Member Info for ToffAppleton1

Heally

‘I'm just averaging into the companies I like. I have 3 tranches in BT now and I made my first purchases of RDSB and BP today.’

I expect you know BP’s operations are centered in the USA. They have far more exposure to WTI than Brent. And the cost of extraction is considerably higher.

Most of the time there’s a high correlation between the two – the prices largely move in sync. But whereas WTI suffered greater than 100% losses, Brent ended the day less than 7% down.

That’s why I much prefer Shell over BP.

In my view it makes Shell’s dividend safer than BP’s

Toff

Fruit

“looking at last 3mth performance ftse has fallen by 23 per cent and bt by 30 per cent.”

The time frame I was quoting was more like two months; not three.

February 16 - ftse100 closed at 7400.
Up until then BT was in free fall

Since them the market has dropped 1800
But BT. Although it has continued to drop has outperformed the market overall

This is simply because BT hasn’t been so effected by the virus as many other businesses.

Toff

Fruit

“toff - i did ask this a couple of days ago, but you didnt reply. I just wondered if you were short or had no position in bt? “

I’m a short term trader mainly. Looking to make a fast buck with a quick in and out.

However I do hold a few shares long term for dividend income. Shell being one.

As regards BT. I did have a small position up until recently but sold at a loss. Right now it’s in terminal decline. The proceeds from it has been used for trades that have already recovered some of my losses.

I’m waiting for the next trading update to see what that brings before I go anywhere near BT again.

Toff

Fruit

‘Only reason i can think off, as telecoms shouldnt fall as much as oil stocks thats for sure.’

There’s no correlation with oil stocks.

People have got short memories when it comes to stocks. BT went into a howling dive right after the election, long before the virus gripped markets

It was by far the worst performing stock in the ftse leading up to the virus.

However it has to be said it has outperformed the market since.

Don’t be influenced by Fleecy’s alternate version of reality - check the real reality out and take a look at BT’s historic shareprice on yahoo.

This share won’t get direction until the next trading update on May 7. But given market sentiment towards BT, if it disappoints it could drop to £1.

Toff

‘What is clear is that BT is at a bargain basement valuation and that value will be seen by the market at some point.’

Bargain basement valuation maybe Fleecy, but you didn’t buy at these levels, you started buying in at £4-5. You need BT to triple just to break even.

Your alternate version of reality belongs in a science fiction book.

Toff

Gert

My opinion about brokers counts for nothing. But the market is influenced by them and therefore cannot be ignored. It doesn’t matter whether they’re right or not.

Toff

Centrica : HSBC cuts to reduce from hold; cuts target price to 28p from 80p

Toff

Math

“I expect the div to be cut, but no capital raise.“

Me too. I’m predicting the dividend will be cut to 5p. This would give BT in excess of £1 billion to spend on infrastructure/reinvestment.

Judging on BT’s trading figures next month, the market should get a better idea if a rights issue is in the pipeline.

Toff

ND

“Where dose the 14billion pension deficit come from ???”

I overstated BT’s pension deficit and for that I apologize. It’s probably closer to £8billion.
One has to wonder what impact the current stock market plunge has had on the fund? And all the dividend cancelations are going to weigh.

In 2018 BT had the second-equal worse pension deficit in the world. Do you envision an improvement on that in 2020?

Toff

Booboo

‘When the stock market goes down so does BT's pension deficit ,in the same way when it goes up the deficit is reduced eventually back to zero.’

So the deficit goes down whichever way the market goes. A win win situation

LOL

Toff

When Centrica (CNA) cut its dividend by more than half at its half-year results in July, group chief executive Iain Conn cited increased demands on the energy company’s cash flows, which included “additional pension contributions” – its scheme deficit was calculated at £1.4bn following its triennial valuation. Centrica’s overall deficit contributions, including the previously disclosed asset-backed contribution arrangements, will amount to £223m in 2019, falling to £175m a year from 2020 to 2025 before “a balancing payment of £93m in 2026”. These payments are likely to represent a fairly sizeable proportion of its full-year cash flow – Centrica registered net cash flow of £1.9bn in 2018, and these levels are plunging. .

The pension deficit alone is only marginally less than its market value. Forget about dividends for the next few years - battered shareholders will be lucky to escape a rights issue. When slime ball politicians slapped the price cap on to score vote-winning populist points from the proles did they realize they were putting 30,000 in jeopardy. Stone Age socialism from conservatives. Anything to win an election I suppose.

Toff

ND

Below was a new item released just last week. It’s highly unlikely BT will triumph over a formidable adversary like the government. They rule don’t forget.

The head of the BT staff pension fund has said that the telecoms group faces a bill of up to £1.7 billion to meet the cost of changes to the measurement of inflation that have been proposed by the government.

Morten Nilsson, chief executive of the BT Pension Scheme, said that the net cost to the fund of the suggested changes to the retail prices index would be between £1 billion and £1.7 billion and that BT would have to meet that cost.

The hit BT would take would range from £1billion, if the change was implemented in 2030 to £1.7billion if brought in half a decade earlier, but ultimately a bill BT has to pick up.

Toff

Broker

I don’t know whether Centrica will recover or not. What I do know is that retail investors have been piling in since the stock fell below a pound. During the same time institutional investors have been dumping it. And I know that virtually everyone who bought in is sitting on losses, varying from minimal to eye watering. Mostly eye watering. But small retail investors will continue to buy in if it falls to a few pennies and convince themselves they’ve found the bottom; just like all those who came before them. That’s the ways it is and the way it’s always been. And that’s why the majority who play markets lose.

Toff

On the face of it BT does look cheap. Market capital of only £12 billion

But once you add the £18 billion debt. The £14 billion pension deficit, the £1.7 billion needed to pay for the government’s pension changes and the billions they needed to upgrade their infrastructure, BT doesn’t look cheap.

In fact, the sword of Damocles is hanging over BT with the word DEBT engraved on it.

Toff

Simon

One part of BT’s business that isn’t open for business are the 553 EE shops. The rents will still have to be paid on those.

Toff

The cost of investment in 5G and fibre is crippling, despite the cutbacks and cost savings. Net debt has ballooned to more than £18.2bn – up £7.2bn from March 31st 2019.

How can BT justify paying over £1bn in divis when it needs to sort this debt out, get a grip on the pension deficit and do the kind of capex needed for 5G and mass fibre rollout?

The answer to that is it can’t.

Toff

BT’s free cash flow has already dropped 42% to £1bn in the past quarter, and net debt has mushroomed from £11.1bn to £18.2bn.

It’d have been a lot easier to address by having a rights issue a couple of years ago when the shareprice was much higher. To do it now would decimate shareholder value. It’s nothing short of criminal negligence when a company saddled with this much debt continues to pay dividends.

The board are playing a precarious balancing act. The problem with debt is it’s easy to keep on kicking the can down the road; until you drown in it.

I can’t see how BT can avoid the issue without taking radical action - and soon. Cancelling the dividend and a rights issue are their only two options. Maybe when they update in May they’ll drop a double bombshell on investors are opt for both.

Toff

Reincarn

I’m not sure losing £250,000 and then coming on here telling all and sundry about it is the best thing to do. Sometimes it’s better to keep things to yourself.

The danger of these boards is that they quite often reinforce erroneous opinions and validate mistakes. It’s known as the power of suggestion. That’s why it’s better to evaluate all opinions and not just select the ones that please you.

I wouldn’t be surprised if Aspers didn’t get the brilliant idea to repeatedly average down on a losing position from here. No disrespect but these boards are loaded with novices who have little chance of ever making any real money. And it’s only a matter of time until they get saddled with a big losing position and don’t know how to handle it.

Winning is easy - it’s the losing that’s hard.

Toff

Fleecy

From today’s Fool article you posted.

“If earnings don’t pick up soon, it wouldn’t surprise me to see BT diluting existing shareholders by raising more capital from the stock market. And that’s a risk I’m not prepared to take by holding shares in BT.“

I posted about the probability of a rights issue two days ago - exemplifying my trademark prescience. The article bears my sentiments out.
The hefty sums needed for reinvestment predicate this scenario. But the dividend would have to go first. BT shareholders should start to put the funds in place if they’re to retain their share of the company.
By my estimates shareholders will be on the hook for 60p for each share they own.

Toff

Galvy

“I haven't bet the farm on this but it's worth a punt. As I said, this SP has been dropping for seven years.”

Yes as you say, it’s devilishly risky betting on a stock that’s in a death spiral. Optimists mention the likes of Taylor Wimpey falling to 5p but at the other end of the spectrum there are dozens of companies that never recovered.

Obviously those buying in low will benefit from a recovery the most, but many will need the share to quadruple or even go up 8 or 9 times just to get even. In truth those who bought in at £1-4 will never recover their losses.

I always look at it like this with stocks like Centrica. If you invested £10,000 @£2 or £20,000 @30p you’ll lose more @30p if it does go bust. Stocks like this are also a world of pain and sleepless nights.

Centrica is a spin on the roulette wheel.
Red or black?
Time will tell.

Toff