Phoenix Share Discussion Threads

[garycook] 28/9/2016 12:30

Just reading HL article on PHNX,and Shore Capital has upgraded PHNX to Buy from Hold,and upgraded the stock,because of the prospect of the 58.75p Dividend in 2017,and strong sustainable cash flows for years to come.

[rcturner2] 28/9/2016 12:14

In my opinion this is a good deal for shareholders, assuming a post rights dividend of 50p a share. If you subscribe to the rights you will have the same capital value as before, but the yield would be higher, implying that the shares would rise from the 730p post rights price.

The nil paid price is likely to be lower than the "true" price, because I suspect many people will not want to subscribe, owing to lack of cash in the relevant accounts. The nil paid rights will have their own market and can be bought and sold through your broker.

[speedsgh] 28/9/2016 12:11

@This_is_me. Think there is a typo error in your calcs above. Been scratching my head for a while but now dawned that it is 7-new-for-every-12-existing shares.

You have: cost of 5 rights shares = 508*5 = 3556p
Should be: cost of 7 rights shares = 508*7 = 3556p

Sorry, small point but just to help others who might also be puzzled like I was :o)

[scburbs] 28/9/2016 11:49

Thanks for all the comments. So if a fair post rights yield was 6.25-6.5% then the stabilised ex-rights price at 50p dividend should be 770-800p.

The pre-rights price corresponding to this is 920-970p.

[this_is_me] 28/9/2016 11:43

Current cost of 12 shares = 865*12 = 10830p
cost of 7 rights shares = 508*7 = 3556p
cost of 19 shares = 10830 + 3556 = 13936p
average cost of each share = 13936/19 = 733p
value of one nil paid share = 733 - 508 = 225p

I hope that helps some to understand how it is calculated. Naturally the market will take a view on whether the acquisition is a good deal; currently the first reaction is very positive. If a lot of nil paid shares are dumped on the market it will not do the share price any good.

Like many of you I have my shares in my, and my wife's, ISAs both of which are fully invested. but we have time to sort out what to do.

[garycook] 28/9/2016 11:43

Can someone clarify for me that if I own 1,950 Shares,then the 12 for 7,Rights would mean me being able to buy 1,137 shares at 5.08,but the value of the 3087 shares,would work out at around 7.33,after rights.So if I buy the 1137 rights it works out roughly the same after the reduction in the share price So I would be better off selling the Nil Paid rights surely.

[rcturner2] 28/9/2016 11:11

Let's assume that 730p is the fair value after the deal.

You are being given the option to buy shares at 508p, this is a deeply in the money option that is worth 222p, the nil paid rights will trade around this value once we have gone ex rights.

[edmundshaw] 28/9/2016 11:02

No, you've lost me there RCT: In-the-money options? Doesn't that apparent discount get offset by the future lower share price of Phoenix for current shares?

[this_is_me] 28/9/2016 10:55

Why did they issue the RNS at 8:00? That caused me to miss most of the presentation.

I agree that Deutsche Bank is in trouble so that must have helped the negotiations.

[rcturner2] 28/9/2016 10:31

It's fully underwritten.

The nil paid rights are effectively an in the money option and should be priced pretty close to fair value.

[edmundshaw] 28/9/2016 10:25

At around the current price (860p or so) taking up all the rights represents an increase of over 34% in one's holding.

Quite a significant consideration, for me at least... Do I want to become overweight here? On the other hand, what price would one get from selling the rights? Would it be a fair one? What will be the appetite of the market for £735m of new shares in fairly short order? Tricky...

[edmundshaw] 28/9/2016 09:49

Close enough to my own calculation of 730p, jonwig. The difference would come from a slightly different pre-issue price.

[rcturner2] 28/9/2016 09:46

Yes, that makes sense.

[jonwig] 28/9/2016 09:39

My reading of the dividend is, from the introduction:

"Acquisition will support a proposed increase in dividends in respect of 2017 to £197 million ..."

There are currently 248.08m shares in issue, so there will be 392.8m post-rights. This suggests dividends for 2017 of 50.15p.

XR share price ~733p, so forward yield 6.8%.

[edmundshaw] 28/9/2016 09:35

Note 2 is quite plain, sadly. "Stated after adjusting the 2015 dividend per share for the bonus element of the Rights Issue" means exactly that the dividend yield will be up 5% but the dividend itself will actually fall.

[bluemango] 28/9/2016 09:34

It is actually stated in the release as a (further) "5% increase in dividend per share"

[rcturner2] 28/9/2016 09:32

I must admit I took it that the dividend would be per share, otherwise what is the point of them talking about a 10% increase?

I do accept I could be wrong though, as others have posted it has happened at other companies.

[bluemango] 28/9/2016 09:30

I don't thinks Pimsin's scenario above could be right, they won't be decreasing the dividend per share, even with more issued. Ignoring the rights issue, it comes out at 0.588 annually (0.294 half yearly). Early clarification on the actual amount would be useful.

[jonwig] 28/9/2016 09:28

A couple of thoughts:

It's striking how accurately they can seemingly predict future cashflows and dividends from zombie funds, and yet the share price of PHNX has been very volatile over the years!

Part of a desperate fire sale by Deutsche Bank, hence the bargain price.

RCT2 - yes, another way to avoid dilution.

[rcturner2] 28/9/2016 09:26

there is also the option to sell some of the rights to fund the purchase of the remainder

[jonwig] 28/9/2016 09:23

p49b - there will be a date at which the shares go "ex-rights" (second half of Oct) and you'll be credited with "nil-paid" rights shares, which you can sell in the market or redeem by paying for your new shares.

In this case, it looks worthwhile to take up the offer, though I have a problem (shared by others, I imagine) that my PHNX are in an ISA which hasn't enough cash spare - I'll have to sell something.

speedsgh - thanks for your analysis in post #1803.

[rcturner2] 28/9/2016 09:17

lol that's what a rights issue is

[p49b] 28/9/2016 09:16

Will the rights issue be available to current shareholders?

[pimsim] 28/9/2016 09:16

Think it works out at divi of 50p per share in 2017. With adjusted share price after rights issue around £7.32 (taking today's price at £8.64). So divi yield in 2017 around 6.8%. Don't hold me to these calculations!

[edmundshaw] 28/9/2016 09:10

Cheers madmix. Yes, I recognize that phrase "bonus element". I hadn't reached the notes!!