Pennon Share Discussion Threads

[dartboard1] 27/11/2020 10:07

I agree with your comment that price would rise if they returned all cash in divi... divi of 2.5b is worth 591p (I think), leaving continuing business with underlying pbt of 183m... at 16 PE, same as SVT, would be 693p...591p + 693p = 1,284p ... and about 30% above where we are...

[essentialinvestor] 27/11/2020 10:04

They can't do a special; well they can but it would be arguably very unwise.
Share consolidation is the way to return the proceeds, if a suitable target is
not found.

Sky high ratings will make that difficult.

[dartboard1] 27/11/2020 10:01

Pierre, you're correct... back in the day (18.03.20), they said "board intends to use net cash proceeds to reduce borrowings (tick)... and make a return to shareholders, whilst retaining some funds for future opportunities"Hoping for a special divi, but not sure they'll have room if they end up buying a company as big as Southern Water...

[pierre oreilly] 27/11/2020 09:05

Anyone have any views on the most likely target for pnn? The most investable water co ATM? Tia for any ideas. If there is a t/o in the sector, all in the sector benefit, so looks ripe for investment to me.

[essentialinvestor] 25/11/2020 12:30

Dart, luck with that.

[pierre oreilly] 24/11/2020 23:41

Dart, yeah exactly. All the time the price is a balance between bulls and bears, buyers and sellers. I hope pnn comes good for you. I'll sit on the sidelines and see how things pan out.

[dartboard1] 24/11/2020 16:03

That's what makes a market... I've done a small top up this afternoon. Time will tell.

[pierre oreilly] 24/11/2020 15:15

Well 1b of the £3.5b already gone, into areas which don't benefit shareholders much (like the pension and debt repayment). Not saying it shouldn't go there, but the cash return some were expecting back in the day will never happen. Selling viridor is a strategic disaster imv, they've sold a hell of a lot of profit, and the cash raised seems to keeping well away from shareholders. I really hate it when the company implies they've done great things for shareholders, and yet they simply sit on £2.5b of shareholders cash. I sold when i did a cursory analysis of the ex-everything and didn't like what i saw once the viridor profit vanished. Was thinking of buying back in at around 1050, but fortunately read on here anout the ftse demotion likelihood (which is probably why shareholders aren't going to get their mits on their own money - in the hope of not getting demoted. 2% divi. omg, people invest in water cos for the divi!.

Agree, director egos are ruining pnn for shareholders. I won't be buying back here.

[dartboard1] 24/11/2020 15:02

I agree with the sentiments above, return of capital would be in the best interests of shareholders. But it looks like a disastrous capital allocation decision is already priced in. If they returned the full net disposal proceeds of 2.8b, PNN would trade at a market cap / EBITDA of 3.6. Severn Trent currently at 6.3. So there is potential to overpay for a new business and still come within peer comparisons

[essentialinvestor] 24/11/2020 12:45

Would agree with all of that, it can be done very simply through a share consolidation.

[essentialinvestor] 24/11/2020 12:21

Yes, however the market can only value the current business atm

and very roughly ascribe a value for the cash optionality.

As another poster mentioned and it's the same point I've made previously,

there is a danger than PNN get screwed on any acquisition price.

This is a new CEO, there are arguably major risks here imv.

The market is belatedly waking up to those, that how I see it.

[dartboard1] 24/11/2020 12:15

Is the 2% dividend not based on the continuing business? The market cap will include all the surplus cash on balance sheet.If it's returned, the market cap will reduce and the dividend % increase.If the buy another water co then the new profits will hopefully increase the dividend to be online with market cap for peers

[essentialinvestor] 24/11/2020 11:51

This is turning in to a farce.

The current price is Not supported by a 2% yield, nowhere near.

[essentialinvestor] 24/11/2020 11:50

This is turning in to a farce.

The current price is Not supported by a 2% yield, nowhere near.

[whackford] 24/11/2020 11:47

Disappointing that no decision on viridor cash,given what has been said previously. I listened to q and a on phone, company pressed by professionals but no indication. the only point I got was that 100% ownership of an acquisition was a requirement. I suspect we will not have long to hear their decision in view of previous statements and the small number of opportunities to be evaluated.

[rogsim] 24/11/2020 10:51

The problem for PNN is that any possible takeover target knows the size of their "pot". It appears that the search is confined to water companies, or similar, and all Boards of companies in the sector will be on their guard as a result. It will need hard bargaining and there is the prospect of over-paying: I hope that PNN's advisors are on the ball. Giving a cash dividend, while attractive to some investors, would now be a sign of weakness.

[bluemango] 24/11/2020 10:40

Assuming same proportional decrease is applied to final dividend, that makes annual div around 21.5p, which is a yield of around only 2.2% at current price. Glad I got out some months ago.

[gateside] 24/11/2020 10:32

Market not impressed with results. No return to shareholders. Not sure selling Viridor the the wisest decision.

[dartboard1] 16/11/2020 10:52

Hopefully that's 6B net of their 3B debt

[dartboard1] 16/11/2020 10:13

Pennon looking now at Southern Water. Who are bigger, in turnover than PNN, but Southern look like they have a lot of debt, not a huge amount of free cash flow ... and a lot of capex to spend in next 5 years... Think I'd rather the special divi, and carry on with what is a great remaining business ...

[ohisay] 16/11/2020 10:07

IC today..

According to The Sunday Times, Pennon is considering a takeover of private water company Southern Water. Analysts at broker Jefferies estimate this would cost at least £6bn but note that Southern’s relative underperformance on regulated equity (RORE) “would be dilutive to Pennon's top performer status between 2015-2019”. Value for shareholders would only be created if Pennon were to eke out performance improvements. Any transaction would likely require approval from the Competition and Markets Authority (CMA).?

[pierre oreilly] 09/10/2020 11:34

Gateside, thanks for that nugget.

I was just contemplating buying back in, not too keen due to the uncertainty, but keen due to the hopefully safe divi. I think the index angle is a real concern - index funds will have to sell out if it gets demoted. Anyhow, decided to wait until the air clears and see where this ends up. From a selfish pov, ideally for me would be demotion, consequential selling, and then a buyback as the cash return (i believe they are 100% committed to a cash return, and not a splurge with the cash). I rate the next few months a good rtime to start reinvesting in the markets again, and pnn will be one for me ... eventually.