Member Info for wealthtrasfer

Is a Cosmen bid incoming?

I guess it depends where they got the 6m shares. If it was off-book it wouldn't move the dial. If it was on-book it must have been over a prelonged period as volumes haven't been there to do that without effecting the market and sp.

Ian - spot on, they know better than anyone else what they have. I dont think its reliant on interest rates dropping though to re-rate. Debt is serviceable, Fitch words not mine. Costs cut £30m pa.a. and looking for more to c. £50m p.a. Contract renewals to reflect the past inflation to be completed in next 12-18 months, The financial statement, not my words. Then they will be in a much better place. Completing a sale of school bus is obviously transformational in debt reduction and cash to re-invest with perhaps a measured share buy back to boot. Step change in the sp if it happens.

Focus is on March results. No impairment is likely to bring a small positive result. No impairment due in UK. ALSA should be okay with growing profits and both discount rates and growth stabilised. US impairment most likely due to profit margins but may just get away with it as discount rates reducing and growth forecast improving (over Dec 22).

There are other things that should also be playing out including route/mileage reductions in UK bus as First have done. Again Fitch's words not mine.

Its going to be close but a small bottom line profit then debt reduction will transform, regardless of interest rates.

Lots of potential buyers. Interestingly might include this Goldman Sachs award winning entry:

https://www.linkedin.com/posts/ritunarayan_zum-ceo-ritu-narayan-recognized-as-goldman-activity-7120836008639700992-7N8k?trk=public_profile_share_view

https://www.ridezum.com/student-transportation/services/

First Group powering ahead after announcing a deal with Hitachi for 1,000 electric buses and investing £100m. Without knowing deal structure hard to say but compares well against MCG 300 buses at £150m.

Cant see anyone offering enough for the whole business that would satisfy II's and Cosmens.

The only likely unsolicited approaches would be for ALSA which would likely be rebuffed unless it was from the Cosmens. I'm guessing there would be a lot of interest in that but with NA School bus up for sale its likely anyone would wait for that to go first.

There is also a real chance someone would be interested in US Transit and Shuttle but again I guess they would make that part of the School Bus offer or wait until bus is gone.

I hope an offer comes out of the blue for UK Bus and German Rail.

Lots of possibilities which is why I wouldn't want to be out at this stage.

You said it QD, could happen anytime!

If the sale doesnt go through then we still have a cash generating machine that covers its debt. Cost savings now identified of £50m p.a. which more than offsets any increase in the refinancing rates and with no further refinancing required for a few years.

The board then will take a knife to the slow underperforming businesses in UK Bus and German Rail and likely dividends will be held back for a couple of years whilst the debt is reduced slowly.

It will just be a slower recovery. Unless something else unknown happens I cant see that they need to raise funds.

QD - its not gone on the market yet so not likely to have any offers!

I see both sides of the discussion. I just hope my side is right.

QD - I understand; and on the basis you see no value in the Goodwill (future value of the business and all its contracts etc...) and no value in its underlying profitability going forward then you would be right and probably being optimistic as it would probably be worth nothing. However thats not how most people view it here or the bankers, funds, accountants, analysts etc... Goldman Sachs clearly don't see it that way either or they would be putting a price tag on US School Bus @ $0 rather than @ $1.5b. The sale may not happen or may attract interest below their public valuation but it clearly has a significant value based on more than its net assets. This being its cash flows, operational IP, future contract values and profits, brand, etc....

Then there's ALSA, producing good profits and growing its margins and revenues. Worth another $x b more?

US Transit and shuttle $$$m

UK Coach and German Rail £££m

Im not saying that all things are perfect and good but the underlying business still adds up in my world to a whole lot more than 30p which is why Im still here and waiting for the 'catalyst'.

QD - to back up my reasons on value (as Ive asked you to do). The goodwill 'headroom' increased by some £230m at the half year report. That isn't recaptured in the Goodwill intangible asset value. Unlike year end 22 when the operating profit became a loss due to impairment the gain at half year wont be added to assets or profit. If it was treated the same way as the impairment then there would be a large profit this year. It is stored as future releasable value. Hope that makes sense.

QD - as you well know individual buses depreciate, however these are changed and updated regularly, again as you well know. The contracts that the buses serve have a value over time which is linked to their profitability. The profitability is linked to revenue and costs. Costs have increased ahead of price increases (interest rates, fuel, wages etc...). The impairment of last year is a reflection of that and reduces Goodwill. Revenue increases later, however that isn't re-captured in Goodwill. So the underlying value of the business is based on its lowest achievable return at a given point in time. Which is why in your analogy the £1m house is still a £1m house and not the current or actual realisable market value of lets say £3m. I dont know if you just dont get it or are causing mischief. But as I said, work out the market value of all of the parts of the business today, even at their lower end due to cost inflation, and benchmark against comparable deals done in the last couple of years. Add them up and deduct debt. That value is many multiples of current SP. You shouldn't be so sensitive to negative feedback if you throw around varying numbers and scenarios without backing them up. You never back up your claims with anything factual and misrepresent the financials on a regular basis. One of your opinions that the SP would drop to 60p did happen but it wasn't based on anything, so appears to be 'right place right time'. You also have flip flopped between buying and selling several times, so hardly surprising that you've had some negative comments. Bring real and accurate financial and commercial reasons why the sp will now go to 30p (half of your last 'prediction') and if its credible I'm sure it will be received a lot better.

QD - Good analogy of the house value as it perfectly goes against your theory. If you will allow me to explain: you bought a house years ago for £1m and over the years have increased loans on it to £1.1m. This has been possible because the house value has increased substantially and the banks are happy to lend against it. Also you rent it out and get increasing rents from it over time . Occasionally the roof needs fixing . The difference between what you paid and the current (and forecast future value) is the goodwill and of ‘real’ value. You need to look at what MGC is worth by adding up the current value of the sum of the parts based on what it brings in. Deduct the debt. You are left with a substantial multiple.

Unforeseen by the market! A broken clock is right twice a day. Who knows you could be right to think that it could drop again but not backed up by any financial logic or facts, I can’t balance my view that the company is worth a lot more. Either broken up or as a whole the company is worth multiples of current sp.

As I say, you called 60p at £1.20, not 30p at the time. Now we are at 60p (totally unforeseen by anyone) you are adjusting your call to 30p. At least we know you're not an analyst as they only forecast whats actually already happened ;)

Is your plan to keep halving the current sp until it rises

Pedro - those euro bond holders are not going to be happy at the Q3 update. Bond was trading 5% down shortly after announcement. The management got it away just before they changed course. Good job they dont need to refinance again soon as they would struggle big time. As jnc said they need to deliver and get consistent. I bought into the management and their historically good forecasting and the 5 year plan with same sentiment as JG. However they have lost the room right now and have a lot to do to get it back. Its going to take time. A good sale of NA will be a start and delivering a profit without impairment (although to be fair they cant influence the need to impair). I was thinking there would be a steady climb through the end of the year in anticipation of results and sale but I now think that theres nothing doing here until March.

Pedro - they are all down grading their previous 'forecasts' to reflect the current SP. There doesn't appear to be any analysis or consideration of macros effecting the SP!

Just sheep following the share price wherever it goes. Little to no value in their views as they alwasy seem behind the curve.