Member Info for valuewalk

Yeah...at least. The more and more I look, the more and more I see the value. 75p a share is still a joke, really, on a long term analysis. The UK is not a small nor insignificant country, to have its largest airline you should be paying closer to £1 billion really- which would be £4 a share. When you consider the durable economic potential there, and even more so when you view this advantage through the lense of CRAZY valuations for ephemeral, hypothetical start-ups with no staff, no assets, no track record of profitability.

£1 would be nice, but perhaps a bit delusional. Then again....£220 million or so to acquire the UK's largest domestic carrier, tap into revenue of £750 million a year....as I said before, with the macroeconomic tides a'turning, £220 million could equal two or three years of profits- so a 'free' company almost. Obviously there is a chance that this will not be how things turn out for the buyer, so that will be priced in.

But a couple of bidders who are super bullish could be enough to force it to £1.

This is my point exactly greendave! Turnover is crucial to this argument, because it allows you to see the potential for profit. A few intelligent moves and a £750 million airline could make a £100 million a year profit, which would warrant I'd say £8 or £10 a share. There is still a HUGE amount of upside even if you bought this airline out at £1 a share, earth shattering upside remains. And that is without increasing turnover or operating on exceptional margins (for the airline industry).

They have hedged 90% of their fuel requirement, or projected requirement (if they end up using more than expected then they'll be buying that at market prices, if they end up using less they won't see the benefit so much). I calculated it will save them a few million over the next year..........BUT, whilst that may seem like small potatoes to a £750 million a year airline, if this trend of lower fuel prices continues then they will reap major benefits over the coming years. No buyer will be ignorant of that.

Well if it is Branson we will get cash, in theory we could get shares in say Stobart if its them, but for a takeover this size (small) I think it'll just be cash.

I think we'll see 20p today. In terms of an offer, if nobody else appears I reckon 30p could maybe be enough to get them over the finish line. In a war, as many have said, we could see 70p.

I disagree. We can fight this, in the end if the Indians ruin their reputation over $70 million they're not as canny as I would have thought. They are just being bloody minded and obstinate.

I don't agree. With a war chest like they have things are open to you. You can hire lobbyists for a start. Someone in the Old Etonian diplomatic loop to have a quiet word with their opposite number in India about making that $70 million problem appear. I ordinarily would not approve of such back channel stuff/corruption, but here WE are owed the money, arbitral tribunals are fairer than any court in the world by and large....So any means fair or foul. As JJ Cale sang, "You'd be surprised at the friends you can buy with small change". A couple of million on lobbying and dining people out could produce the desired result, it's a million miles from the battle Paul Singer took on to force the Argies to pay up on X billion worth of defaulted bonds. This is $70 million, it's a drop in the ocean for any serious government and not worth poisoning relations with Britain for.

If they sell it for $20 million, fine. We are short changed a bit, but it still quintuples our NAV and will enable some work to take place elsewhere.

Yep. It is worth £0 or it is worth £75 million +++++. I would not feel cheated buying it out at £75 million (not that I have, nor am likely to ever have, £75 million burning a proverbial hole). In fact I would see it as an opportunity to take things easy for a private equity guru, dump a little in to secure confidence and wait for the oil tide to turn, sell up for a multiple of what I put in.

All that is likely keeping buyers back is bureaucracy/greed (i.e. waiting for the share price to plummet as much as possible to scare everyone into accepting their crappy bid). We don't have that many proper moguls anymore, Branson aside, who can, on their own initiative, just write a cheque for £75 million without having to bow before the compliance manager (cause they're using investors money). If we did, it would have been snapped up ages ago. It's all MBA graduates with graphs and charts who can't see the wood for the trees most of the time.

@ Oshea,

Anyone completely discounting the idea of Flybe going bust is mistaken, it is just all down to probability. I see a viable airline, which just needs one of its major costs to drop and it is well back into the black. You see something headed down the drain. Time shall, as you say, tell.

Others occupy an intermediate position, they don't have the sort of long term views we might have. They bought for 10p and they want to get out for 15p, if it is boom or bust thereafter they don't care. So it won't be black and white between longs and shorts what happens, if we go bust some longs will still win, if we zoom up some shorts may still win (not that it has very far to drop now- seem like nickel in front of a steamroller territory to me.

Few things are certain, but we can say death, taxes and Flybe not selling for 15p a share are among them. What I suspect will happen is either a cash rich, growth oriented hedge fund/syndicate will just buy it out without having to spend months doing pitch decks.....or someone who needs debt will do it, but it will take longer because they will have to convince their lenders of the upside and the guarantee that they will be paid.

I mean, if you look at a really leveraged kind of situation it is still worth it. £25 million cash, £60 million debt, with first charges over everything not already charged, PIK loans with 15.5% interest a year. If this happens it'll be ok for us lot in terms of buyout, but for the staff it will mean layoffs, asset stripping to pay down the debt and then emerging with a slimmed down airline ready to IPO for £120 million in a few years with zero acquisition debt. The lenders know that they will get paid whatever happens. I'm thinking what happened to AC Milan recently with Elliot Management, the lender knows worst case they will effectively get control of the airline for £60 million, best case they're milking £9 million a year in interest until its all paid off.

@ scully,

Same with me. I see a very bright future, and maybe Branson does too from what we are hearing. That increases my confidence further, he NEVER puts his own capital at risk if it is not a sure thing. He is quite risk averse.

I've got 80k so I'm down, I dunno, £1,600 notionally (don't really bother looking day to day). My maximum exposure is £9k and change. I really don't see myself only bagging £3,500 on this one. I think maybe £25k (42p buyout) iif it is a buyout fairly soon- if it just sits and matures anything could happen, but with stronger GBP and lower oil I'm seeing a £100k profit over two years or so. I don't think I am being unrealistic, mainly because Flybe will either sink or swim and I'm betting on swimming. No way will it still be trading for 10p a share in six months or a year, it'll either be bought out, bust or trading for well above 50p.

I bought in at 11.5p. So if we DID get bought out at 15p I'd be irritated and short changed but not out of pocket. It would be better than going bust, I just seriously doubt that happening.

@1onic,

I'm saying, it is almost a sort of game theory point now. If I bought in at £2 a share, it's now at 10p. No way would I take 15p, I'd rather let it ride and if it crashes.....oh well, I've already lost 95% of my money, if it recovers I'll get much more than 15p. Too many people are in that position for these 15p takeover ideas to have any validity to them.

Sure. I'm saying market participants seem to be overreacting in both directions, long and short.

Indeed. When you consider that most companies trade at pretty large premiums to book value at the moment it looks all the more odd. The truth is there is method in the doomsayers madness, madness though it may be, Flyb is burning cash but not at a rate that leaves me overly concerned at the moment. It really comes down to, will conditions change a bit (and it need only be a BIT) before they run dry? I think yes, that's why I am in.

They have a huge turnover, relative to their MC, to play with. £750 million, even if you can only eek out 4% a year it is enough to justify a £300 million MC these days (look at PE ratios if you don't believe me). I remind myself that Ryanair and Wizzair, who face more competition if anything than Flyb (albeit have more diversified risk), operate on 10-14% net margins. So it is not a huge ask of us longers to want to see £1.50 a share in a year or two, if it should not be taken over.

I'm not denying the erosion of cashflow, nor the risk (not yet materialised, I add) of consumer confidence falling, but in the end their revenue is actually up on last year not down. Revenue gives you the maximum you could make if you were super-efficient, if Flybe were run perfectly and with oil/currency in its favour it would earn over £100 million a year in PROFIT....companies doing that command valuations approaching £2 billion (or more in the case of sexy stocks). Yes, it's potential is limited to the UK market, so what? I am saying, on CURRENT turnover it could do that, so again, not asking much.

It is probably a way to instantly take the company off the table. At much less you are risking a) Someone else gazumping you, b) Not persuading enough people, especially those who bought in at £1 + per share that it is worth it, as opposed to betting on a long-term rise of 100s%. I have no doubt that a 60p bidder would get the Company.

As it goes, anyone plotting a 60p per share buyout is probably sat in a boardroom somewhere persuading others that it is a good sell. It's £145 million proposition (assuming, probably falsely, that this buyer has zero FLYB shares already), so it's not big at all but it's not tiny. Then you'd need to put some more into it to kill off a bit of the debt, reassure consumers 100% that it is good to go, then wait for four or five years before flipping it or IPOing it again. As I said before, with wind in its sails and three or four good years (£50 million + profits) it's worth £800 million or more, especially as the debt burden falls away. So, it is well worth waiting 5 years to triple your money when you are operating at a nine figure level.

I think you could well be right Scully. 10p would be a decent vote of confidence, just in terms of market mechanisms. It may be that some of the cautious start to slowly pile in, and we gradually see 10p, 15p etc as they realise that the sky hasn't fallen.

Interesting today. But possibly no more interesting than yesterday. One of a few things, or some combination thereof, seems to be happening. Investors do perceive some risk in the stock, which is why it is trading at an hilarious fraction of its worth. Also, people will be watching cable like a hawk (even though, just because it moves up to 1.32 is no guarantee it won't drop back down again- short termism as ever). Some people don't want to buy without a takeover already in the offing.......they will lose a lot of upside for their caution, but their business not mine.

The true position has yet to reveal itself, but I know where I stand.

@ Julian. I think probably they are doing two things, killing two birds with one stone as it were. Making sure that, if the worst happens and conditions persist, they are not in an extremely weak bargaining position when they need cash. Secondly, communicating to the market that they are still very much solvent. £70 million in cash is a lot of cash...but not for an airline, where cash dries up quickly. We all know the facts I think, they have more than enough cash to be solvent for now, the real question is a) Whether or not cable and fuel prices will move in Flybe's favour (fuel already has/is), b) When this will happen.

We all know that the status quo is not sustainable infinitely, but I don't think anyone is suggesting that macroeconomic factors such as fuel and currency will stay stable for eternity, are they?