Biffa Share Discussion Threads

[mitzis] 07/8/2007 16:29

The last line of post 939... Biffa may attract recovery buyers sooner as it supplies essential services..

[awe430save132] 07/8/2007 16:26

What`s suddenly caused the change in sentiment?

[mitzis] 07/8/2007 15:40

Change of sentiment.

[awe430save132] 07/8/2007 15:13

Bottom or bounce?

[ialwayswinatmonopoly] 07/8/2007 11:04

Found this on iii website. Article is dated 3rd August 2007.

With markets generally pressured, it is worth being alert for well-established companies whose shares are taking a pounding. Genuine investment value may exist where there is a sound track record of earning power but the company may have lost short-term growth appeal.

Furthermore, when the overall market is jittery, stop-loss selling and short selling may extend a sell-off. Hence, the risk/reward profile is potentially attractive, so long as you are confident of long-term prospects.

Biffa (BIFF), the FTSE 250 waste management group, is an interesting situation to follow. At biffa.co.uk you can learn more about its activities, which show a prudent aspect of integration, yet also diversification. Since the spring, Biffa shares have plunged over 30% to about 240p, with 235p recently attracting buyers. This represents a chart reversal back to market levels last autumn when Biffa demerged from Severn Trent (SVT), the water and waste management group. So-called 'spin-offs' can be worth backing if the seller is in a hurry to change strategy, although it is worth questioning why the parent group has decided to divest.

Biffa started life reasonably well as an independent quoted company: last December's maiden (interim) results showed a 20% rise in pre-tax profit to £41.6 million, although a modest 6% rise in revenue to £377 million did not exactly smack of a growth business. A company's revenue context matters, not just profit/earnings, especially if a demanding PE applies. Biffa shares soared to 355p by the New Year but since then Company REFS have shown mixed broker opinion with the consensus erring to 'sell' - which has proved correct. There may not be anything fundamentally wrong with Biffa's strategy and operations, just that its shares were over-priced. The directors appear to believe in value: four of them bought a total £183,805 worth of shares at prices between 285p and 290p on 13 June. This looked like more than just a propping-up gesture.

Investors may still be wary of a demanding price-earnings multiple. Even at 240p, if Biffa achieves the consensus £78 million pre-tax profit forecast for the year to end-March 2008 and £84 million in 2008/09, the shares' prospective PE is in the late teens when analysts project moderate earnings growth, longer term. Moreover, Biffa shares yield only about 2.8% prospectively, which does not exactly lend support relative to say a 4-5% yield. This has been a dilemma for the shares while news flow has somewhat deteriorated. It is possible investors continue to shun Biffa, yet this is how a buying opportunity could arise.


Bad weather

A 4 April trading statement read firmly but appeared to present a bold face given a mild warning that 2006/07 revenue and profit would be at the lower end of market expectations. Such a revelation is hardly what investors expect, barely six months after a company has floated amid claims of an exciting new phase based on economic growth. The 26 July AGM update included a caution about increasing competition in waste collection besides the influence of bad weather. While 'blaming the weather' is often seen as a lame excuse, it was obviously fair this summer. The main concern emerging is the competitive environment for waste collection, which represents about 60% of group revenue. The Government's Waste Strategy white paper is said to offer growth opportunities; and indeed Biffa has responded to the challenges and opportunities well, via initiatives to improve customer retention levels while securing price increases. But if meaningful revenue growth is proving hard to achieve and, in addition, competition starts to affect margins, investors will remain wary. In its first quarter to end-June, Biffa achieved a modest 4% like-for-like increase in turnover to £197 million, said to be in line with management expectations. Free cash flow rose 17% to £40 million following tighter financial controls, showing how a company can deliver value despite modest top line progress. But margins can only improve so far and at some point the top line becomes critical. Most likely, this is already investors' worst fear.

More positively, in the event of economic slowdown, Biffa could prove a more dependable business than those exposed to consumer spending, due to its focus on essential services.


Conclusion

Biffa's interest charge needs watching. Borrowings have soared from £148 million to £385 million, although in the last financial year the interest charge was stable at about £23 million, covered four times by operating profit. Biffa may not be strained by this debt, yet it cannot have helped investor sentiment while interest rates have risen this year. At end-March, the balance sheet had shareholders' funds of £656 million and Biffa is currently capitalised near £900 million.

A more general fear that may be overdone is the sense, usually articulated by the media, that the UK will face pressure on availability of suitable landfill sites. Biffa's stance is that recycling initiatives should help reduce the volume of waste going to landfill in the years ahead. In principle, this should enhance the role of a waste-processing group although it looks harder in practice. I have seen the exasperation on the faces of Biffa personnel at my local recycling centre, as people take little notice what material to put in which skip. More positively, public motivation to use recycling centres and local councils drive to encourage this culture means recycling is here to stay.

A key determinant of the company's financial trend, hence investment value, will be the next trading update in late September before interims on 28 November. Meanwhile, if the stockmarket was to get a serious upset in August/September, Biffa may attract recovery buyers sooner as it supplies essential services

[7767] 07/8/2007 10:49

it looks like there might be a change in sentiment, offers are being taken out and bids being upped.

[mitzis] 07/8/2007 10:15

This foot and mouth is getting serious I remember last time when it started a mile from where I was living and the aftereffects.

[johne1] 06/8/2007 17:38

I also think it is serious shorting. However, I do tend to take note of the press as well. The news in the Daily Mail makes sense to me. MA activity on the decline is another factor. I think professionals need good reason to sell short.

See also: -

2delta - 4 Aug'07 - 10:31 - 931 of 935

Daily Mail - "Investors dump more Biffa stock amid fears of a profit warning"

[7767] 06/8/2007 15:06

imho i believe that some one is shorting the stock so as to be able to take a tranche on board at a low price and then launch a bid. Watch and see!!!!!!!!!

[ashtongray] 04/8/2007 17:49

Also the co have just given a positive trading update only a week ago so a profit warning would have serious legal implications for them. Doubt they would want to risk that.

[coincall] 04/8/2007 11:38

2delta,

Also strange when you consider how much material needs to be trashed and buried after all the flood damage, then when all bits replaced from the insurance claims, all the packaging that needs to be disposed of. Costs of damage now estimated at £3.3bn

[mitzis] 04/8/2007 10:38

Thanks for that 2delta .

Mind you it did mention that the recent fall made a take-over a more distinct possibility for pi's.

[mitzis] 04/8/2007 10:21

Poor old Gordon Brown not having much luck 1st the floods and now another outbreak of F &M its a strange time.

[davidoj] 04/8/2007 08:27

Dow in free fall 286 down Friday at close
The interest rate may be on the up next month
[money for doing the job,] it's a good little earner.
House repo report, bad
It may take a while before we see the bulls back in full flow.
Don't ever forget shares can go down as well as up

[johne1] 04/8/2007 08:17

I hope you've all got your shorts on, for Monday.

I won't be bothering with this one - there are plenty of heavyweights to play with.

Any comments?

[awe430save132] 04/8/2007 00:56

It`s his company he`s knows what he`s doing.This is a market thing and the shorter`s are having a field day but he must know what the future holds and eventually they will get burnt and the real investors will win out! At the end of the day you don`t throw £100,000 at something you don`t beleave in!

[ideal420] 03/8/2007 23:32

I agree that the Chairman buying is a mixed message. He could be holding for years, so yes its a confidence boost, but again cheap credit is on the way out and it might show a lack of immediate interest.

220 here we come.

I am long from 257, but also shorting from 246. Such a low forward EPS was likely to kick the PE down to nearer 10. If it hits 215 I'm loading up again. Just need to get enough from shorts to cover more buys.
Or start busking....

[blueforce] 03/8/2007 21:22

It looks like Biffa is being heavily shorted. With the bad luck the company have suffered with flooding over the past year, plus the increased competition on waste collection, the shorting may well continue for some time. The directors have bought in at these low prices, so that's encouraging. But i think this has further to fall. I do hold BIFF but have not really looked in any detail at it since I bought them. I clearly need to catch up. Can anyone tell me if there are Brokers notes out on BIFF

[tom89] 03/8/2007 17:28

Johne1 - 3 Aug'07 - 16:26 - 922 of 922
Thanks again.
I'll have a look. I have thought of looking at consistant gainers or those that appear in Toplists but always feel I have arrived after the event.
I have learned to have the 'close deal' flag highlighted with cursor hovering in case of any sudden moves but have been caught out badly. I use GFT but only when I feel they are not drifting the price.
I also stick to the two percent rule. I also set up EMAs for 22,50,100 & 200 days and find this helps to show trends.

[johne1] 03/8/2007 16:26

Tom89 - 3 Aug'07 - 16:15 - 921 of 921

I don't think you are thick, at all.

If you watch the live share prices, you can sometimes notice patterns. Between news, traders/investors will be undecided. Technical analysts will know far more than myself. If you notice that, during the day, the shares are trading between consistent highs and lows, just follow the pattern. However, the patterns can be broken and prudence is required. The good thing about betting is that you can bet with as little as £1.00. It is easier to stop and go the other way, also.

An example: -
between 232p and 238p is what I traded today.

I use Capital Spreads.

I am only learning myself but, it is good fun, whilst making a bit of cash.

All in my humble opinion.

[tom89] 03/8/2007 16:15

Johne1 - 3 Aug'07 - 15:36 - 915 of 920
Thanks John.
Sorry to be a bit thick but 'small bandwidths', what do you mean?

[tom89] 03/8/2007 16:10

No, but there could be a merger with some European mob.
Be In Fine Fettle Autumn.

[johne1] 03/8/2007 16:09

'tis still a confidence boost, to the markets, I think.