Smith (ds) Share Discussion Threads

[typo56] 20/6/2018 12:26

There's no certainty TERP will end up at 490p. A lot can happen between now and 10 July. But it doesn't really make any difference to your net acquisition price if you buy shares the day before ex-rights, or buy the next day at TERP.

(edited - previously I'd said 25 July, which is the fully paid date. Ex date is 10 July)

[losos] 20/6/2018 12:16

As Typo56 has calculated a TERP of 490p I might add a few around that level, I'm sure his sums are correct :-)

We all need to keep in mind that sometimes a big aquisition can go disasterly wrong. I know only too well after AMEC took out Foster Wheeler and then the oil price dived.

SMDS looks to be in the right business (With internet shopping taking off) but who knows what lurks in the Europac dungeons haha.

[bscuit] 20/6/2018 11:57

Ditto and will be one of my biggest by value and about 8% of the portfolio.

[phillis] 20/6/2018 11:43

Indeed CT
Not to forget the 9.8p divi on the enlarged capital base either!

[churchtower] 20/6/2018 10:23

Pleased to see you back in again Phillis. This in my opinion is one of the best medium to long term investments available at present within the FTSE 250 index. Present holders and those considering buying should view the presentation by the CEO and CFO on Monday, on the Company website, should they be in any doubt as to the confidence of Management and the potential of this business. I will be taking up my rights in full and will continue to ignore the current shenanigans of the market.

[phillis] 20/6/2018 09:35

I'm back in to take up the rights

A successful business with strong European/ N American base is just what is needed for this as yet undetermined post Brexit era

[marksp2011] 19/6/2018 16:17

Typo

Yes there is psychological side to this but from the fund PoV there is also portfolio allocation. If SMDS was a screaming buy then everyone would be keen to get their hands on the shares and overweight the portfolio.

my view is that it is an add/hold. I wouldn't have been deploying fresh capital here but I am not a seller either. I don't know what I will do about the rights and I will leave it as late as possible before deciding

[losos] 19/6/2018 15:15

Typo56 - Yes understand what you're saying, it could be described as a kind of con but if I sit back and do nothing I will be able to keep my percentage holding (microscopic tho it is haha) at a share price apprx. 33% what the market price today is at, and with no commission or stamp duty to pay. For the very small private shareholders (like myself) that is something to think about.

I consider myself a long term holder and having not added any since a very small 'top up' in early 2015 I was considering adding, some analysts were saying they were 'over bought' and share price was too high.

At least we know the terms now and can make a decision.

[typo56] 19/6/2018 14:56

marksp2011

I suppose it tells you the level at which the underwriters would be willing to pick up stock, should the rights fail. In this case, the rights would fail if the ex-rights price falls below 350p. At the moment the TERP would be around 490p (assuming my sums correct). Do you read that as lack of confidence?

Otherwise, I don't really get why the price matters to existing holders. Presumably they're holding because they believe in the company's prospects and the market will be already be priced 'correctly', based on current demand. If the company want to tap them for another 95p per existing share I don't see it matters how many sheets of paper they're given in return - they still end up with the same percentage of the company.

[marksp2011] 19/6/2018 14:36

Typo

The rights price is important

If the share price is 100 and the RP 98 it tells you something about the demand for the rights and the popularity of the offer (and to my mind makes me question why it needs underwriting)
If the share price is 100 and the RP is ten it also tells you something :)

[typo56] 19/6/2018 14:10

Losos, over the years I've dabbled with rights issues and the pros and cons of ways to play them.

I've come to the conclusion that rights issues are a con trick. They're sold as being a bargain discount offer only available to existing, loyal shareholders. In reality, by the time you do the sums, existing holders are no better off than anyone else buying in the market.

I don't know what the big fuss is about the rights price either:-

If you're going to take up your rights in full it makes no difference what the rights price is set at.

If you don't take up your rights you'll suffer a dilution, but the lower the rights price, the more you'll receive for the nil paid shares (effectively you've reduced your investment in the company).

If you want to maintain the same level of investment you can take up your rights in part, paid for by the remaining nil paid shares.

The mechanics of open offers are rather different, where you're forced to participate or lose out.

[losos] 19/6/2018 13:35

Typo56 - Thanks for the analysis, over the years I have participated in a few RI's and a couple of times I didn't participate and (eventualy) received a cheque for the 'nil paid' thingies :-) as you have said normally the dividend isn't included on the new shares but when you do all the maths it comes out the same. The market seems to have a way of judging these matters haha.

[typo56] 19/6/2018 13:01

Bscuit, as I explained above, I don't think you really lose out. The market will price the nil paid shares you receive to take account of the dividend.

The previous earnings, dividends etc will be adjusted for the 'bonus element' in order that future numbers are done on a like for like basis. I think this is done on the basis of the price at close on 24 July divided by TERP at that time, but I may be wrong.

[bscuit] 19/6/2018 12:35

My annoyance is that the fact that the dividend per share is less than last year notwithstanding good results as the dividend pot is being shared with the new shares, which get an instant bonus, whereas I have had to wait since the last dividend.

I note nobody has explained the phrase "bonus factor" to which I referredin post 2330.

[typo56] 19/6/2018 12:22

I think it's cleaner this way. Otherwise they'd have had to run with two stock lines from the fully paid date (25 July) up to the ex dividend date (4 October).

It also means the nil paids will track 350p below. It can be confusing when there's a dividend to offset too.

[dogwalker] 19/6/2018 12:12

Thanks Typo56. Your second point is the key one of the two.Fair enough then. It certainly doesn't look good though.

[typo56] 19/6/2018 11:55

Dogwalker. It may seem unfair but...

1) Short term the dividend income will normally be offset by the capital loss as the share price falls to reflect the ex-div. Therefore, if the divi were bigger, the price drop would be bigger.

2) The dividend value will be reflected in the price of the nil paid shares. i.e. without the dividend, once they go ex rights the nil paid shares would normally track about 359.8p below SMDS (350p exercise price plus the 9.8p dividend they wouldn't be entitled to). In this case they should track about 350p below. In other words, should you wish to sell the nil paids or let them laspe, you'll be receiving 9.8p per nil paid share more for them than you would if they didn't have the dividend entitlement (it effectively adds 3/11 * 9.8p to your dividend per SMDS).

Therefore, overall, I don't think you're as hard done by as may first appear.

[dogwalker] 19/6/2018 11:22

That's it Typo56, the company is regressively thieving dividend from the pre-existing holders during the period to which the dividend relates, in order to ('progressively' as they say ) coerce or bribe people into buying their new issue of shares.
Hopefully for holders this doesn't become an act of hubris.My motto & message for this packaging company is 'Get stuffed'.

[typo56] 19/6/2018 10:51

I'm not up to speed on all this stuff about the divi and the rights, but normally rights issues don't qualify for the forthcoming dividend. That's not the case here. I therefore feel sympathetic to the argument that existing holders are being hard done by.

Were it not for the rights shares, holders might have received about 27% more dividend. You'd have probably given it back as capital on the XD drop anyway though!

[ali47fish] 19/6/2018 08:42

sorry eddy what do you mean - is this a comment on todays rns about the rights issue? please explain

[eddyeagle1979] 19/6/2018 08:03

Agree with Dogwalker and marksp2011 re the dividend. Poor form by DS Smith in my view.

[phillis] 19/6/2018 07:44

TERPS 505p?

[dogwalker] 18/6/2018 21:51

marksp2011's argument is correct. The company is 'out of order' in this instance. Specifically, they have demonstrated that their dividend policy is a regressive one i.e backwards -looking.