Kier Share Discussion Threads

[gettingrichslow] 31/5/2019 08:18

B+, so The Times is directly quoting Kinwah (post 2359) from this discussion board??!!

[edmondj] 31/5/2019 08:15

Minerve,

I've no short position and don't short, I'm looking at Kier as to whether it represents a (fools?) recovery situation. The short position of 4.8% is well down on 14%-ish at the end of last year but interestingly Kuvari retain conviction to keep increasing theirs - and they called the rights issue' timing astutely. Thus a binary question whether their analysis is now awry or a pertinent red flag.

hxxps://shorttracker.co.uk/company/GB0004915632/

[brexitplus] 31/5/2019 07:51

From the Times

“Kier Group bounced more than 12 per cent after hitting its lowest level since 2000 at 260¼p on Wednesday. The FTSE 250 construction company has failed to recover since it shocked investors in December by launching a heavily discounted rights issue. Its biggest shareholder, Woodford Investment Management, was among investors to take part at 409p per share, and will be hurting from that decision.

Trading volumes in the stock yesterday were above-average, at 1.8 million compared with an average of about 800,000, suggesting that investors could see positives on the horizon. The improvement in the share price sparked debate on online trading forums yesterday. One punter wrote: “Kier may well prove to be a bargain of a lifetime but for many investors the relentless downward trend in the share price is a warning to stay well clear.” The shares closed up 32½p, or 12.5 per cent, at 292¾p.“

[minerve 2] 30/5/2019 22:49

ltcm1

Frankly that last comment is rubbish.

It was the banks that put an end to Carillion, not the shorters.

Anyway, two wrongs don't make a right. Tighter regulation and accountancy rules would prevent most of these problems from occurring and companies, if given a chance to recover, can do just that. Even Amazon had problems. We don't need shorters to tell us a company has problems.

Frankly if you are investing/shorting Kier then you should really be up-to-speed with the Kuvari stuff. It is 6 months out of date and I have spent much time in discussion with those at the FT over this. The timing of their presentation was fortuitous because it ended-up being a day before the rights issue which only came about because the supply chain was straining. If Carillion hadn't have caused fear - amplified by shorters - Kier may have avoided a rights issue.

But we are where we are.

If you agree shorting is a good idea let me know and you will be filtered. I struggle to maintain the desire to hold conversations with people who don't have morals and values that match with mine. I KNOW I am right. Sorry.

[ltcm1] 30/5/2019 22:20

Appreciate the post Edmondj.

[ltcm1] 30/5/2019 22:17

But with Carillion the shorters did everyone a good turn because the company wasn't naking money and was distorting the market with their lowball desperation bids. Had the shorters not rumbled them this farce would ahve gone on a few more years leading to most likely a very dramatic disorderly bust.

Unfortunately the same rumours persist about Kier, they seem to win nearly every contract they go for! And yet they have this tiny balance sheet by comparison with the scale of the work they do.

Maybe they are just very good at pricing and can make their size work, it just seems a bit unlikely to me, looks like they paid too much divi out and perhaps the profits never really existed once the tail end costs are accounted for.

[brexitplus] 30/5/2019 21:49

Interesting analysis by Kuvari.

[minerve 2] 30/5/2019 21:33

EdmondJ

I think you are about 6 months' behind. Didn't your short go well today? :)

[edmondj] 30/5/2019 20:58

This was their rationale as of January, if you can't get the link to work:

Vikram Kumar's Presentation at Sohn London Conference

(Note: On the day after the conference Kier Group made an emergency rights issue of £264m and the shares fell 34%.)

Kuvari have held a short position in Kier Group since August 2017. They are currently short 0.71% of the company’s stock. They previously held a disclosed and successful short position in Carillion, the support services company that collapsed in Jan 2018.

Kier Group are in the construction and contracting business, mostly in the UK. The UK government is a big customer – infrastructure services, road maintenance and development and civil work such as schools and hospitals. They also build residential houses and commercial buildings.

Kuvari do not like these types of businesses because they are low margin, commoditised and competitive. If government contracts cost more than anticipated to fulfill the company is liable.

Kumar called the accounting aggressive. The contract nature of the business means that income does not come in steadily but in lumps. The contracts can be multi-month and multi-year. There is a temptation to try to smooth revenue by booking work that may have been done but not paid for. With the IFRS 15 regulation coming in Kumar believes the company will be forced to re-state some of its revenue.

With short positions, Kuvari pay great attention to working capital and particularly receivables – how quickly once you’ve invoiced your customer can you collect cash? Kumar believes that Kier’s customers are slow to acknowledge the work that has been done and slower to pay up. He believes that Kier have been booking income before customers have acknowledged work has been done.

There is a lack of cash generation in the business. According to their accounts, Kier generated £95m in cash over the last five years. Kumar believes that they have overstated that cash. Kier had to restate their full year 2017 FCF from over £100m to -£56m after pressure from regulators.

The most worrying aspect of Kier’s business is the high leverage. Kuvari estimate debt could be as high as 6.8 times, taking them well into distressed territory. Kier owns the equivalent of 68% of the equity in JVs. Kumar believes that the JV’s are being used to hide the leverage. The debt is not being consolidated. Kier also calculates leverage at a low point during the financial year and does not average it which would lead to a higher figure.


Read more: hxxps://www.marketfolly.com/2019/01/vikram-kumar-short-kier-group-sohn.html#ixzz5pRKiHvBi

[edmondj] 30/5/2019 20:55

Interesting that Kuvari Partners (who called the rights issue well, last year) have continued to add to their short this year: was 0.71% of the issued share capital in January and rose 0.13% on 29 May to 1.44%. Marshall Wace trimmed theirs very slightly on 28 May, to 1.53%.

hxxps://shorttracker.co.uk/manager/kuvari-partners-llp/

Either they are playing a blinder or their reading is flawed:

hxxps://www.marketfolly.com/2019/01/vikram-kumar-short-kier-group-sohn.html

(P.S. - think you might need to change hxxps to https, can't seem to do so when posting.)

[minerve 2] 30/5/2019 20:14

ltcm1

I am not in the game for predicting when. I am in no hurry. It can stay like this for 5 years for all I'm concerned.

[ltcm1] 30/5/2019 15:25

Thanks Kinwah, good to finally have a rising day at least here.

Minerve the Woodford outflows are unlikely to turn around anytime soon, the FT are reporting he has had a big loss in his Income fund this month, so the redemptions are unlikely to slow it would seem.

[kangaroo joe] 30/5/2019 12:30

Wincanton recovered from circa 40p to around 280p. No rights issue required (just) but took 3 or 4 years, so it can happen.

[minerve 2] 30/5/2019 09:40

Just wait until Woodford (and other UK domestic) has £10M+ inflow/day rather than £10M/day+ outflow if Brexit is soft or we Remain. Some shorts are going to get seriously burned. Should be fun.

[brexitplus] 30/5/2019 09:24

Zicopele

Of course he does. Woodward loves redemptions😁😁😁

[zicopele] 30/5/2019 09:16

High quality discussion? We have a poster who is seriously suggesting that the biggest owner of stock wants the share price to fall.

[kinwah] 29/5/2019 23:18

Thanks ltcm1 and Minerve for a high quality discussion. I have enormous respect for Minerve's overall approach to investment. Long term with his portfolio he will make good money and add to the millions he must already have. I traded Kier successfully after the rights issue but I was pleased to get out while the going was good. The market's view, no doubt driven by shorting from hedge funds, is that something is seriously wrong with Kier beyond the published accounts. The question is, is it brave or foolishly stubborn to hold an investment position in the face of relentless selling pressure on the basis that you believe there is underlying value? Really it must come down to appetite for risk. Woodford takes a very high risk approach which must concern the FCA. Minerve probably believes his portfolio balances the risks of an individual investment failing. Kier may well prove to be the bargain of a lifetime but for many investors the relentless downward trend in the share price is a warning to stay well clear.

[minerve 2] 29/5/2019 22:07

ltcm1

Woodford isn't going to change his methods just because he has outflows.

I outperform most institutions. I have the advantage of not having to confirm, I don't have to report periodically, I have no one other than myself to be accountable to, and my portfolio is much smaller.

It works. I've been in this business for three decades and I'm still here making a good living. I have no other income other than what I earn here.

You can't do this in half-measures though. Coming on here part time, where it isn't your day job, not understanding accounts, will only lead to tears.

Lots of jealous, ignorant idiots, in the stock market, and on ADVFN in general, make my life much easier.

[mad foetus] 29/5/2019 21:58

The one thing you know about Minerve is that nobody knows as much as him or makes as many great decisions as he does. Even when he appears to be wrong, it is actually us that are wrong for judging him at the wrong time.

[minerve 2] 29/5/2019 21:02

ltcm1

Think about what Woodford wants. He is game, and so are other institutions, at wanting to force the share price down because they want time to build a holding - maybe even over a couple of years - at lowest possible value to their funds. They are the ones lending the stock for goodness sake. If you have confidence and conviction, like I do, you don't care whether the share price falls to very low prices. It's good value. No one knows for sure the eventual outcome, it is all risk reward.

If you believe the company will continue forward and does not need any further meaningful capital requirement for the foreseeable future investing close to book reduces your risk. The share price falling therefore is to your advantage. If you are buying a stock at 10x book you are risking 90% of your investment if the business fails or converges to book for whatever reason.

I think there are many trolls on here who are not qualified to:

(a) Discuss investment theory and methods; and
(b) make an opinion on Kier.

You cannot make an informed opinion on Kier if you have not read the accounts and studied the business in any great depth.

[gettingrichslow] 29/5/2019 19:21

Ltcm1, it's all about emotional attachment. Makes people blind to the obvious. They then start creating more and more unlikely scenarios that (in their heads) will bring back their losses. Until reality finally bites. We see plenty of that right here on this board.