Regus Share Discussion Threads

[topdoc] 12/6/2009 08:31

all this talk about business models. it hasnt done too badly over the last few years has it. market leader no debt pays a dividend etc etc. time will tell. value will finally show through.

[jeffian] 12/6/2009 00:48

Cambodia,

As I have said before, the two key drivers to keep an eye on in this business model are Occupancy levels and REVPAW. At 83% occupancy and REVPAW of £7029, RGU made a gross centre contribution of £305m last year and an operating profit of £147m. If occupancy levels drop to 80%, profit is wiped out even if REVPAW stays the same (which it won't - see latest Trading Statement: "Market conditions remain tough. We are continuing to see pressure on occupancy and price which is impacting net income").

[cambodia] 10/6/2009 17:49

Does anyone have any instinct about where RGU share price is heading?

Value of pound is increasing - no help to RGU.

Business performing well in recession.

Wide geographical exposure.

Signs of price of rented office space is deteriating.

However businesses continued barriers to finance means that trend of renting offices should continue.

[bigbigdave] 02/6/2009 19:46

Nope, no sign of mine either CR.

[cockneyrebel] 02/6/2009 15:48

Everyone had your divi paid in for Friday gone? I seem to have been missed :-(

CR

[cockneyrebel] 01/6/2009 09:49

On the way back up nicely.

CR

[cockneyrebel] 27/5/2009 12:07

Why would 6 years ago interest me re RGU more than the last 5 years Jeffian?

They are a cyclical business so how have they done so well through a recession in the down cycle? And doesn't that mean they should do even better in the up cycle?

Anyway, Panmure disagree with you today:

1058 GMT [Dow Jones] Panmure Gordon initiates Regus (RGU.LN) with a buy rating and 81p target price. Says the buy ratings reflects Panmure's view "that Regus looks attractive following share price weakness of late, with peak to trough earnings of 55% already factored into our forecasts." Brokerage adds that its target price of 81p equates to 15.0x 2010 trough EPS or 6.8x peak earnings. "With in excess of 20% upside, we believe the risk/reward looks positive at current levels," it says. Shares +2.3% at 68p.

CR

[knockers2] 27/5/2009 10:24

interesting analysis of rgu
what do u think?

[jeffian] 26/5/2009 01:07

I know I promised not to bore you again but I cannot let CR get away with that load of old baloney.

RGU was never "over-geared" and it is hardly a plus-point that it is "debt-free". It never had any debts because nobody in their right minds would lend to it. It had a huge capital injection of many £100m's from its initial flotation and proceeded to blow that to the point it had to enter Chapter11.

£0.25bn "net" cash? Pshaw! Take a glimpse at the Balance Sheet -

Current assets
Trade and other receivables 231.8

Corporation tax receivable 8.3

Cash and cash equivalents 219.5

Total current assets 459.6


Current liabilities

Trade and other payables (214.8)


Customer deposits (174.8)


Deferred income (132.6)

Corporation tax payable (61.7)


Obligations under finance leases (1.3)


Bank and other loans (5.1)


Provisions (2.0)
(592.3)


Net current liabilities (132.7)

In other words, it only has cash because it keeps its tenants' deposits and hasn't paid its creditors as quickly as its debtors.

Get your mind round this; RGU is only profitable to the extent that it can get its short-term tenants to pay more than its long-term lease obligations. As the latter may be close to £1bn/year now, £250m cash will go nowhere if a decline in occupancy/REVPAW tips the balance from operating profit to loss, particularly as it mainly represents tenants' deposits and other unpaid liabilities.

It's a cyclical business. "History is a good guide imo and in the past 5 years earngs have grown every year:". Ask CR to show you the figures for the preceding period.

Regards, Ian

[empirestate] 25/5/2009 13:05

CR there was a bounce on PHTM on Friday, am gonna pick up a few tomorrow morning, there is quite a bit of money in at18+ so it could run to there quickly without much selling

[empirestate] 25/5/2009 13:02

CR yr slipping quarter billion cash rather

[cockneyrebel] 25/5/2009 12:53

Sort of spells out the love hate relationship many might have here.

All I'd say is that if RGU got into Chapter 11 through over-expanding too fast. Dixon learned his lesson then. We all make mistakes, it's a question of whether you learn from them. Since then he hasn't let the business get over geared and now it is debt-free and with a quarter million net cash.

History is a good guide imo and in the past 5 years earngs have grown every year:

2004: 0.7p eps
2005: 5.03p eps
2006: 8.34p eps
2007: 10.44p eps
2008: 12.62p eps

That's actually a staggeringly good performance from a company with all that cash, no debt and 2 years into a recession. I don't think brokers are giving any credit for recent performace imo.

CR

[jeffian] 21/5/2009 10:37

Bolders,

Those were the days! I won a few battles on the way down to 3p/Chapter11, but CT spectacularly won the war, riding it from 3p up to around 130p. Fortune favours the brave; he was certainly brave and, no doubt, made a fortune.

8-)

I've made my point so I won't bore you again. Good luck to all holders.

Regards, Ian

[ac1983] 21/5/2009 09:34

Topdoc:

One is related to the other.

[topdoc] 21/5/2009 09:19

forget all these so called reasoned arguments.the question is where will the share price be in the next few weeks

[bolders] 21/5/2009 08:40

Jeffian - thanks for your response and actually I like your comparision with MWB who do of course have a different corporate structure. You had a good debate with a guy called City Tourist on here a while back (where is he?)but I think the market and model has moved on from then. Regus have the brand name and the global coverage and in a portfolio the size of theirs they will be some centres overperforming whilst others are underperforming, hence they are diversified.

I think they will continue to keep many of their centres at high levels of occupancy for the forseeable future, since I think there is an extremely good case to be made at the moment, in the current economic envirnoment to only take space on a short to medium basis - which of course is their market.

[slj] 21/5/2009 08:18

jeffian, I like to hear contrarian arguments - it helps to form a balanced view. Your view, and everyone else's, is very much appreciated by me anyway.

[jeffian] 21/5/2009 00:59

Bolders,

It doesn't hurt to have a contrary argument on any bb - people can make up their own minds - but you misrepresent my case. I have no problem with the concept of serviced office per se. Of course they meet a need as you describe ("...companies have to act with increasingly agility, budget their costs with certainty, have the flexibility to expand and contract, and flexibility of term..") and they do that by removing the risk from themselves and passing it on to the likes of Regus who charge them a premium for the privilege. This isn't about serviced offices, it's about the corporate structure. Competitor MWB Business Exchange own a substantial proportion of their offices freehold whereas RGU lease all theirs. If occupancy rates and REVPAW fall below a certain level, both companies lose money at the P&L level but the difference is that MWB still own an asset of some value while RGU finds itself with leases of negative value and has to write off fit-out costs etc. which are currently shown in their Balance Sheet as assets. This is exactly what happened to cause their entry into Chapter 11 a few years ago and who's to say it couldn't happen again? The 'model' works at a certain level of occupancy and REVPAW - above it you make profits, below it you don't. If you think that RGU are guaranteed to keep all their offices 80%+ occupied at current REVPAW for ever, you're onto a winner; if not, well I'm just reminding you of the alternative.

Regards, Ian

[waynerwayner] 20/5/2009 12:47

Hello.

I bought in yesterday as it seems pretty clear to me this is a great business in a recession.

I personally know seven small companies who have downsized and moved from their regular rented premises to Regus offices, and I see no reason that this wont be the case across the country.

I would think these hard times are only going to boost their earnings, not diminish them.

[bolders] 20/5/2009 12:18

CR - it doesn't 'depend upon your view of the economy at all' Sure in difficult times there will be pressure on pricing just as there are on all areas of the economy.

However Jeffian simply doesn't understand (or want to understand their model) at all - Regus (or any other serviced office operator) don't simply lease long and re-lease short term at a premium - they provide accommodation solutions to occupiers wanting flexibility and somewhere to place their staff, often at extremely short notice. In a world where companies have to act with increasingly agility, budget their costs with certainty, have the flexibility to expand and contract, and flexibility of term, serviced offices provide the perfect solution. The world is a different place from what it was 10 years ago.

I don't normally comment on this forum - but I'm tired of him reeling out the same tired arguments that he's been reeling out for the past 5 - 6 years at least. Serviced offices have a highly established, accepted and understood role to play within the wider property market - Regus are the market leader - enough said.

[cockneyrebel] 20/5/2009 11:27

Well it depends on your view of the economy imo Jeffian - I guess if you think we aren't bottoming you'd be right. However I think we have bottomed.

RGU have grown earnings year after year - by around 20% ewven through the last two years when we have had a recession - they have also increased cash and started paying a divi that has just been hiked dramatically.

I don't see that as a badly performing stock and once the trader types turn turtle again it will rally north imo.

These have outperformed nearly every company you care to name in business support or property - and they trade on a hideously low PE for that performance and lack of debt imo.

We'll have to agree to disagree imo but I've just bought more here.

CR

[topdoc] 20/5/2009 09:22

i expect a £1 by end of year latest

[ukinvestor220] 20/5/2009 09:04

from annual results in Mar:
We have delivered post-tax earnings of GBP114.9 million and increased our net cash balance by over 100% from GBP101.4 million to GBP211.2 million, despite having returned GBP36.3 million to shareholders, GBP37.5m to the banks and invested GBP69.5 million in growing our workstation capacity.

hardly on a knife edge is it

[topdoc] 20/5/2009 08:46

i expect these to be back above 80p in a week