Firstgroup Share Discussion Threads

[slaterlpj] 17/6/2013 15:08

Well I can't see many of the smaller investors being confident to more than double their exposure to this, with a full take up of their rights. I'll keep my money in my account for now, and if it does stabilise circa 100p, post RI, I'll consider more shares then.

Doesn't look too promising for any return on the lapsed rights either does it!

[dr biotech] 17/6/2013 14:56

I'd have been more impressed if UBS had given the price target when it was 250p+. Seems like most they always move their target prices some time after the share price has already moved.

[forwood] 17/6/2013 13:43

So why did UBS increase its holding from 16,844,068 to 22,783,370 shares?

Was that before or after its analyst's note?

[philanderer] 17/6/2013 13:31

Guardian:

FirstGroup slides as UBS cuts price target amid £615m rights issue

Broker expresses concerns about cost savings, cash generation and future acquisitions

FirstGroup shares have come under pressure as its £615m rights issue continues.

It has fallen 3% to 80.8p while its nil paid rights shares are down 31% to 5.75p, prompting City traders to wonder about the success of the issue. Paul Kavanagh at Killik & Co tweeted, "Trading close to 85p rights price. The rights takeup [is] looking less compelling - underwriters?"

Meanwhile UBS analyst Alex Brignall issued a neutral recommendation on the shares, cutting his price target from 122p to 100p. He said:

The net proceeds are expected to be £585m, used for incremental capital expenditure (around £200m over 4 years) and net debt reduction (around £385m). Whilst the net debt reduction was critical to address the credit rating, the long-dated nature of the debt means that gross debt reduction and interest cost savings are limited.

Despite the more solid balance sheet increasing the ability for management to restructure, we still have concerns over plans for more bolt-on acquisitions in the capital intense US bus business, whilst ongoing cash generation remains the big unknown. Margin recovery expectations are already high, whilst bus service operator grant subsidies remain a risk. We would wait for some delivery on targets before becoming constructive

[slaterlpj] 17/6/2013 13:05

You might be right careful. Looking at the buy/sell on the np rights today. Very blue. Is it possible to find a figure for the number of rights that have been sold, with reference to the number issued in total? If the great majority are sitting on their rights, I suppose that would back up your claim that in 3 weeks all will be normal.

What do you call normal in terms of the share price at that point?

[forwood] 17/6/2013 13:04

yep - so many selling their rights or letting them lapse will leave a market overhang, thus sell it down now. However, things don't always work out like that. Some big institutional players have increased their stakes and are seeing this as a realistic investment long term. As soon as the rights is over, this is likely to bounce. And I guess more and more will see it that way and perhaps are buying now to be sure of getting a 'good' price (because the present is the only certainty). I did buy in much higher c 99 but seeing it was still falling, sold for a 2p loss. Bought back in c 90/91, feels much better and reduces the risk - which I guess is down to 85. Only a matter of time before it's back over the £1, and I think that will be next week!

[careful] 17/6/2013 12:29

the share price is low because professional traders see an opportunity.
there are bound to be a large number of investors selling their rights at this point.
these can be mopped up by crafty investors exploiting this special situation.

it will only stabilise when we know how many shares will be left with the underwriters.
then the overhang will need to be be cleared by placing the shares.

say about 3 weeks and all will be normal.

[careful] 17/6/2013 12:29

new york, new york, so good i typed it twice.

[slaterlpj] 17/6/2013 11:48

pyueck, I agree, that's why I wrote,

"The price "might" rise to the theoretical ex rights level (140). But even if it does, will it stay there or drift back down again?"

I don't know if the price will rise to the terp, because I and nobody else knows exactly, why the share price is now so low, other than it's beeing sold or driven down. But sentiment against FGP suggests why the share price has dived, and suggests that it won't rise much when the the RI is complete.

I fear the share price will remain where it is or even fall post RI, so I'm not buying into it. If I'm wrong, I've lost the opportunity to buy fgp at a big discount to the share price it may reach immediately post the completion of the RI.

[pyueck] 17/6/2013 11:32

Slater the TERP price per the original rights issue is irrelevant, the share price has dived since. There is no logic in thinking the share should rise to 140p once rights issue is completed.

[slaterlpj] 17/6/2013 10:44

Hassini 2. "I can't believe some people still buying on the fall"

Yup, Esp' when the price of the ordinaries is now only 5p above the rights price, and still falling. But then again those buyers must have confidence in the RI and the company going forwards. Are they wise before the event?

I cofesss I don't know what to do. So it seems that doing nothing might be the better option here. I think I'll either sell the rights or let them lapse and hope for a crumb from the Underwriters on sale day.

What might happen on the 26th?
The price might rise to the theoretical ex rights level (140). But even if it does, will it stay there or drift back down again? There is no longer a dividend. The reinstatement of the dividend, is only intentional, and might not happen when it's supposed to. The board has to prove the use of the money raised, and improve the finances. Until that happens, demonstrably, sentiment will be aginst FGP, and the share price could well drift much lower than the 140. Hence there could well be plenty of opportunity in the coming months to add shares without the uncertainty of the outcime of the RI.

It's all too much of a gamble for me to add another £9.5K in rights take up. I think I'll sit tight.

[careful] 17/6/2013 09:32

p.s.
have you ever noticed when you chat to buy to let addicts.
they tell you how much rental income they receive and what their property is worth.

..that is EBITDA thinking.

[careful] 17/6/2013 09:27

it is useful to see how much a business makes each year ignoring its debt and depreciation.
these factors are often open to interpretation.

[goliard] 17/6/2013 09:01

pyueck, just to say that it is great to see someone post about how meaningless ebitda multiples can be. I am always amazed at how many people rely on them and ignore debt. Even worse when it is defended by saying 'lots of industry people use this...'.

[hassani2] 17/6/2013 08:44

I can't believe some people still buying on the fall

[darias] 17/6/2013 08:21

Looking at current share price and a group with high labour and capital costs seems to me that there is no rational reason for taking up the rights.

[nomdeplume] 17/6/2013 07:54

Well argued, Mathew. 'herd'?

[robertfaulkner] 16/6/2013 23:15

I know what's going to happen, it's either going to shoot up above 120p soon as the Rights Issue is over or it's going to continue to drop

[davemuray] 16/6/2013 21:25

I know, have managed to free up some cash to be able to take up the RI but really not sure. Have till 21st but will be pig sick if it drops sub 85p after ! Guess its all about the long term view which i feel pretty positive about but worried about short term volatility. Which is why at present I'm thinking about selling my rights, seeing what happens and topping up if required post RI.

[slaterlpj] 16/6/2013 21:08

It's a pity there's no truly unbiased opinion expressed in the media about this RI, saying one way or the other, if it's worth taking them up.

[pyueck] 16/6/2013 20:31

Neil no idea, what are you wanting people to say?

[neilyb675] 16/6/2013 17:39

are these headed to 72p..........discuss