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Was already in for a significant sum, and topped up again today at 145. Unless they go pop (fingers crossed not, as that would be disappointing ;-) medium to longer term this looks very promising.
@comeonvog - I have been on National Express, but I’ll be honest and say it was when my alternative transport failed :-) As others have said it is a low-cost transport provider and as such draws support from those seeking cheap options, that frankly have limited alternatives often. I don’t have all the answers and like many others we are all peering into a teacup and seeing very different things. Hence I’m not sure there is any such thing as a sensible investor ;-) all the best to those both in and out of this gamble! In 12-18 months we will have the benefit of reward or failure ;-) I’m definitely in :-)
@comeonvog. So anything I say here is a view on medium to longer term outlook. I’ve never been a competent investor in “timing” shorter term market reactions. Frankly I’m awful at it. Medium to longer term, and as share prices, over time, tend to better reflect company value, I have seen more success. In terms of growth there are two angles to consider: growth from the status quo, and growth beyond (medium/longer term). In terms of the status quo my personal view is that there are reasons to be broadly optimistic. There is a drive to get schools back in the UK and US almost irrespective of broader consequences/ trade offs needed. In some markets NEX held up better than I expected such as in Spain and Morocco. If we then look at inter-regional travel, this has been hardest hit, and did not surprise me (as I highlighted in an earlier post). Inter regional travel will be a combination of leisure trips, airport/holiday transfers and a degree of commuting. The latter may seem odd but having used NEX into London I was surprised anecdotally how it is used by many for commuting. I would expect to see that over time many of us learn to adjust to the need to “live with the pandemic” even in lieu of a vaccine. As an example we see holiday bookings are increasing, UK leisure trips are increasing and companies are slowly bringing employees back (I work for a major bank and they are planning for all employees to be back by end October). Some of this is observational of course but I do think we are, in the main, learning to accept that the pandemic may not have a silver bullet solution. I think in terms of increase from the status quo we will therefore see growth from today, even if it is disrupted by regional lockdowns etc. It does not need to reach pre-pandemic volumes for the present share price to be currently understated.
Beyond that the broader question is medium to longer term growth. NEX is in a comparatively strong position to weather the pandemic financially. Certainly compared to many competitors that have dabbled in less successful sectors such as rail etc. I think they will likely see less competition in the medium term, and be well placed to secure contracts both here in the UK but also in other geographies. On a final point we should also recognise that scale in itself is not necessarily the best indicator for future profitability. Many of the more successful organisations are those that know when to turn down top-line and size appropriately to market changes. If NEX has to adapt or restructure then it has advantages within its franchising model for agile restructuring that others simply do not have.
As I say I may be wrong but I do think we will see a gradual increase in coach travel from today, and significant opportunities in the longer term.
Ultimately the view on NEX share price attractiveness is a personal perception on the outlook for the pandemic and impact on personal behaviours/travel etc. No investor can say there is not a degree of risk obviously. But there are a few things that are of interest in my view. If you compare 3 month NEX performance to, say, the First Group. You will see that NEX is underperforming here. First Group have made clear that they have a question mark over ongoing viability even in the short/medium term. So that is an illogical performance outcome. NEX have provided the opposite update, namely that they have stress tested their financial commitments Q4 2020 to Q2 2021 and could absorb a second wave. Compare again the performance of NEX to many airlines over the last few months, and again it underperforms. Do we really believe that airlines with enormous debt gearing, a much higher reliance on capacity fulfilment and their scale of exposure to the pandemic internationally are in a better place than a coach company? Possible in some scenarios, but improbable. From a personal perspective I saw little in the results that took me by surprise. Institutional investors still seem to believe a 12 month out turn of 300+ for this stock and I tend to agree, looking both in detail at the results and the comparisons in the wider market.
If this is the share price recovery starting...all I can say is....they must be very slow readers...
I’ve been through the results update again to make sure I haven’t missed anything. The element I cannot understand in this drop is what investors have perceived as “left-field” news. I just cannot find any. The scale of loss was wholly predictable. The passenger number drops within expectations/comparable travel operator experience. The lack of willingness to provide forward profit guidance sensible/predictable. The current funding available almost certainly better than most expected. The stress testing on forward expenditure should a second wave occur reassuring. There is nothing here today that wasn’t here yesterday (or should have been understood) in negative updates.
One factor I personally find interesting is that the scale of price drop assigned to the coach industry has been broadly comparable to many airlines. Again there is a lack of logic to that approach, and suggests that many are simply viewing the sector in a holistic fashion. There are two significant reasons why an airline is at far more significant risk. One is that aircraft need near full capacity and to be near full flying hours to cover the exorbitant costs of aircraft ownership. Secondly they are more exposed to individual national pandemic approaches/lockdowns/quarantines etc. For the coach sector to be treated from a price perspective in much the same way completely misses the scale of exposure point/debt gearing/capital investment requirements etc. Genuinely can see no firm logic to bundle them in the way the market seems to have been doing.
I am personally more confident than I was despite the drop. For me it is illogical and reeks of a lack of realism regarding how this pandemic is most likely to play through. Of course there is a risk but if you are holding a stock with a 100-150% upside potential it would be naive to think otherwise. Looking across the market there are multiple other players that are in a far weaker position financially.
My point is rather what in that did the market not price in prior to the results. There are, at least for me, no surprises in that whatsoever. The fundamental gamble in this stock was always in terms of short to medium term viability. The stress test that they cover adequately covers this in my view. Assessing intrinsic company value (as we see all the time and to an extreme with technology stocks) is about medium to long term returns. I see nothing in these results that suggests those returns will not be forthcoming, even if a full second wave is experienced. Financially weakened yes, but most businesses are at present. Many more, dangerously so.
A strange market reaction in my view. Having read the results front to back there is no significant downside that should have been unexpected. Cash on hand is better than I expected, the Q2 loss was absolutely to be expected, the future stress testing way better than I could have hoped. A little unsure what investors were expecting....
With operations in UK, Spain, Morocco and US and a variety of contracts operating under different terms and conditions it is difficult at present for any external to fully and properly assess what the results may surface. I am expecting to see that across a variety of contracts the impacts have been mitigated to some extent. School shutdowns for example may have a lesser impact than we may imagine due to contract terms, government support and the fact summer holidays were diarised across the same shutdown period. Numerous contracts will be on a cost plus basis which is also beneficial, particularly in conjunction with government support. Inter-regional travel will be hardest hit I suspect with passenger numbers way down, and likely more challenging to offset overheads. If the US and UK push ahead with avoidance of any second wave national lockdown, and Morocco and Spain slowly emerge from current 2nd wave fears this could be a slow rise to mid 200s. However it’s finely balanced. I’d expect the results to be obvs disappointing but better than current fears. Fingers crossed.
Of course it’s possible. However what we are really debating is how quickly they can return to provision of service and as importantly capacity %. That’s in the lap of the gods to a large extent. The PE ratio is beyond attractive if you believe we are slowly easing out of lockdown globally. Of course we shouldn’t understate the risk, but this current pricing is a reflection of confidence rather than intrinsic value. That could turn in a heartbeat in my view.
NEX are some 30% below index averages over the last couple of months. That is a reflection of concern over second wave covid and revenue exposure in Spain and the US. If you believe the 2nd wave fears are overcooked or that governments would be unlikely to pursue the full throttle lockdown strategy again then there is strong upside potential here. A gamble indeed but not many stocks out there currently with a circa 100-150% upside potential in my view. You take your risk and hold your breath on this one.