Enterprise Inns Share Discussion Threads

[osirisra] 23/6/2009 09:27

F' me things are a bit grim at the moment. ETI @ 116, BARC @ 260

Glad I cut my losses and ditched a little while back. Not soon enough though. Roll on ETI @ 100 when I will not be able to contain my compulsion to buy back in.

[call-logger] 15/6/2009 07:08

Spot on post, Ian

No longer a holder here for pretty much that reason

[jeffian] 14/6/2009 23:16

Osi,

It's quiet becaue this is effectively a shorters' thread (look at the header post). I had a LTH thread running ( ) but even I admit that has probably been overtaken by events!

Regarding your comments, I largely agree with you but the issue is 'fashion'. A few years ago, it was 'fashionable' to have very lean Balance Sheets and those companies which looked too 'fat' with substantial assets and net cash were encouraged to gear up and either return cash to shareholders or buy more assets with borrowed money (result: GEC became Marconi and wiped out shareholders and Mitchells & Butlers nearly did the same). The next 'fashion' was to 'return value to shareholders' (which could have been done either via increased divis, free share offers or a capital distribution) but which was often done by re-purchasing shares in the market and cancelling them. How this returned cash to anyone other than the shareholders selling to the company, I'll never know and I pleaded with ETI not to do it but apparently it was 'what the major shareholders wanted'. Probably the same major shareholders who have now decided that cash conservation is the big issue and no divis should be paid. As you will see from many companies which could afford to pay divis but won't, this is the current 'fashion'. So much so that when ETI went ahead and paid their Final 2008 divi, the share price got hammered and when they waived the Interim divi the market cheered! Are they mad? It would be nice if common sense could prevail and someone could remind the institutions that divis have been the foundation stone of their long-term performance. It would be as well if companies and their institutional investors could remember that unless they can guarantee capital growth (and who can?) without a divi there is little point holding a share. I hope ETI consider this and come to your conclusion and mine rather than slavishly following the current 'fashion'.

Regards, Ian

[osirisra] 13/6/2009 09:07

Hi Ian, I thought I'd be the only person posting on here looking at the low number of posts.
I agree the divi situation is totally up in the air. Thanks for putting a figure of 80m a year to it (saved me working it out).

Regarding possible dividends, here's my guess/theory to get people thinking:
If you take the next 24months ie include June 2011's divi and cut them in half the company will have saved 80m. If they are looking to make a dent in the £450/500m (call it 475m) short term debt then this gives them 16.84% of what they are looking for.
Half a divi would give 8.1p a year which still gives 5.4% return at a share price of 150p.

Regarding the value of the company:
They stated in their latest communication, the media brief of 10/06 that the estate value is £5.6b and this is a value that has been drastically reduced for obvious reasons and can pretty much be taken as a "bottom of the market" valuation.
In the same brief they state that the total debt is £3.7b. A quick bit of math gives you a figure of +£1.9b once you subtract the debt from the estate value.
We have a Market Cap of £759m with the share price sitting at 150p. To realise the £1.9b as Market Cap ie if the company folded today and everything was sold, debt paid and remainder split amongst shareholders we would receive 375p.

There is no getting away from the fact that even at bottom of the market property values ETI are worth 375p on asset value alone. They also state that their profits are enough to service the interest on the debt twice over. So they have an asset value of 375 and generate cash as well. On top of this they have skipped the dividend (and may skip/reduce in the short term) then the situation for shareholders gets better and better.

My view on a skipped divi to reduce debt if you are a long term holders is this:
So long as they are reducing the debt to improve the future position and not just trying to keep their heads above water then fine. A pound less to me today to pay a pound off of the debt meaning no more interest on that pound in future is fine.

Hopefully we can get some posts going on here and get people talking ETI.
Regards
Osi'.

[jeffian] 12/6/2009 23:46

Osi,

I wish I could believe you about the divi but I'm not so sure. A number of recent brokers' notes, whilst being generally bullish about ETI's survival prospects and likely further recovery of the sp, have talked of the company aiming to reduce its short-term bank indebtedness (due for refinancing in May 2011) by £450/500m. Short of a firesale of assets, it's hard to see how they could do this without passing the divi (costing about £80m/year). It would be nice if they could include some guidance on their divi policy in the IMS due 16 July.

Regards, Ian

[osirisra] 12/6/2009 18:22

"Enterprise Inns advises that it will release its next interim management
statement for the financial year to 30th September 2009 on Thursday 16 July
2009."


Tick, tick, tick. With the share price bubbling along between 150 & 160 it's time to pick your entry point and wait.

This company makes money, its operation has fallen back a few % pouints that's all. It has nearly finished disposing of unwanted property.
They were quite happy to keep paying a hefty divi' but caved in to pressure to knock lumps out of the debt. The main debts aren't renegotiable for quite some time and the banks are already on the mend so there isn't a refinancing problem really. Never the less they decided to skip the June divi' and focus on debt. The reasult of that is that the share price suffered from 180 but those who buy now will benefit from a company with less debt and one that has a track record and commitment to paying good dividends.
The yearly dividends paid last June and last December add up to 16.2p.
There is a very high chance that ETI will resume divi's in December (possibly reduced this time around).
10%+ divi return, reducing debt, restructured property portfolio, huge property portfolio which realistically can only go up in value from here, no refinancing problems.

DYOR
Osi'.

[jeffian] 21/5/2009 12:42

Thanks, Cerrito, that makes sense. The market may think that ETI will repurchase its Corporate Bonds at 67p/£1 as Punch has been doing, and the Credit Suisse analyst also gives it as one of his reasons to support the stock, but if he'd been awake at the Q&A session after the Interims, he'd have heard Ted Tuppen bemoaning the fact that, because all focus is on the short-term £1bn bank loan due for renewal in May 2011, they are paying down 'cheap' bank loan rather than buying in and cancelling more expensive bond debt, which they'd probably rather do. Maybe DG's purchase is just saying "we would if we could".

Regards, Ian

[pelleeds1980] 21/5/2009 08:36

Got stopped out this morning at 130?! Have I got any grounds with the sb company here? Feel a bit cheated

[cerrito] 21/5/2009 08:02

Jeffian your 256
For some reason cannot find the article in the FT search page
Article suggested bonds look a good deal and said that as FSA directives do not require directors to disclose bond purchases the announcement was quote a strategic move to shore up investors confidence unquote

[cerrito] 21/5/2009 07:54

From today's Independent
Enterprise Inns strengthened last night, rising by almost 4 per cent, or 6p, to 158.75p after Credit Suisse said the stock had room to trade higher, despite having more than tripled in value since early March.

Pubs companies were hit hard last year as operators sold out, spooked by the combination of tougher trading conditions and mountains of debt in parts of the sector.

The recent market rally has seen a number of leading players bounce back sharply as the prospect of recovery in the wider economy came to the fore. The pubs sector's overall market capitalisation has almost doubled since the beginning of this year, bolstered by improved beer volumes, stronger trade during the key Easter period, growing disposal activity and news of better-than-expected levels of leverage in recent updates.

The picture is likely to get better, according to Credit Suisse, which said that Enterprise, for example, might yet re-rate further. The current valuation, when measured against the broker's forecast of more stable trading conditions, success with asset disposals and the implementation of certain debt repurchases, imply too high a probability of default, or a dilution of equity, and suggests that the stock is primed to climb higher.

"Each of our valuation approaches (discounted cash flow, net asset value per share analysis, historical multiple analysis) offers share price upside potential," the broker said yesterday, initiating coverage on Enterprise with an "outperform" rating.

[the_doctor] 21/5/2009 05:40

Fair enough :o)
Although I was referring to its fundamentals, moreso than the details of the product.

[jeffian] 21/5/2009 00:14

No idea, doc. My knowledge of 'software' is about on a par with my knowledge of bio-tech!

Cerrito,

What did it say? I was wondering if anyone would pick up on that and what 'message' DG was sending. On the one hand it says he thinks ETI will still be around and able to repay its debts in 2018. On the other, why buy the bonds when you can buy the Ordinaries? 10% interest v. no dividend? 67p-£1 in 9 years - what does this say about the growth prospects for the shares? I assume the intention was to send out a positive signal but seems like a mixed message to me.

Regards, Ian

[grevis] 21/5/2009 00:13

Evening Euro Markets Bulletin
ADVFN
Wednesday, 20 May, 2009 5:28 PM
Credit Suisse has been running the rule over pub groups as the sector has returned to favour, in line with the market's enthusiasm for the recovery prospects of highly geared companies.
The Swiss bank reckons that the pub groups are likely to see further declines in rental income and property values this year, which will impede the rate of recovery.
It highlights Enterprise Inns as its favoured stock in the sector. It expects the stock to out perform and has a price target of 224p.
'Our preferred pick is Enterprise Inns, as we forecast the group will make progress reducing debt ahead of the May 2011 refinancing. As such, we expect its 2010 estimated calendarised P/E multiple of 4.5 to increase,' the bank said.

[cerrito] 20/5/2009 23:48

FT had a write up of CFO George buying the 2018 bonds at 67

[the_doctor] 20/5/2009 21:29

OT:
jeffian - in the interest of more constructive banter than our 'discussions' on PRM, it would be good to hear your views on PHD.

[knockers2] 20/5/2009 11:26

think i've found a bull

[scoby doo] 13/5/2009 22:30

In at 48p out at £1.68p cheers

[osirisra] 13/5/2009 09:20

No interim divi !!!!!!!!!!!!!!
The divi payments in the face of recognised prudence was the only thing that propelled ETI up.
Serious alarm bells for holders as the interim will not be the only divi missed as they switch stratergy to debt clearing. The turnstiles at the exits are spinning. Time to go and go quickly. This is on a serious downer until they comfirm/deny final divi.

Lucky to be above £1 by the end of the week and with no new news and only uncertainty this will drift to,,,???,,, 70p IMHO.

[pilkington] 12/5/2009 15:24

Anyone else noticed how we seem to be following Barclays up and down for the last 6 months.

ETI - black
BARC - blue

[pilkington] 12/5/2009 12:24

From today's Times


MPs call for change in 'tie' deals to save pubs

[jeffian] 11/5/2009 23:41

That's odd, spob. For as long as I've known ETI, they've specifically NOT included the 'lotting premium' in their Balance Sheet. The notes to each year's accounts specify that the estate is valued "on a pub by pub basis" (i.e. without any group premium) and the 2006 accounts go further, saying "Our independent valuers advise us that the valuation would be some 15% higher if valuing the estate as a whole" but this was never included in the Balance Sheet. If the analyst is saying that it has crept into the covenants of the corporate bonds, I'd like to see chapter and verse but, in any event, it only seems to involve £1.7bn out of a total of over £5.8bn.

Let's see what tomorrow brings.

Regards, Ian

(Edit: I've just had a look at the Unique investor report which covers over 3500 pubs in the former Unique estate. In the section dealing with "Net Worth Covenant" it specifically says "- Fixed Assets (as per Balance Sheet" (i.e. no lotting premium). In that estate, its headroom above covenant value is a net £1.3bn.)

[jeffian] 10/5/2009 15:49

and this in the Indy