, the longer it goes on, the more pressing it becomes for management to do a deal. It's bad business practise. The board has had the better part of two years to try and find a (major) acquisition. They've already done one small, dubious acquisition (there are questionable synergies and they didn't dispose of one non-core business just to acquire another non-core business). The pressure to do a deal is understandable but they shouldn't be looking to do a deal just because they have the cash; they should be doing a deal because it makes commercial sense and, if it makes commercial sense, then raising additional capital should never be an issue.

There's no shame in admitting that they can't find the right deal at the right price to grow their core business. They need to distribute the surplus cash now and come back to shareholders to raise new capital if and when they find an acquisition that's right for them. Sitting on the cash and generating a paltry investment return is bad, bad, bad! It makes management lazy, less cost conscious and more prone to make bad managerial decisions for the wrong reasons. Their ROCE is lousy.

Essentially it's still a bear market; private equity, brokers, analysts etc. are looking for any excuse to undersell the market (in a bull market they'd be looking for any excuse to oversell it). When gloom sets in it's often very hard to shake. We should just wait and see how markets respond in the coming weeks.

They've been clammering for the BoE to reduce interest rates and some analysts are now predicting that there might be a further two rate cuts before Xmas but It's a glass half empty as far as they are concerned, despite the fact that the profits of LGEN are likely to rise (as interest rates start to fall we should start to see a rise in bond prices, and investment gains should follow reversing the trend we've seen in the last 3-4 years, and investors returning to the market to try and improve their investment returns).

BsaBantam, AB has got more cohones than all of her male peers who you seem to prefer. Well you've got a male CEO at LGEN and he's managed to knock 10% off the sale price in less than six months just by opening his mouth (the Capital Markets Day went down like a lead balloon)!

Meanwhile, AV has gone from strength to strength and has consistently delivered under AB and her team. AB has been in situ now for circa four years and some men still seem totally incapable of giving her credit where credit is due. AB is calm in a storm; people seem to forget that it's been quite a turbulent time over the last four years and AB has never panicked, like some of her male peers. Remember the rushed RNSs to assuage market's fears on at least two occasions whereas AB has remained silent, only issuing RNS when there is real news, and consistently delivered.

Transfer your money to LGEN by all means but if you haven't got a business case keep your misogony under wraps.

It should be noted that TFIF went ex-dividend on 18 July and that the fall in the quoted NAV between 16 July and 22 July is due the NAV reported on 22 July being XD i.e. excluding the 2p dividend payable on 02 August. So, as the expectation of the base rate falling continues to build momentum, the NAV is continuing to trend upwards.

One would expect the NAV to start to rise as interest rates fall. In theory, as interest rates start to fall, investors would start buying into the underlying non-indexed bond funds (the yield on indexd bonds tracks interest rates and, as such, the NAV should not be affected by interest rate movements), which, in turn, should push up the price of the bonds and reduce the yield in line with the fall in interest rates.

I believe that they've been short since late May, if not longer

Because it's being shorted by Hound Partners (at least in part)

There appears to be a WHT exemption for dividend distributions made by Luxembourg funds to their investors according to this website: https://cms.law/en/int/expert-guides/country-tax-guide/luxembourg

It depends on how you treat the capital raised for capex; they don't intend to use it to pay down debt and, although in the long term you'd hope that capex on existing property would enhance its market value, in the short/medium term it might only prove to offset the ongoing general market falls and/or declines in asset values that would otherwise occur without the capex (the NAV has in part fallen due to asset sales but also due to the continuing market downtrend). I've therefore ignored it for the purpose of assessing LTV until a clearer picture emerges.

Also, bearing in mind the indicative reduction in total dividends going forward of c£10m, despite the expected reduction in financing costs which should follow the capital raise, and the requirement for REITs to pay out at least 90% of their EPRA income, would all point towards a (relatively) significant reduction in net rental income. Capex may cause some disruption to rental income but it seems more likely that they are planning to offload another c£50m of property IMHO.

If we're being honest even an LTV of over 40% is still too high at this point in the cycle. They'll have little, or no, investment headroom after the capital raise (small additions perhaps but not large portfolios) and if they want to be in a position to take advantage of new opportunities as the investment cycle starts to turn then they either have to reduce their LTV still further (by asset sales) or hope to return to the market to raise even more fresh capital in the next (say) 12 months.

Given their stated aim of now reducing LTV below 40% I think they needed to raise another c£40m of capital to pay down existing debt. That was probably an ask too far. As a result, they're likely to continue downsizing their asset portfolio after the capital raise (unless there is a marked increase in propery valuations in the short term) and their EPRA earnings will, inevitably, be reduced accordingly.

The real question for me is how did they ever expect to pay down their debt? E.g. how did they originally intend to repay the retail bonds? Did they think they'd simply be able to refinance them on similar terms? Was it really prudent to assume that debt costs would remain at historic lows? When they issued the original retail bonds quatitative tightening was already on the horizon and, even without COVID and the war in Ukraine, that was likely to result in rising rates. It seems idiotic to have funded long-term assets with short term loans and not undertaken a sensitivity analysis.

Certainly, with the benefit of hindsight, the issue of unsecured retail bonds without a plan for repayment (not refinancing) looks extremely foolhardy because once interest rates started to rise their ability to refinance was severely compromised. I have another REIT (AEWU) that foresaw the probable increase in interest rates and acted to refinance their secured loans 6-12 months beforehand but I'm not sure RGL ever had that luxury. Even if RGL'd foreseen the probable increase in interest rates, issuing new, replacement bonds in a short time frame would have been very problematical and their secured lenders would probably have baulked at their existing weight of debt and have wanted some of the existing secured debt paid down at the same as re-financing (something RGL was never in a position to do).

I sold at a (painful) loss and will wait to see how this now progresses (the fact that Bridgmere still sees an opportunity here is "tantalising"). As usual I waited too long to sell (I should have sold before the capital raise was confirmed) but have to admit at being rather bamboozled by the share price reaction after each RNS. Each time I expected the share price to tank but it always seemed to rebound more than I expected. Having net assets potentially equivalent to 4x the share price looks great on paper until you realise that the patient is on life support and at risk of running out of cash before the assets can be realised in an orderly fashion and without resorting to a fire sale.