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they are raising that extra capital, circa 600ml shares, to remove the undrawn revolving credit facility. They don't need that money for operations (maybe a bit gets drawn down in winter but only a bit). They are instead doing it to dilute the Russian who has 25% of the company and is barred from participating. So all other shareholders benefit provided they subscribe. TUI can then return funds through a capital return if it so wishes. The Russian can't receive any economic benefit per sanctions so he'd miss out on the capital return too. That is my take on it anway - they are diluting away his shareholding with every equity raise.
I think FCF will be 1.5bn next year so at an Enterprise Value of 8bn it still stacks up.
There's a pretty strong argument though that inflation has / is peaking and interest rate rises in the US have gone way too far and will needlessly crush the economy. Not sure any of us should heed warning from central bankers about inflation when they got it wrong on the way up. If that's the case, supporting the economy with all this stimulus in the UK is the way to go.
M&S will be fine. It's trading very well. Take a minimum 2 year view. When they update in Nov the results will be strong and a retrace to 1.50 is on the cards in IMO.
cheers
Ah no you heard wrong. M&S are behind only the two German discounters in sales growth in grocery. I work for a supplier and they are killing it. No idea about fashion & homewares. Kantar monthly grocery market share releases are generally reported on it you bother to look.
If everyone in every job thought they had the luxury of striking the whole world would come to a ghastly, crashing halt. All most people see on the picket line are overweight middle aged men eating pastries, blaming others for their problems. They’d all be better off shedding some kegs, picking up some new skills if they need them & shopping themselves around to other employers if they are unhappy. Picket lines = loserville
I think inflation will remain high and interest rates will need to rise but your view feels too overly negative. NatWest's results last week, and all the banks for that matter, spoke of very little signs of consumer distress. They have all the data in the world. The people who are really suffering weren't buying package holidays to begin with. The majority of people are feeling it a little at the margins, and that's the extent of it.
Also the market is pricing in interest rate rises. Consensus is for a 50bps rise and 2 year gilts are at 1.75% already. That's in the price of equities. Fund managers in the states are already sitting on the highest levels of cash for 20 years. What you are describing isn't coming as a shock out of the blue.
I think TUI's much bigger issue is overcapacity in cruise lines + capital intensity and that is what i am interested in seeing commentary on.
Of course it’s partly Brexit. It’s not TUI. The passport delays, visa delays, driver test unavailability, shortage of HGV drivers, easyJet & BA cancellations, delays at Dover etc etc…all symptoms of the same root causes. Broken supply chains and labour shortages because of lockdowns & Brexit. Blind Freddy could see this
The staff aren’t there to hire or haven’t had clearance checks sorted in time. Cancelling some flights won’t deter future bookings. I’ve had plenty of flights cancelled or changed on me before. Big deal. Part of the experience of cheap cattle class aviation
Don’t blame TUI or even the government. Blame Joe Bloggs who wanted lockdowns and wanted Brexit and didn’t give much thought to the mess both would trigger. A few more Eastern European baggage handlers and cabin staff would help things immensely right now
TUI will be fine. What they don’t cancel will be at maximum margin. They’ll divert the planes to other markets
I agree. E.g. TUI's bookings from the UK are up 16% vs. 2019 at 20% higher price. Homebuilders are passing through all inflation. There are pockets of the market with some pricing power that'll be dragged down in the overall decline to come (my view) that'll be good buying. I will top up Boohoo after 4th May if there is good sales growth + no blow out on US costs. I am not so worried about their EBITDA margin, 10% long term is very achievable with own platform + own brands + UK production.