Melrose Industries Share Discussion Threads

[sogoesit] 04/9/2015 00:19

The more interesting question, imv, is whether it's worth buying now for the distribution as meanwhile alludes to.
If I buy now I get £2 back in a few months time. My net cost is therefore 68p for which I get a company with one business still going and £1.3bn in cash ( or £1.30/share ). Let's assume the Brush going concern is written off against the debt... what's not to like in getting 130p value for 68p?

[sogoesit] 03/9/2015 17:55

EdmondJ, MRO give the choice to investors to take their Returns as Capital or Income. If you take the proposed return as Capital you would be charged 18% (if you're a basic rate taxpayer) on any excess over your £11,000 annual CGT allowance or 28% BUT this profit could have any other capital losses written-off against it for CGT purposes.
(And who wouldn't have any capital losses, either carried forward or in a tax year :-) !)

On the stay-in or leave front I have calculated that the post-distribution share price would have to fall to about 100p before I lose money on this investment.
(Have owned since 2013 and have re-invested each share consolidation to keep my nominal shareholding about constant. Should the share price be around 240p (mentioned above) my RoR would be about 20%pa all distributions included).
Good luck!

[bigalan3] 03/9/2015 08:54

Some buying today. Acquisition on the way?

[daveb12] 19/8/2015 17:23

I too agree with the stay in there approach. not likely to go down too much and possibility of new acquisition announcement. Also i am a little lazy and working on the hopefully cant loose too much here in comparison to the rest of market plummeting today!

[meanwhile] 19/8/2015 10:27

I wonder if Honeywell, with their wide range of manufacturing technologies, have any clapped-out engineering businesses for sale.

[meanwhile] 14/8/2015 16:20

EdmondJ,
I think you'd pay the same tax if you sold the shares.

[eipgam] 14/8/2015 14:01

cisk.. most links will work if you change one of the http letters to a capital eg.

[edmondj] 14/8/2015 11:18

Depends if you get hit for tax on the capital return, then yes wait to buy afterwards. Presumably that is partly why some brokers are touting clients to exit.

Obviously it doesn't affect institutions or anyone holding in an ISA or SIPP, but anyone else could get a whopping income tax bill.

Shoot, if I am misguided, but that looks the case.

[cisk] 14/8/2015 11:11

Morning MW / AJTM

I read the Charles Stanley Melrose note with much chuckling - it's clear that Rae Ellingham, the analyst covering the stock, doesn't know much.

The quality of their research is v. poor and they just rehash publicly available figures.

I believe the driver of the short-term valuation is how much debt the remaining group will be left with post-disposal; there could be a significant discrepancy there between post-dividend share price and how much cash they retain. Time will tell...

I had a little rant on stockopedia the other day concerning analysts and a poster asked if they were any good ones worth following - take a look if you're interested:
hxxp://www.stockopedia.com/content/recommended-analysts-104577/

(change the xx to tt in url)

If there are any good analysts out there, they'd be trading on their own and keeping well quiet and enjoying the returns from their research. Or running a fund and putting their money where their mouths are.

Otherwise they work for a broker like Charles Stanley - or Goldmans and the like - and churn out rubbish and get paid handsomely for it!

[am just the messenger] 14/8/2015 10:50

What a pleasure it is to read your comments. They make an interesting balance to the advice my brokers give which is to sell-I actually told them I would not be selling.

Thank you once again

[meanwhile] 14/8/2015 10:23

There may not be a better opportunity for some time to buy MRO than right now. Around £2.40 in cash (assuming the sale goes ahead) + a business and a share price of £2.70. You can't lose much. And another new venture coming soon.

The 2 recent broker downgrades confirm this theory. How clueless they are. Charles Stanley suggests a 'temporary exit', presumably expecting a dormant period. Well, you'd be bloody annoyed if you missed the next acquisition
announcement, wouldn't you, because you'd exited temporarily.
Don't they know that MRO's gains come when they announce something and not when they do it.

[essentialinvestor] 10/8/2015 12:15

If Buffett had lived in the UK he would not have bought TSCO imv.

One of his rare mistakes.

[meanwhile] 10/8/2015 12:08

Wasn't it a fellow called Warren Buffett who bought a big chunk of TESCO at around 350p in 2013?

[am just the messenger] 05/8/2015 08:11

Thank you guys

You are a very knowledgeable bunch and will follow your advice.

Thank you once again

[sogoesit] 05/8/2015 04:29

Don't forget they will already have about £1.3bn in cash from the Honeywell sale post the £2 distribution depending what happens to the existing debt (£787m).

[eipgam] 04/8/2015 17:24

am just: they have committed to returning c£2 per share to the shareholders and then will raise some more for the new purchase. As M/while has pointed out, it is likely that we will be offered discounted shares if we take part in the £3bln fund raising. Judging by previous experience.

[meanwhile] 04/8/2015 16:31

Buying up businesses, improving them and then selling them on is Melrose's sole purpose.

[am just the messenger] 04/8/2015 13:30

Just a further question. We will be receiving a divi covering the sale of the business to Honeywell. Are you thinking that Melrose have a new venture lined up as once this sale goes thru there will be little left?

[am just the messenger] 04/8/2015 13:07

Wowie--many many thanks-much appreciated

[essentialinvestor] 04/8/2015 13:01

lol at victim

[meanwhile] 04/8/2015 12:45

My advice is 'don't sell them now'. The shares are entering their 'money-making period', when a new acquisition is seen to be coming, with new shares issued at a good discount and the market seeing the prospect of a big turnround in the victim's business.
Look at past history of the share price. This is where the shareholder money is made.

[am just the messenger] 04/8/2015 11:41

Good morning gentlemen,

Being advised to sell my small Melrose holding now as once the proceeds have been returned the share price will be reduced accordingly.

Any advice from your end?

Thank you

[eipgam] 03/8/2015 17:41

The sales proceeds are likely to be returned by tried and trusted means (if the rules still apply) eg taken as income or capital gain. SL. have just done a similar operation with the proceeds of their Canadian sale.

As far as financing the next deal, I do seem to recall MRO had a rights issue at one time and I remember selling some nil paids to finance buying some of the new shares. (no spare cash at the time).

It does seem to be an expensive process to divvy up £2bln and then ask all the same people (and others of course) to stump up £3bln. Perhaps they will devise an alternative.

[meanwhile] 03/8/2015 12:21

We all agree then.
What I'm looking forward to seeing is the structure of the sell & buy finances, by that I mean the return of 2 Billion to existing shareholders and the financing of the next acquisition. How it's done may depend on the timing of the next acquisition, I suppose. In line with previous sales, Melrose are committed to returning the cash from sales, rather than directly re-investing it.