Regus Share Discussion Threads

[jeffian] 19/5/2009 21:52

"I think if you are going to count future lease payments then you have to count in future rental income too."

That's exactly the point, CR. They take long-term leases (albeit now with break clauses and, apparently, some variation in the rent linked to profitability) but "future rental income" has no security at all. RGU's occupiers can walk away at the drop of a hat - that's the point of 'serviced offices' - but RGU cannot walk away from their long-term obligations.

Good luck to you with your investment. If it all goes pear-shaped, it's as well to understand what the possible dangers are.

Regards, Ian

[cockneyrebel] 19/5/2009 20:54

Like they have been paying the leases for a year through a recession and the cash has increased.

CR

[cockneyrebel] 19/5/2009 20:51

Well that's your point of view which you are entitled too.

I think if you are going to count future lease payments then you have to count in future rental income too. Seems a bit like valuing a company by it's liabilities and ignoring its assets if you don't, imo.

CR

[jeffian] 19/5/2009 20:02

This is a Mr. Micawber company ("Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.") although it's the other way round - in RGU's case the income is variable but the costs are largely fixed.

From 2008 accounts:
Revenue: £1077m
Expenditure: £928m
Profit: £149m (13.83%)

That is with average occupancy running at 83% which is high. It doesn't take a huge reduction in occupancy and REVPAW to wipe out that slim margin and these are the very areas RGU say are under threat.

CR keeps repeating the company is debt-free with £250m cash. Leases (the obligation to pay £x for y years) are equivalent to debts and it only has cash because it hasn't yet paid people it owes. Look at the Balance Sheet - current assets (including that £250m) = £460m; current liabilities = £592m; Net Current Liabilities -£132m. These negatives are only balanced by the value of 'Goodwill' and 'Property, Plant and Equipment' (i.e. leases and fit-out costs) both of which have to be written off if things turn against you.

I just don't like the model. Stripping out the Regus 'brand', it is basically just taking leases of office buildings at full market rent and then re-letting them at a premium rent and pocketing the difference. In good times (and these past few years have been the best it gets for RGU) tenants are prepared to pay over the odds for the additional 'services' provided by RGU and the flexibility in occupying from 3 hours to 3 years. But it is also that flexibility that is the Achilles' Heel - when the going gets tough they can simply walk away without penalty. IMHO it's a 'feast & famine' company which does well making very thin margins on huge turnover in the good times, but struggles to survive in the bad times.

It's just an alternative point of view.

Regards, Ian

[rochdae] 19/5/2009 16:52

Worst case senario of all businesses is that they can fail; best case senario it that they prosper. Meaningless statement. Growing revenue, expansion and a revived market. Don't see a case for selling.

[topdoc] 19/5/2009 16:47

why do you have such a -ve view of RGU

[jeffian] 19/5/2009 16:07

No, the "worst case scenario" is that it goes bust like it did last time!

[cambodia] 19/5/2009 15:45

Well I've gotten trigger happy and got in here. After having justifiable risen from 40 pence the share over the last 3 weeks has been hemmed in a tight range.

People have sold on the news. And the news looks good.

This buying opportunity may give the impetus for the next leg up.

Worst case scenario share falls to bottom of range at 73 pence.

[jeffian] 19/5/2009 13:02

Never shorted anything in my life, topdoc. Just a comment from an old property hand. If you don't like it, ignore it.

[rochdae] 19/5/2009 12:41

But revenue up 16% and continues to expand. Very few reports are out and out positive atm.

[topdoc] 19/5/2009 12:24

short are we jeff

[jeffian] 19/5/2009 11:40

To those wondering why it has reacted the way it has, you might want to re-read my post 99 above and then ponder the comment in the IMS that "We are continuing to see pressure on occupancy and price which is impacting net income". Occupancy and REVPAW are the key drivers for this company and the margins between variable income and fixed cost are very slim. We are currently in a very bad recession and the mystery has been why occupancy has stayed so high in complete contrast to the employment and property markets. It doesn't take much slippage in those key drivers to see profits disappear in a puff of smoke and, beyond that, a cash pile of £200m doesn't look so great against an overhead of £1.5bn/year.

[bigbigdave] 19/5/2009 10:06

Well I've added, got to take advantage of a dip like this after such a positive statement.

[ac1983] 19/5/2009 10:05

Don't know what's going on today; investors should be bailing into as opposed to out of this. They must be keeping their powder dry for some dog of a stock instead.

[cockneyrebel] 19/5/2009 09:19

Sit and think about it, many larger businesses have been hot for six. When they expand or the owners re-start another business they won't want to dive in and buy or rent large offices that they have a big commitment to - it will be the sort of thing RGU do that will be in demand - profit taking here is way too premature imo, no doubt some fund listening to a tosspot broker somewhere, then in a week or two they'll be all bullish again.

CR

[its the oxman] 19/5/2009 08:21

yep - with a cautious tone, but all to be expected in reigning in expectations - basically good progress though

[cockneyrebel] 19/5/2009 08:20

Picked up more this am - dip is nonsense, these are a buy imo.

CR

[cockneyrebel] 19/5/2009 07:52

A good statement.

Brokers are forecasting 4% sales growth, RGU up 16% so far - I'd say that's well ahead.

CR

[whowantstobeamillionaire] 19/5/2009 07:29

without a doubt - anyway, brr when brokerages are on board IN FULL, you will see those surges right before your eyes :-


free advice - close ya shorts IF you get the chance they will blaze hard and fast... YOU ALL CAN DARE to SHORT but my instinct tells me anyone short will BURN real HARD... cos the good news WILL be shared globally – have agreeeeeeat day me haz work to do....


He ho :)

[ac1983] 19/5/2009 07:24

Seems fairly positive.

[cockneyrebel] 18/5/2009 14:07

Breakout, new recent high and this thread is dead - great bullish indicator imo.

CR

[cockneyrebel] 18/5/2009 11:04

Very big volume on Friday - someone in the know perhaps and buying ahead of the t/s.

CR

[ac1983] 15/5/2009 22:04

Let's hope it's as good on the quarterlies