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Real-Time news about Pace (London Stock Exchange): 0 recent articles
|dabeesg: Surprised that the Youtube TV service hasn't been mentioned on here. Think this affects the share price as well.|
|alexmcdonald: Back to the UK tomorrow morning then a long drive to Scotland. This has been a fabulous cruise and I would highly recommend it for next year. We saw the Northern lights on 2 consecutive nights. The snow in Norway is pretty good too.
The only negative since we were away is the Arris share price, which should recover in a few months. I wish they paid dividends!!|
|1gw: Andbyle - I got to a similar place on the 2017 estimates (although perhaps with about 100bps of reduction built in rather than 150bps) which is why I am comfortable having bought more, although obviously the share price could do anything in the near term.
What's curious though is that if I apply the same analysis just to 1Q17, using a 150bps (i.e. midpoint) reduction in GM and trying to calculate the reduction in eps vs the 1Q16 guidance Arris gave last year I get an expectation of a 21c reduction in adjusted earnings for the quarter. Whereas in fact they are guiding to almost flat compared to the guidance a year ago (i.e. 36c to 40c adjusted earnings in 1Q17 vs their guidance last year of 37c to 42c in 1Q16).
To be clear:
$1560-1610 revenue guidance for 1Q16 (given with 2015 full year results)
$1435-1485 guidance for 1Q17
$125m reduction in guided revenue
$31m reduction in GM due to revenue shortfall (25% GM x $125m)
$22m reduction in GM due to 150bp reduction in GM (0.015x$1460m)
$53m total reduction in GM
$40m reduction in adjusted earnings (assume 25% non-GAAP tax rate)
$21c reduction in non-GAAP eps (192m shares)
So if that is right, are they saying the gross margin reduction only kicks in from 2Q? Or perhaps are there other things happening in 1Q to hide the GM pressure? I guess 1Q16 was atypical because of the timing of the acquisition so there may have been additional costs in 1Q16 that fed into non-GAAP earnings but which are not going to be in 1Q17 non-GAAP earnings (staff and product lines now redundant for example).|
|1gw: In my defence....
....I would say the point I was making the other day was that the share price tends to move quite quickly between 50c markers ($29 to $29.50 for example) and that having got through the $29.50 one the next target was $30 which I thought might need a bit of "oomph".
If you look at the Arris International share price history in the chart above you can see it started life (at the start of this calendar year) at just over $30. It soon dropped below $30, flirted with $20 and hasn't yet made it back above $30 on a closing basis. So I imagine that a fair number of shareholders who held all the way down might have decided that they will sell some of their holding if it ever gets back near $30 again (a bigger "psychological" mark perhaps than £4 or £5 was for Pace). This (predicted) selling pressure is what needs "oomph" to overcome (in my opinion).
Without tempting fate by suggesting that we're going to crack through $30 tomorrow, I will repeat the question I posed before. IF we do break through $30, what then (in the absence of market-moving news)? Is it reasonable to think that if this (predicted) selling pressure around $30 can be overcome then the share price could make quite substantial further gains (without news) as the weight of momentum buying becomes the dominant factor?
Myself, I have a "psychological" mark at the equivalent of £5 for Pace, but I doubt there are enough of us carrying that particular level to cause much resistance at whatever the Arris equivalent $ price turns out to be on the day.
Go on, take your best shots!|
|1gw: Yes and in fact on Wednesday October 26th (3Q results day), 2.4m shares were traded and the share price finished at $29.53. So I think the computer may have got its wires crossed with that article.
Still, it stops me talking about today's share price. Oops!|
|1carus: Blunder... very difficult to time the highs particularly over several years. Given enough time there might be a new highs but it diminishes your return as you wait for them. I believe the share has more legs but realise there is more money to be made elsewhere. My problem has been ending up with a relatively large value of these outside of an ISA, taking several tax years to bleed out the profits efficiently.
Nice problem to have though. My colleagues and Apple die-hards were warning me of cloud and cord cutting almost a decade ago which I believe did have an undue effect on PIC share price and still hasn't really impacted STB's although the role of the box is changing. That said, I am not smart enough to predict the forward path of the industry ... it may have to deal from a lot of pressure through online services within a few years or not. Asian markets might open up at a faster rate and be a game changer. I will probably keep a small holding just out of interest, but by this time next year I too will be out of PIC/Arris. ( Rate of change is increasing and that makes things less predictable)|
|1gw: Andyble - "not too sure it would work like that"? Meaning you don't think the shares subject to a TRS would count as "shares on loan"?
Here's another link which asserts that "Typically, the TR Payer retains the servicing and voting rights to the underlying asset, although occasionally certain rights may be passed through to the TR Receiver under the terms of the swap." So it's unclear!
So let's say A owns the Pace shares and enters into a TRS with a 1 year term with B and that the merger vote occurs during the period of the swap.
If B has the voting rights then B should vote the way B believes is most likely to produce a short-term share price gain - presumably for the merger.
I think A would also be likely to vote for the merger if A believed that the merger would be beneficial for the share price in the longer term (i.e. starting with the time that the swap ends). The only way it would be logical for A to vote against the merger (assuming A believes the merger is good in the longer term) is if A believes a short-term share price fall following merger rejection (to which A is indifferent because of the swap) would lead to greater share price gains at the end of the swap than if the merger vote was passed. But that's a really difficult market-timing call to make.
There's a further link below which gives the following example: "Suppose a bank holds a large portion of the stock of a company. The bank wants to reduce the risk of holding the stock without selling it. It then enters into a total return equity swap with an investor."
It seems to me this is a credible scenario here. Those institutions which have built a position in Pace and believe in the long-term prospects, but are nervous about short-term price movements given the merger uncertainty, are perfect candidates to supply the shares to investors speculating shorter-term, particularly after the initial price spike.
|corrientes: Thanks lgw.
With the declining value of what is mostly a paper offer, waiting a further 3 months is not something to be happy about. If there is no improvement in the PIC share price, and it could equally deteriorate further, the company will have to be VERY informative as to why the merger makes sense. The Market may well put the kibosh on this anyway.
In that case, I would like to see substantial dividend increases in this cash generative business if their results over the next few years continue to be positive. At least a higher yield would compensate for a continually discounted share price.|
|corrientes: The dollar has declined about 4% against sterling since the announcement.I still think that this incessant downward movement in the PIC share price, now 7.5% since the closing price on 23 April, most odd. Don't know the Arris price change over that period.|
|1gw: Merger completion risking and unrisked Pace share price
I think the Zacks downgrade, while odd in that it doesn't say anything about the Pace merger, is maybe indicative of some disappointment with the Arris 1Q results and some concern about Arris' competitive position following Cisco's launch of its CCAP product.
If I go back to my "ready reckoner" and say that this new information merits a 10% reduction in the "Arris failure" price - i.e. I assume that if the merger fails, the Arris price returns to 10% below its level just before the merger announcement, and I keep the Pace failure price at the level I assumed before (it's pre-merger price adjusted for the exchange rate), then I get the following (using the Arris and Pace actual prices and exchange rate at around the UK close yesterday):
NA = $37.53, R=37%, Pace unrisked = £4.80
If I instead assume the Arris failure price is reduced by just 5% I get:
NA=$35.94, R=30%, Pace unrisked = £4.66
Where NA is the implied price of a New Arris share with no merger risk, R is the implied risk of the merger failing and Pace unrisked is the implied price of a Pace share with no merger risk. As a reminder, I am using simultaneous equations involving the current Arris and Pace prices, the current exchange rate, the unknown values of R and NA and the assumed Arris and Pace prices if the merger fails to deduce the values of NA and R (and hence the unrisked Pace share price).
So these results suggest that the implied risk of failure has reduced (previously I was getting about 50% risk of failure), but that the implied unrisked price of a Pace share has also come down, from the level of just over £5 that seemed to be implied before.
Note, if you ignore the implied merger risk in the current Arris share price and go with the simpler merger formula price (Pace price = 1.325 + 0.1455 x Arris price / xrate), you get a theoretical Pace price of around 4.45, which means the actual price (at yesterday close) of 4.21 is now only a 5% discount to this theoretical price, which again is a narrowing compared to where it was earlier.
The implied risk of failure coming down (or the "discount" reducing) I think is in part a result of the arbitrage positions that have been built (short Arris / long Pace) since the merger, which have pushed down the Arris price relative to the Pace price.
Apologies if this seems somewhat arbitrary and over-complex. This is my opinion only, offered to provoke discussion. Please do your own research.|
Pace Plc share price data is direct from the London Stock Exchange