Bodycote Share Discussion Threads

[masurenguy] 18/11/2008 07:29

Negative view from The Independent this morning probably won't help the share price !
....................................................................................

The Independent
Tuesday, 18 November 2008
Investment Column:

Bodycote tarnished by auto industry links
By Alistair Dawber

Our view: Sell
Share price: 96p (-27p)

Kicking a company when it is down is best avoided, but for buyers it is pretty tough to find anything nice to say about the engineering group Bodycote. The shares were down 22% yesterday as the company, a supplier of thermal processing services, announced a profits warning. The finance director, David Landless, added that it was "anybody's guess" how 2009 would pan out.

About 20% of Bodycote's work comes from the toxic automotive industry, in Europe and the US. While the company may get disproportionately punished by the market for this part of the business, existing investors will take no solace from the fact that the shares were already down by more than 50% in the last 12 months, before yesterday's update. Yes, the stock is now cheap, but the indication from analysts is that this does not mean it will get catapulted upwards on signs of a recovery. Yesterday, watchers at Dresdner Kleinwort cut their recommendation from buy to sell.

It is not true, however, that the company is a lost cause. The group has sold off its testing business, and while investors will be miffed that the cash handout from the proceeds has been halved, Bodycote will have a strong balance sheet heading into a downturn. Analysts at Singer argue that on a price earnings ratio of 9 times and enterprise value to Ebitda of 2.5 times, Bodycote shares are fair value. The group is cash generative and has a minimal pension deficit, they say, "but the sector is going through the downgrade phase so it will take a while for this value to emerge". The group's inherent value indeed may yet emerge, but it could well be after a long period of pain for investors. Sell.

[guman] 17/11/2008 21:34

when would holders get 40p and what is the qualifyng date?

[beaufort1] 17/11/2008 17:34

IMS states that after returning cash to shareholders the company will have negligible net debt

[beaufort1] 17/11/2008 17:28

Debt will be paid off out of proceeds of sale Robbie

[robbie12] 17/11/2008 17:26

Beaufort1 - 17 Nov'08 - 16:54 - 331 of 333


The market cap of the company is now less than the cash proceeds of the sale. How can the rest of the company be valued at less than nothing?


debt

[jenny tulwought] 17/11/2008 17:24

Beaufort1, my thoughts exactly, I bought in too for the same reason, at 95.5.

JT.

[beaufort1] 17/11/2008 16:54

The market cap of the company is now less than the cash proceeds of the sale. How can the rest of the company be valued at less than nothing? Have bought in today

[beaufort1] 17/11/2008 16:54

The market cap of the company is now less than the cash proceeds of the sale. How can the rest of the company be valued at less than nothing? Have bought in today

[masurenguy] 17/11/2008 16:39

"chris1604 - 2 Nov'08 - 317: Sounds too good to be true chaps, therefore, it probably is. I suspect that things may have changed since the indicative return of 80p a share.Bodycote may have to allocate a bigger proportion of the sale proceeds to the pension fund and pay down a more significant amount of their borrowings.In the end we maybe looking at 40p a share and going forward that may be a more prudent course of action which will be more beneficial to shareholders on a long term basis."

How very prescient ! You obviously have a very good handle on this company - however todays price fall seems to be an overreaction to the news - what's your view ?

[pugugly] 17/11/2008 15:26

Market may be right - Operatioal risks high with over 50% in very high risk markets of cars, trucks, aircraft and tooling. sould survive given retention of 50% of cash

I would have been happier if they had retained all the cash.

[jenny tulwought] 17/11/2008 14:06

Edging back up towards the North side of a quid by the close and a further gradual recovery for the rest of the week for what has been a rediclous over-reaction.

JT

[davius] 17/11/2008 10:55

I spotted a refence to BOY in the Times a week or two ago, commenting on the cash return and stating how well priced the shares looked. Having had no available funds since I've been unable to invest, just as well after the market reaction to todays news.

This seems a gross overreaction, market cap under £310m with the £260m cash which was to be returned being halved to £130m, or 40p per share.

93p now, would have expected a bounce but no sign yet.

[w.bramley] 17/11/2008 10:23

Panic sales - Think the fall today is an over reaction in a general market gloom.

[drectly] 17/11/2008 08:59

I agree it may make some sense, but the market does not like it when you do not do what you say. Unlikely anyone has the funds for a T/O at present, so a long but probably profitable wait for things to change.

[amitkoth] 17/11/2008 08:20

This makes it a much better play, with no debt.

Puts them in a much stronger position - better for the business long term.

[hybrasil] 17/11/2008 08:09

40p back as opposed to 80p?

[chris1604] 04/11/2008 18:12

Many thanks for the comments re the pension fund.

Certainly the improvement in the share price suggests we are not alone in thinking boy is a steal at these prices

[t1lal] 04/11/2008 11:20

Nice to see some deserved improvement in the share price.

[drectly] 02/11/2008 21:36

Pension fund fairly well explained in 07 full year report, amount in equities looks about 30 m (sterling) so impact not too great, perhaps 10m since they considered 80p payout initially, not wanting to have to raise addition funds in the next few years a more likely reason to pay out a bit less now.

[drectly] 02/11/2008 21:30

Pension fund is a good point, if someone has the value of the fund and the % in equities, it gives a good quick guide to the increase in liabilities since early Sept, with stocks down about 20%.
As a shareholder (which I am) I would prefer they stuck to the 80p, this would allow the purchase of a lot of lower priced BOY shares with the cash, yes makes them a bit risky and they may have to reduce divi for a bit, but long term it could work well, including if there is a t/o.
As a BOY Director (which I am not), I would take advantage of the general turmoil, to sort the pension fund, has to be done some time and good for existing employees to know it is better sorted, reduce debt and hold enough cash to pay a good divi even if things are a bit tough for a couple of years. Much easier to talk a good story if you are still paying a good divi, whether people got 40 or 80 p would soon be forgot. There only problem, they pushed back on 350 p in shareholder interest, if 80p becomes 40p, pressure for t/o likely to increase.

Be interesting what they do as long as cash raised for the sale to complete, will continue to hold, will add with any special divi and hope for t/o in time to take advantage of other value in this market.

drectly

[clampit] 02/11/2008 18:43

chris 1604;-
General meeting on 9th October RNS:-

"Bodycote PLC ("the Company") announces that, at the General Meeting held
earlier today, the Shareholders approved the resolution required for the sale
of the Testing Business of the Company ("Sale") to proceed as set out in the
circular sent to shareholders dated 23 September 2008 (the "Circular")."

Circular stated the Directors proposed returning 80p per share. Can they really now suggest it should be much less? Not much point in asking the shareholders for approval if that is now the case.
We shall soon find out!

[chris1604] 02/11/2008 16:15

Sounds too good to be true chaps, therefore, it probably is.

I suspect that things may have changed since the indicative return of 80p a share.Bodycote may have to allocate a bigger proportion of the sale proceeds to the pension fund and pay down a more significant amount of their borrowings.In the end we maybe looking at 40p a share and going forward that may be a more prudent course of action which will be more beneficial to shareholders on a long term basis.

imho of course

[sleveen] 31/10/2008 08:27

Without checking your arithmatic essentially yes

[amitkoth] 31/10/2008 08:10

Just to confirm something.

Their recent sale, which they've received in cash, is basically their market cap (with debt stripped out)??

So I'm essentially buying cash at the moment?

With the profitable business thrown in for free?