-3x Short China Discussion Threads

[the stinger] 17/4/2011 21:39

aspers,,,,,maybe in a month or 2.....

[aspers] 17/4/2011 21:20

Take over this coming week at 35p!!! ;-))

[pwhite73] 17/4/2011 20:53

You haven't mentioned the main culprit....yourself.

Take a good look at the Holding RNS news items of late. You will note institutions have been buying into and steadily increasing their holdings in this company. It may be they have given assurances to the company and the landlords that they would support a rights issue if some sort of sensible compromise can be reached.

[kenny] 17/4/2011 19:50

dealy - you were quoting impressive sounding Ebitda numbers when the share price was 120p. The shares are now about 11p. Do you admit there is something wrong with your analysis? Do you see that having a zillion pounds in Ebitda is meaningless if you are about to run out of cash?

In any event, you keep quoting positive Ebitda numbers which are all historical. Wake up to the fact that current Ebitda is negative not positive.

Also, is it not about time that we addressed the fact that management screwed up by over expanding via expensive acquisitions of run down properties which need many millions spent on them to bring them up to standard? Even if each property only needed an average of £250k spent on it, which totals £187m, where are they going to get that from?

Are management perfect and it is all the fault of the landlords, local authorities, the government, the capitalist system, Colonel Gaddafi and any other scapegoat I have not mentioned?

[edmondj] 17/4/2011 19:47

Mainly seems to depend on how the landlords figure their best interests are served.

Baffles me, how Panmure continues to support the shares.

Really in the gamblers' last chance saloon now...

[tempramental] 17/4/2011 19:35

still looks to be in a precarious situation to me, has little bargaining power as all the chips are with the other players, is literally begging for survival. Existing shareholders are going to get shafted somehow, either by administration or recapitalisation with massive dilution imo

[the stinger] 17/4/2011 16:16

Upto the LL's really isn't it.....survive and 'probably' prosper or go bust.... If they can agree terms then the current share price will be a bargain as any rights issue will be at 20 - 30pish...thats unless it gets a new offer..

Found this from a few of years ago - how times change....

Southern Cross Healthcare "buy," target price raised

Thursday, September 20, 2007 8:30:08 AM ET
Panmure Gordon & Co

LONDON, September 20 (newratings.com) - Analyst Richard Newboult of Panmure Gordon maintains his "buy" rating on Southern Cross Healthcare (ticker: SCHE-GBX). The target price has been raised from 700p to 725p.

In a research note published this morning, the analyst mentions that the company's organic growth model is well supported by demographic changes in the UK and is largely predictable. With the agreement with Bondcare, Southern Cross Healthcare's capacity has expanded by 5.8% without any significant capital expenditure, the analyst says. The company's key role in the consolidation of the industry is likely to be a potentially strong driver of earnings growth, Panmure Gordon adds.

[dealy] 17/4/2011 15:57

the company generates cash from operations. The conversion rate of ebtida into cash is about 100%. This article sounds like it was written by the shorts. The company hasn't experience a 15% drop in revenue in the last 15 months. No way.

[schlemiel] 17/4/2011 14:48

accounting terminology dont pay the rent cash does and for sche cash is in short supply

[edmondj] 17/4/2011 14:38

How come no one seems to tell brokers' analysts they keep living in the fairyland of ebitda (and not just re. SCHE) lol. Quite a difference from the bottom line.

Amazing that various institutions such as J O Hambro increased exposure quite recently as storm clouds gathered.

[dealy] 17/4/2011 14:13

The company still has 31,000 residents so its revenue can be easily calculated. The company has not experienced the enormous drop in revenue that a 25% rent hair cut would demand.

Ebitda is a perfectly good metric to value and measure a company. At SCH the conversion rate to cash flow is also 100%. The company is generating 31,000 times £580 or £18m per week in revenue. Its current cash rental cost per week is less than £4m per week. There is room for manoevre if sensible adjustments are made.

[kenny] 17/4/2011 13:22

dealy - what you should learn from your analisis above is, by using EBITDA to assign value to the shares in SCHE, you are deceiving yourself. I pointed this out to you over 8 monhts ago yet you are still living in the fairyland of Ebitda.

SCHE long ago reached the stage where all private investors should have exited - leave this one to the professionals to invest in on a rights issue at 5p or whatever, or to buy out after it goes into administration.

[dealy] 17/4/2011 12:59

Put another way: if the company needed £50m of annual rent cuts to survive then that would mean a total of £70m of cuts would have to be made this year for the company to survive (taking into account the £20m of cuts already announced). Now, just 15 months ago the company was doing £80m of Ebitda so that would mean that revenue would have to have fallen by £150m in just 15 months. Revenue has fallen maybe £15m in that time frame.

Also, if the company need such drastic additional rent cuts just to survive I can assure you it would already be in administration.

I believe the company has laid out a wish list for how to flourish and prosper rather than how to survive. Survival can be achieved with mild rent cuts and some slight improvement in admissions and fee increases from the LA's.

[dealy] 17/4/2011 12:47

well that contradicts what the company said on Thursday when it said that the meeting was constructive. Saying no is not constructive. Either the article is exagerating or Jamie mis-interpreted the feedback from the landlords at the meeting. The company doesn't need a 25% rent cut because that would boost Ebit margins by 6% to about 7.5%. It might need a 25% rent cut for this quarter but it doesn't need a permanent 25% rent cut. Even last year (which was a very tough year) the company generated £53m in Ebitda. This year if rents weren't reduced it would probably still generate about £25m. It doesn't need a £50m annual rent cut to survive.

[kenny] 17/4/2011 12:36

Article from today's Sunday Times:

"Southern Cross has warned its landlords they must cut rents by a quarter or see the company collapse into administration in weeks.
Senior management at Britain's biggest care-home group made the plea on Wednesday at a tense meeting in London with the owners of its 750 homes.
Southern Cross, which looks after 38,000 elderly residents and patients, has been in negotiations with landlords since August, when it admitted was struggling to meet rising rents. It has been squeezed by falling occupancy levels and cuts in care fees paid by councils.
Management, led by chief executive Jamie Buchan, met landlords at St Bride Foundation, a conference hall near Fleet Street.
Industry sources said landlords were told they needed to reduce rent on properties by a quarter or Southern Cross was likely to run out of cash within two months.
Several of its biggest landlords told The Sunday Times they are unlikely to agree to the reductions, and would prefer a different operator to take over the homes.
The company said that if the rents cuts are agreed, it will survive and raise fresh funds by finding new investors or by launching a rights issue. Landlords could also be given shares in return for agreeing to the rescue deal."

[pwhite73] 17/4/2011 10:47

dealy

Don't start me off. "Communist Britain"??

"It's ok for public sector managers to get huge salaries and gold plated pensions but it's not ok for businesses to try to make money."

Businesses were and still do make money but far too much of it was ending up in the private bank accounts of the owners and directors instead of ploughing it back into the business. Hence the current parlous state of UK Plc.

[dealy] 17/4/2011 10:32

What's amazing about the communist Britain that Blair and Brown left behind is the rotten sentiment towards enterprise. It's ok for public sector managers to get huge salaries and gold plated pensions but it's not ok for businesses to try to make money.

[dealy] 17/4/2011 10:31

Here's an article in the mail that shows upside for the industry (of course it re-hashes the old problems and the lie about SCH seeking government support):

Care homes talk on standards to get NHS patients By Mark Foxwell
Last updated at 10:02 PM on 16th April 2011

Comments (0) Add to My Stories
The bosses of Britain's four major private healthcare groups are to meet next month to set new standards for looking after NHS patients in an attempt to persuade the Government to use their services more.
Dr Peter Calverley, chief executive of Four Seasons Healthcare, is working with Martin Green of English Community Care to come up with a set of standards for the care home industry.
Four Seasons, Southern Cross, the Priory and Barchester Healthcare have joined forces to convince the Government to let them help the cash-strapped NHS and provide accommodation for the sick and bed-ridden.

Good intentions? Critics fear that the motive behind private healthcare interest in getting NHS patients is to restore finances
The care home bosses believe they can help save the NHS money by offering their empty beds to patients who are on costly acute care wards but who do not need intensive levels of nursing.
But healthcare workers are increasingly concerned that patients could end up in the hands of private providers whose prime motivation is paying dividends to shareholders rather than the wellbeing of the elderly, sick and vulnerable.


More...Elderly care: How health authorities make funding decisions {thisismoney.co.uk}
A £10,000 care home penalty for the thrifty {thisismoney.co.uk}

In the past year several massive care home providers, including Four Seasons and Southern Cross, which together cater for 48,500 patients, have faced financial difficulties.
Both overstretched themselves during the boom, when they were under different ownership, to pay massive cash dividends.
Southern Cross, which has 750 homes, is seeking Government support-to stay afloat after being hit hard by local authority spending cuts and rising rent charges.
The company recently had a request for short-term financial help rejected by the Treasury. This has caused consternation among the 31,000 elderly residents who have been left in the dark over the future of the business.
Paul Saper, chief executive of healthcare consultancy LCS International, said: 'I have visited more than 70 Southern Cross homes in the past six months and found terrible conditions, such as unsecure doors.'
Four Seasons also ran into trouble after accumulating debts of more than £1.5 billion, breaking banking covenants in the process.
The company tried to find a buyer before eventually refinancing with its lenders.


Read more:

[dealy] 17/4/2011 10:27

can't access the article. Does it tell us anything we don't already know i.e. does it say something like "landlords and LA's all refuse to play ball"?

If not then we are in the same position as last week.

[pwhite73] 17/4/2011 10:21

ST article is old news and nothing shareholders don't already know about. If the landlords refuse to play ball the company goes into administration its as simple as that. This has always been the case. SCHE cannot trade its way out of difficulties without lower rent fees.

Its in everybody's interest to come to a solution. The political fallout will be considerable for this already fragile coalition government. 31,000 elderly folk turfed out onto the streets because of greedy landlords and government spending cuts.



"Several of its biggest landlords have told The Sunday Times they are unlikely to agree to the reductions, and would prefer a different operator to take over the homes."

LOL sure they'd prefer a different operator. They'd agree to Billy Smarts Circus taking over Southern Cross if they thought it would secure their rents but it ain't gonna happen.

[matt19] 17/4/2011 10:07

Sunday times today...................Bad news 7p tomorrow unfortunately.

[the stinger] 17/4/2011 08:52

To all serious posters here -
Correct me if i'm wrong here....however, isn't sche priced to go bust now still?....looking at the last couple of sets of results all the issues that stand now also stood a year or so ago when the share price was at 30p+ range.

They also have quite a few assets still i.e. £14 mill of property on the books.

If the rent issues are sorted this could see a rise back to 20p ish followed by new capital at that or at a 30p level....

And following the independant report july time - LA fees are restructured etc...this could be a 5 bagger with ease..

If the rents are sorted this has to be a very strong buy.