Kier Share Discussion Threads

[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.

[ltcm1] 29/5/2019 19:05

I thought this was yielding 3% but then I saw that was the p/e :)

The yield is 19% here, how can the market get it so wrong and not see the value Woodford and Minerve have spotted???

I get it that markets do tend to overshoot both on tops and bottoms but here the decline has been fairly gentle and there aren't signs of capitulation as yet.

Experience tells us when a share declines in this manner they seldom bounce straight back, what you get more often is a flatline for quite a while if they do survive.

The other thing is even small cost incursions say £50m, are going to have a big effect on the share price.

[gettingrichslow] 29/5/2019 18:31

There's a lot of fear here then isn't there? Even the dunderheads, morons and chimps can see that? But value? Unlikely... fanboys only.

[minerve 2] 29/5/2019 17:32

SP action is driven by greed and fear. Value is driven by facts.

[ltcm1] 29/5/2019 17:29

Well I guess he is basing his buying decision on the value as he sees it of the company as a business, which is not impacted by the share price as such. At least in theory!

I suppose it is the unlocking of that value that will prompt more buying, not movement in the share price.

[minerve 2] 29/5/2019 17:27

At the moment no. Because I want to see what the CEO says after his review and I want to see what affects the circus in government is having on procurement.

I've bought shares which are, I believe, are good value. The fact that the shares are cheaper doesn't drive me to buy more. You shouldn't let the share price action influence your buy/sell decisions. It is your servant as and when required.

When I am happy that my original investment thesis is confirmed I will add.

Anyway, what's it to you what I buy and sell? This is one of 24 stocks I own.

[porsche1945] 29/5/2019 16:31

@minerve, I'll re phrase the Q'. As you have been banging on about the immense value locked up in kier ad nausem, then you must be a strong buyer at these new lows yes??

[eriktherock] 29/5/2019 15:29

Lod on the way

[ltcm1] 29/5/2019 12:37

Minerve what you have to understand about Brexit is there are two completely different groups voting for it.

If you are in parts of Wales or the North East smaller towns then there is a great fear there of losing jobs, sadly it is easy to see how they think Brexit will somehow defend these jobs. However the reality is these areas will suffer most from Brexit.

The people in other areas mostly accept we will be poorer for some time going forward but will have more control and soverignty as they see it.

What is evident is that Cities and University towns are growing but smaller towns and more remote areas are really starting to struggle in a big way. This is the real problem we have in the UK and globally.