Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
'divi wont be 10% when it gets cut or passed in aug.'
Any reason for cut? ,,, RMG profit is over £500 mn a year. They are paying £240 mn as dividend. They have cash pile £600 mn and it could rise as they sell more access properties they have. RMG do not have a lot of debt to pay. Plus savings from (profits - dividends). At present, they are spending money on transformation, reducing costs and making group more efficient. Now, it is obvious for even a layman that transformation, reducing costs and making group more efficient would increase their profit further.
So, why RMG going to reduce dividend? What would be the reason? ...You mean, Rmg Would reduce dividend just to make short sellers happy? :)
Waiting should not be problem. Just keep buying and consider that investment for pension. I doubt any pension funds could give better return than buying RMG, because 10 percent dividend a year may increase (in value) over time with share price also increasing and unlike Pension, you will always going to have assets in your name.
It is really a laughable situation. Why it is laughable? ... Because, it has 60p per share cash (or £600 mn cash). Running profit is £500 mn (plus) every year. Obviously, revenue from letters has to go down with era of emails, whatsup and other electronic messaging (instead of letters). But parcel business would rise over time, as more and more people are switching towards internet buying.
RM is in best position to take advantage of parcel business, and they can do that by slashing their prices, what they can do easily due to their infrastructure spread all over the country. If they work on it, their parcel should cost much less than any other company (because of their vast infrastructure).
Further, I believe their assets value spread all over country are much more than reported. With negligible debt, huge property portfolio (ready to get sold as need is decreasing), huge cash pile (£600 mn) and huge profit (£500 mn), I think their capitalisation (less than £2500 mn) seems ridiculously low. So wait and rely on dividend (that is also quite good at ~ 10 percent of present share price).
zccax77: Intu has not written-down anything. It is just like, you bought some properties (to let). After few years, market value of those properties got reduced. Obviously, you would not write-off any of those properties. What would happen is that, property value in your asset list would reduce, that is all. It would not change income from those properties, nor your debt would increase. Anyhow, your debt to property value would increase. If some tenants do not pay rent than income might reduce too.
Same happened with Intu. Their property market value has decreased from ~£10.5 billion a year ago to £9.2 bn today. In such situation, you might not care and keep enjoying the rent (especially, when rent you are getting is more than enough to pay interest and up-keep those properties). ... But if you are prudent, realising that your debt to property market value has increased, you might stop spending your rent income, rather pay lender to reduce the debt (as well as interest on debt). ...
And that is what Intu is doing. Intu property market value was ~£10.5 billion early last year, that got reduced to ~£9.2 bn today. Debt is ~£4.8 bn. To bring the debt back to below 50 percent of property market value, Intu has cut the dividends to reduce the debt. Meanwhile, there are some non-core properties or properties that into thinks could get them good price (in this depressed market), and it is these properties into is thinking to sell.
I do not think there is any surprise in full year result. Result is as expected. Good trading result plus prudent decision of reducing debt from income, instead of paying dividend. Intu NAV is still around three times SP.
Even though I think, big investors got no surprise, small investors looking for quick profit may have got disappointed, may even sell their holdings. But, the result and action of management means, with time, SP is going to move north. But who cares, if they keep on getting rent substantially more than interest on debt, especially when decision is made to use excess rent income on improvements and reducing debt.
zccax77: Intu debt is around 5 bn, secured on different properties, but regardless, Intu is responsible of entire debt. But then, Intu assets are worth well over 10 bn (that is after 8 percent reduction last year, until Oct 2018). I do not think debt matters for long term shareholders. Intu floor occupancy has actually increased from 96.6 percent early 2018 to 97 percent in Oct 2018 ... and their floor area has also increased substantially. They have regular rent paying customers, that I do not think would drastically change in near future (rather, chances is that Intu might get increased rent with time ... even if they do not expand their floor area).
There are people (probably majority) who think that Briexit would harm business in UK (including Intu), but I do not think that it has happen. Intu has huge investment in Spain, and if pound tanks against euro, their Spain asset value would increase. In UK, their assets and rents are in pounds and obviously, would not go down due to UK exits Europe. On the other hand, for many American, Canadian, Japanese, Chinese and European companies, their rent would decrease in UK (due to pounds value going down ... though, here also, I do not think, pound would necessarily go down after Briexit).
Aby1972: If fundamentals are right than it does not matter what the market sees or think, as in long run, fundamentals matter. If Intu property valuation haves to 5 bn, it would only mean that their gearing increased to 100 percent (from present 50 percent). It may affect SP, but if their fundamentals is right and earnings are enough to pay interest and still left with huge profit to pay dividend and expand, than their assets valuation would be only academic.
Only those would suffer who want to make quick profit. SP may go down to even below £1 or less, but if they can keep earning enough, decision to keep paying same dividend or reduce dividend and use the saving on reducing debt, would be up to shareholders. Eventually, SP would recover, maybe after years, but with good dividend, long term share holder should not be worried. ... Problem would start if their profit would start deteriorating badly and it would be expected that profit would keep tumbling. ... But then, in this situation, Intu might start using their huge land holdings for different purposes, like building houses, flats, office blocks, warehouses, colleges/universities, training centres, gyms, etc.
Few months ago, Intu was on provincial offer at double present SP. Intu properties book value is over £5 billion after all debt is taken off (and that was valuation in Oct 2018) ... around 4 months ago. Presently, with £10 bn asset and £5 bn debt, company market valuation is £1.6 bn, that is £3.4 bn less than asset value.
Some hedge fund managers think that next valuation would bring down Intu property asset value by around 20% and thus, they have shorted ~6% of Intu shares.
Situation is that, even if 20% value of assets is reduced (that is unlikely), still with £8 bn asset and £5 bn debt, company would have asset almost double its market value (or ~£2.4 per share). If tomorrow, SP starts going north, around 6 percent short sold shares would run for cover, and thus demand could easily push the SP to over £2, if not more.
I doubt if conservative government would survive that long. It is most likely that we would have general election in 2019, after briexit negotiation would be resolved. It is also possible that we might have another referendum on Briexit in 2019 followed by general election. So I think, government would wait for some years before all of RBS is privatized and if Labour comes, that wait could be decade. But then, as things are turning into, it might be better for treasury if wait is prolonged.
Bdev share price is meaningless for long term investors investing for income. Share price only matters to opportunists who want to make profit from buying and selling, without caring about fundamentals. Barratt development is good long term investment, as it has strong fundamentals and has capability to keep paying high dividend for foreseeable future. So, buy the share, take dividend, forget about selling and live happy. :)
Well ... I do not know why BT would reduce dividend? At present BT dividend cover is 1.7, and that means, profit per share is ~27 pence (dividend ~16 pence). I think, that excess profit would take care of all cash requirements to expand and cover shortfalls. So, there is plenty of margin. Future:
1: EE (BT mobile network) covers UK more than any network (over 99 percent of UK), and also has largest market share (over 28 %). It is surprising that people use other mobile networks, as EE would be first in 2019 to introduce 5G (making the network much faster than other networks supporting 4G). I can hope that once 5G would be standard for EE, many mobile users would switch to EE.
2: Land Lines are needed for broadband, and that means it would stay. Mobile data is expensive and most take advantage of their land line broadband. Anyhow, BT controls landlines that it rents to other networks (I think, only virgin have their own service). As prices are coming down and BT is switching to fiber, BT can easily squeeze other networks (in price as well as service standard) and may even attract virgin customers.
3: Virgin TV service is crap. BT can improve and squeeze Virgin here too.
Overall, I think by end of 2019, EE would further increase their mobile market share from present 28 %. Actually, people would be willing to even pay more to EE for their mobile service, as EE would be covering all UK and would also going to support 5G. BT may also improve their share of land lines and broadband customers.
Thus, I believe BT future in UK is quite good.
Actually, BT should start investing and targeting Europe, especially Ireland, to create market for mobile network (EE), such that people can have 5G and roam around whole of Europe without any pre-arrangement or cost increases.
Keep the shares for 4 more months (until end December) to get 5 pence dividend (to be paid in Feb), that is over 2.2 percent return and most likely, share price would be above £3 by then. If one do not want to wait that long, then wait until November when Q2 results would be announced, that could again push the share price hopefully up.
Regardless, in this low inflation environment, BT's ~ 7 percent dividend is quite a good investment return, especially when chances are that dividend would not reduce but would increase over time.
Do not worry. Wait for end of October 2018. RBS 3rd quarter result is to come on 26th Oct 2018 and I feel it would be above expectation. After 26th Oct 2018, you would not see RBS sp below 300 ever, most likely, sp would be above 350 by end of this year.
According to Deutsche Bank’s analysts: “In aggregate we forecast £11.2bn of capital distribution from 2019-2021, 37% of current market cap which could be executed via a combination of directed buybacks or special dividends. RBS's capital position (16.1%) is already well above requirements, and should continue to climb.”
So, if Deutsche Banks is right than RBS would dish out £11.2 bn by 2011. From here, it can be seen that RBS has enough capital to buy a large chunk of Shares back from government. Obviously, that would increase their profit per share as presently, shares are trading at huge discount. I think if RBS would do that, buy government shares directly, than it would be cheaper for government to sell, plus there would be positive effect on RBS business and profitability (per share).
It is possible that instead of government selling RBS shares in market, RBS itself buys 5 percent shares from government every year, thus buying out all government held shares in next 10 years. This share purchase can be from money RBS could pay as dividend to share holders.
Velo: BT share price has recently taken big battering for no obvious reason, so it is obvious that once sense would start acting its role, share price would rise dramatically. I think by end of the year (2018), BT shares could be over 350 if not 400. Reason is simple, that is, at present price, BT Mk Cap is around £22 billion, exceptionally low for a company with EBITDA of £7.5 billion. Well, even if one takes away every costs from EBITDA, company is left with £2 billion profit (Actual profit is £2.8 billion, but gone down to around £2 billion due to exceptional costs, still quite good).
I think £11 billion pension deficit is on higher side and eventually it would be much less. Most likely, it would cost BT around £8 billion to care for pension deficit (could be even less). BT debt is around £9.6 billion, and that is also not too high for a company that is easily making around £2.8 billion profit a year (around £2 billion due to exceptional cost, that would not be there every year). I think, BT can pay dividend £1.55 billion every year (15.4 pence per share) without much worry, that could even rise after 2020. With such figures, even share price above £5 is not too high (BT share price was £5 in November 2015, only 19 months ago, but pessimistic and cautious approach along with sentiment brought the price to this level without much concrete reasons, and it means, share price can go £5 again if not more in near future).
I do not know what to say about the deal as it is both good and bad for shareholders. Bad for those who bought these shares couple of years ago and waiting for recovery. Good for those who bought the shares recently. Deal means, lenders have bought diluted shares at over 23 pence each. If I understood the deal right than here is calculation: 50 million pounds were swapped for 60.5 percent shares in the company. Present shareholders would have 15 percent of the shares in the company. Total existing shares are around 53 millions So 15 percent = 53 million undiluted shares 100 percent = 353 million diluted shares Bank would hold 60.5 percent of company or 213.6 million diluted shares Bank paid 50 million pounds (in writing off debt) for those 213.6 million shares and that means bank paid around 23.4 pence per diluted share.
You are right that it was not buy but sale that took Gerrard Investment management holding from 6 percent to 5 percent. Anyhow, there is something fishy in the deal. For instance, before transaction Gerrard holding was 3193013 shares in 'WHY' that is bit over 6 percent shares (WHY issued share = 52.96 million) but than they sold just enough shares (20500 shares) to bring new holding to 3172513 shares and thus holding to bit under 6 percent., declaring that they reduced their holding from 6 percent to 5 percent, even though reduction is from 6.02 percent to 5.99 percent.. I think that their nominal sale of 20500 shares would not have made much difference but their declaration that they reduced their holding from 6 percent to 5 percent may have depressed the market sentiment for WHY. I do not know the reason why they did that, but certainly it shows that their intention could be depressing WHY share price.
I think today was the last day for buying IPF shares cheaply. Most likely, tomorrow share price would end at or over £1. On the other hand, whatever the price, share is paying dividend and expected to keep paying increased dividend year after year, so IPF share is much better than keeping cash in bank. I think that dividend with time would keep rising and I would not be surprised if over next few years IPF share price passes £5.00 mark.