Kier Share Discussion Threads

[bluecash] 28/2/2021 14:44

Andrew Davies should get together with the major shareholders and make sure that there is solid support for the share price. Cancelling the equity raise if it's a buy-in, might be an option, or releasing a counter to the Sky News story telling everyone that it is an equity buy-in, not a rights issue (or whatever combination it might be) will possibly be sufficient to keep the share price up. Whatever happens, I hope that the Kier management don't allow the shareprice to drift down and then accept a paltry external cash injection for a huge tranche of shares. If the shares get manipulated down, cancel the offer. Let the major holders know what's at stake and get a public view from them.

[bluecash] 28/2/2021 14:30

The Costain posters here seem intent on telling everyone how great Costain is (in a naked pitch to get Kier shareholders to switch to the smaller firm) while endlessly repeating the argument about Kier's value which has already been discussed for the last two years. It's old news. The shorters have departed. Kier survives. The current news is not about the company's intrinsic value per se. The events at hand are the sale of an asset which seems to be morphing into a corporate raid on Kier shares. The news leak to Sky, the shareprice action and the chief executive's response are what's of immediate interest. If a hedge fund and the vampire squid are trying to buy Kier equity, the chief exec and his team, maybe aided by major shareholders, need to defend the business and avoid being conned through share price manipulation.

[itisonlymoney] 28/2/2021 12:16

Well said belroe. That's why he's getting paid £1/2 million a year. Time for him to front the firm and stand up to predatory vultures. Major shareholders expect him to get a good deal, not just any deal and that's what he said he'd do. He should lean on the majors for support if he needs it. This is no time to sit meekly, being buffeted by rumors placed by cunning corporate raiders.

[imastu pidgitaswell] 28/2/2021 12:16

And sorry for the 'thin analysis' as someone further up said. I'll try harder. 🙄

[imastu pidgitaswell] 28/2/2021 12:16

imastu pidgitaswell25 Feb '21 - 12:17 - 593 of 629 Edit
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F - one of the relevant factors, without boring everyone to tears (!), is enterprise value. The real value of a business (e.g. to an acquirer) is the market cap plus the debt they would take on (or minus the net cash they would be buying).

COST's enterprise value (EV) is market cap minus net cash - so around £100m using 66p (275m shares) and £80m for the net cash (which is what they have said it will probably be at the year end - the current cash levels are a lot higher and were £140m at 30.06.21)

KIE's EV is their market cap (£152m) plus their net debt (c£436m average net debt per the last set of numbers, so c£590m. Assuming their own data is correct...



The key issue is the proportion of the equity to the enterprise value, i.e. how much does a movement in the share price (market cap) impact the enterprise value. In the case of COST, it's a low gearing, i.e. a 10% move in the share price changes the enterprise value a lot more in percentage terms than a 10% movement in KIE's share price does. So in a sector moving upwards, the KIE price has to move a lot more to deliver the same increase in enterprise value.

It doesn't mean KIE is necessarily a better investment, or indeed that the share price will increase by a higher percentage (they have moved pretty much the same since the Summer lows) - it just means that if all is well and the enterprise values increase by the same percentage, KIE will move up by a (much) higher percentage share price. Note the key part - if all is well. The fact that the share prices (not the EV) have moved up by similar percentages tells you something about the risk perception by the market.

Some numbers:

...................COST.............KIE
M cap...............180.............150
Cash/Debt............80............(436)
EV..................100.............586

10% share price increase:

M cap...............198.............165
Cash/Debt............80............(436)
EV..................118.............601

% EV change..........18%..............3%


It therefore becomes a question of risk appetite - if you want higher risk, and potentially higher reward, buy KIE (but be aware of the risks); if you want low risk but still rewards albeit potentially lower, then buy COST. Or you could just do both - a subtlety lost on the KIE thread.

[imastu pidgitaswell] 28/2/2021 12:15

19510 - And I say you are wrong. So round and round we go.

Firstly, spare me the accounting lessons - I've been a qualified chartered accountant for nearly 30 years. I'm not the best, but I know enough thank you.

The only reason those 2 items are showing in trade creditors and not as additional financial debt is because of the exceptional circumstances of the pandemic. The financial (bank) debt would be that much higher otherwise. They are to all effective purposes, debt. As we will see when they discharge those liabilities and the financial debt increases - fact.

And I note your somewhat disingenuous use of the term 'deferred tax' (in capitals?!) when any accountant knows what deferred tax really is; it is not delayed tax, which is what you are describing.

Believe whatever version you want. I just think anyone reading this should be aware of all of the facts. We will get more facts as and when KIE deign to share the true position - but until then, I think it only fair that a full picture is shown. Use the £310m if you prefer - as I said, dyor. I have.

You all seem convinced, because you want to be convinced, that I am deramping this share and therefore that I'm the one distorting. I say it is the current holders that do not want to know about negative views, or do not want them highlighted. Well tough - as someone further up said to me, it's a free BB. I'm honestly looking to invest, but I want to invest with the full picture - we just don't have that and no amount of snarling and name-calling is going to change that.

One question you might also ask yourselves is the issue of the increase of the enterprise value of the business that results from an increase in share price or market cap. I put the next post on the COST thread as people here seem to get upset when confronted with stuff that shows them a different view from their own (and because stdy doesn't trust links from 'derampers' even if they are from the same bloody site...) but with factual information. The key takeaway, whatever version of EV used - and it is a 'kind' version - is that the same percentage increase in market cap does not mean the value of the company has increased by the same valuation. It's up to each investor to work out their own risk appetite.

[ammu12] 28/2/2021 12:15

So we all agree costain is undervalued? Lol

[belroe] 28/2/2021 11:00

claymagnet, you are correct. The Kier chief executive needs to stop having his strings pulled and start leading events like the industry leader he claims to be.

[pineapple25] 28/2/2021 10:50

lol. Good post stormy. A lot of wannabe accountants here who've never run a business.

[stormcoming] 28/2/2021 10:37

stupidgit: You're the one putting out inaccurate info. The DEFERRED tax which most firms took advantage of including sector peer Morgan Sindall (they have just piad it back) and the trade finance all appear in Kier's accounts within the trade payables line. EVERYTHING owing is debt for every company. look at any business and shift everything owing into debt and see what they look like. You are applying an odd standard to Kier to suit your 'accuracy' argument. After you move trade payables into 'debt' what does that make the balance sheet look like? Answer: no different.

The REASON why deferred tax and the supplier payment scheme are in trade payables is because they are NOT interest bearing, so are not treated as a loan, but they are still owing and so appear within liabilities. Compare Kier's payables line with comparable turnover businesses. Don't forget this is a £4bn turnover company, much bigger than most.

You are accusing people of being economical with the truth but it's you who is painting an inaccurate picture. little less talking down from you, trying to be clever, would be appropriate.

[claymagnet] 28/2/2021 10:26

I think this immediate issue is not about the numbers, tho that is why we are in this position. It is about the apparant puppeteering of current events. There is a reason Guy Hands is loaded.

[imastu pidgitaswell] 28/2/2021 10:12

Following stdy’s example of copying from previous posts - which followed on from his above, and which doesn’t quite reflect the true picture:

“I could also agree that all of the scenarios he describes are possible. Who knows which one will occur?

I think, as usual, he is being somewhat economical with the truth - average net debt was £436m during the most recent reporting period (the £310m is a window-dressed year end position), and there is the delayed tax of £80m plus the trade finance (£125m) - so the net debt is (was before any additions to it) more like £640m than £310m. Quite different, but what's £330m between friends, eh? Everyone should do their own research.”

A business with their level of guaranteed government backed income for 4-5 years, and in reality for many years to come, should be a dead cert. That is why I’m interested. But it is languishing at a fraction of its former value because of the millstone of debt around it, as well as the restructuring issues and contract challenges - as is Costain to be fair, on the last one. That’s the opportunity on both.

It needs a way out. This latest flurry should be the best way, and should work. But it might be at the expense of existing shareholders - it’s not possible to tell without proper information.

But what information that there is should be as accurate as possible, on here. IMHO.

[stdyeddy] 28/2/2021 10:00

That might be partly a good idea davv. I don't think they should cancel the sale of KL, but postponing a cash raise until the share price is on a firmer footing (ie much higher) might be sensible. An early decision before the open tomorrow would be good. Davies doesn't seem to appreciate that HE has the whip-hand in day-to-day activities. I hope he uses his authority NOW and if major shareholders want to exert influence, he should get them to put some weight behind the share price

[davwal] 28/2/2021 09:50

Kier should pull the rug on both GH and the raise. They’ve certainly been caught flat-footed by sharp suits.

[hamhamham1] 28/2/2021 07:37

Stdyeddy. Impressive writings, again.

[stdyeddy] 27/2/2021 23:08

Dear 418249, can I call you 418 for short? I agree on the motivations behind the 'news' release. We've seen hedgefunds putting stories out about Kier at various times over the last 18 months. Davies rarely steps up. I think he has seen the stockmarket as some mysterious creature which does its own thing, regardless of his actions. Now that he's trying to raise some equity, I hope he's taking a bit more notice.

Regular posters here have made some other interesting points.
a) Davies told the market twice he was considering an 'equity raise'. Since the last rights issue all but failed, even at a much higher price, he would have to be really stupid to be talking down the shareprice by mooting an RI. I see two possibilities. 1. He IS really stupid. It's possible. Davies has been consistently ham-fisted in his communications to the investment community. OR 2. He wasn't talking about an rights issue. He was talking about an 'equity raise' (a buy-in) from outside investors. Since the story is in the mainstream news, now would be the time for more detail.

b) As a hedge-fund proprietor, Guy Hands is adroit in manipulating the investment community where Davies is hopeless. Davies doesn't even talk to the press post-results presentations. As I and others have pointed out here, it's in the buy-in group's interests to stop the shareprice from rising. Hence the leak to Sky News.

c) How will Davies respond? If he stays true to form, we will hear nothing from him on Monday morning and the shareprice could tank. BUT NOW THAT HE'S IN THE CUT AND THRUST OF A SHARE SALE HE NEEDS TO BE A BIT SHARPER. I HOPE THE MAJOR SHAREHOLDERS CAN GIVE HIM A LITTLE HELP ON UNDERSTANDING THE DYNAMICS OF THE SITUATION. If it's an RI, it might even be called off because it has no prospect of success. If it's an equity buy-in, it will go ahead at advantageous terms for the buyers. They get a massive slice of a major UK business underpinned by government customers and the shareholders will have been ripped off by a canny investment 'consortium'. Or, just possibly, the insiders continue to pick up shares and the share price stays higher. As ever, insiders and the market will decide, but if I don't hear from Davies, I will be looking fwd to seeing the major shareholders boot him out when the donkey work is over. If on the other hand, Davies can fight fire with fire, I will be a fan. He and Kesterton should already have a PR plan to handle news leaks on this project; that will demonstrate his graduation to the role of a good CEO for a PUBLIC company.

d) Value of the business. Someone said £1bn. I make that right. Current £3.5bn turnover and 2% net profit (before they pay it out in exceptionals -- and Davies is suggesting in the last RNS that that is over now, but it remains to be seen). Last yr Davies said increased competition for framework contracts might push that margin down, but then kier managed a 2.5% profit in the next results. Also £3.5bn turnover was achieved in a Covid (recession) year. So net profit is nominally £70m, but with a BUILD BUILD BUILD Johnson administration, that is likely to be £4bn-upwards. Maybe very much upwards. I reckon net profits are conservatively in the range £80m to £100m. A reasonable p/e for the sector might be 12. Enterprise value currently is £310m debt plus £150m market cap. Call it £450m. IF the equity buy-in OR rights issue (whichever it turns out to be) raises one for one (ie perhaps doubling the shares in issue) or £130m plus £115m from Kier Living sale, plus perhaps £35 half-year profit, the business could have practically no net debt and a nominal diluted shareprice of what? 40p? For maybe one minute. Because the debt is gone, the revenue and profit stays. That shareprice has to go to £2 very quickly (a p/e of only 8 on £70m profits) and MUCH higher on higher revenue and earnings.

e) But is debt gone? Not entirely. Kier will still need to use debt as it does now, for short-term project funding and I doubt that earnings will keep pace with working capital demand because there is a logjam (post-covid) of construction projects waiting to be awarded, and I would like to see the UK's largest construction firm bag £5bn a year in contracts. So we will still see some debt on the balance sheet, but it will be smaller and accrued profits will make it progressively smaller until eventually, the money being paid in interest today will become dividend pay-outs to shareholders.

[macromike] 27/2/2021 22:41

Share price manipulation has been a hallmark here for two years.

[418249] 27/2/2021 20:54

Only other point I want to clear up for everyone is that it was the consortium that leaked the news to Sky. There is no way Kier with there non speaking CEO would want to damage the share price (point 1) and with such vague news (point 2).
They were hoping for a massive sell off taking it down to low to 70’s and then capitalise on this as the consortium knows the deal that’s about to be done will launch Kier forward two fold. I wonder how much money someone made shorting the stock just before the tip off to Sky news. It didn’t work as intended and massive support will come this week mark my words.

[ammu12] 27/2/2021 20:21

Good news for construction companies:https://www.cityam.com/budget-2021-sunak-pledges-22bn-for-new-infrastructure-bank/

[bluecash] 27/2/2021 20:21

stedyeddy, literally the top chat post. You're on the advfn kier landing page. Great post. Please re-post. If you don't, do you mind if I do?

[bluecash] 27/2/2021 20:17

So speaks a true fan! I don't disagree tho. Phenomenal amount of interest in Kier this week. Friday volume four times average. Posts on here today number 40. That's twice as many at MGSN in four months. Gonna be an interesting month for kier.

[418249] 27/2/2021 20:07

To those who are not sure, Kier’s share price is going only one direction and that’s up. The only issue is the debt size that if managed will not be a major issue. Guess what.... they are doing something about it in a strong way. Redundancies, selling part of business and raising capital to name a few. Then you’ll be left with a business that only recently topped 1300 on the market with a Massive order book.
The order book is huge and Government backed, they have their tentacles in numerous contracts from Hospitals, TFL highways to Schools.
Kier has almost 1 billion of orders pencilled in this year alone, what does that tell you people? Sell and you’ll have a huge regret in 12 months time, your over analysing this. Huge company + Gove contracts + cheap share price + dealing with debt = 145/165 per share this year.
It makes no difference one way or another because the major players in the market are going nowhere. Everyone I now has a piece of this pie because it’s so undervalued and the potential could be life changing depending on your exposure.
Kier could be debt free in 3/4 years and then why would the share price not be up to its original level at 1300! If they do an equity via shares then the reduction will be anything from 10/15% which will have no serious impact on the future of the share price or effect current shareholder to much especially if by April we are hitting over 100 per share.

[rachet1] 27/2/2021 19:29

steadyeddy: excellent post. Respect. The saga continues.