Rentokil Initial Share Discussion Threads

[mortal1ty] 20/10/2023 09:21

Bonds yields directly influence valuation of stocks.

You are right you can ignore them. The market probably won't though, and will compress the valuation of Rentokil.

My point was many companies (with similar characteristics, i.e. "good companies doing well") have suffered from higher bond yields. Rentokil has not.

So relatively to other "good companies doing well", Rentokil has a much worse risk reward profile. You can see this, in its high sensitivity to slight bits of bad news. Nothing remotely bad is priced in.

[bookbroker] 20/10/2023 09:02

This company ran into trouble in the early noughties buying growth, likely to repeat the same mistake judging by the above remarks, already on a sky high rating.

[netcurtains] 20/10/2023 08:57

.... That is a silly argument.... The bond yield will change a lot... Its not a fixed entity...
You cannot base a portfolio on bond yield amounts on any given day... That is the quick way to lose your shirt.
You invest in companies that are doing well. Sit back and wait.
Following bond yield rates is a mugs game of day trading.

[mortal1ty] 20/10/2023 08:44

fenners.

You know I was referring to slowing 'organic growth'.

If you want to talk about synergies. They paid $6.7bn for Terminix. Even if you attribute all $60m synergies to this deal, those synergies represent a return on capital of less than 1%.

Or another way of looking at it. Terminix makes about $2.1bn in sales. Adjusted net-income of c. $200m.

If you take that $200m net-income + $60m synergies = $260m.

$260m / $6.7bn = c. 4% return on capital employed.

That is less than the current 10 year bond yield, and certainly less than their cost of capital. Management would have been best of not buying Terminix.

So 'buying organic growth' can actually destroy shareholder value.

[essentialinvestor] 19/10/2023 20:04

Back in the day they offered office services, less specialist.

If you read through the FY presentation on the investor relations sight it
will answer most of your questions.

[netcurtains] 19/10/2023 19:56

Thanks EI: They do Covid-19....
Phew.

Seriously its going to be a bad winter again...
Thinking about selling up my entire portfolio (apart from RTO) and sitting it out...
Not sure...

[essentialinvestor] 19/10/2023 19:49

The above gives an idea of their UK offering.

[smcni1968] 19/10/2023 19:34

They made a fortune for a brief time disinfecting offices and public spaces, which has now tailed off.

[netcurtains] 19/10/2023 19:05

EssentialInvestor:

Do you know if RTOs hygiene business is related to COVID?

I'm sorry to report its back again and its very unpleasant.. (like a bad flu this time, last time many said it was just like a mild flu)...

Its going to be a tough Christmas. Sorry.

[essentialinvestor] 19/10/2023 17:20

Well RTO far from a bond proxy during the GFC, their business was hammered hard.

Tbf hygiene/contract cleaning represented a much greater % of their overall business
back then.


The earnings multiple tends to be overlooked and it had been pushed to stratospheric
levels which left ample room for any disappointment to hit hard.

They did not need the Terminix acquisition but did it anyway.

[fenners66] 19/10/2023 17:16

As for why they fell today - it will involve reading what margins either were , or were expected to be - something they have decided not to publish the comparison for but I guess the professionals were already aware of ...
thus this innocuous looking sentence seems to be the culprit...

"we remain on track to meet our full year guidance to grow Group Adjusted Operating Margin to c.16.5%. This includes a H2 margin performance in Hygiene & Wellbeing in excess of 19.0%,"

[fenners66] 19/10/2023 17:12

"mortal1ty
19 Oct '23 - 09:03 - 1187 of 1200

Well given this is a bond proxy with slowing growth and bond yields roofing it, in suprised this hasn't fallen a lot already."


Define slowing growth.....

because from the RNS "Revenue growth of 59.9%" yeah that's a disaster practically moribund , clearly management did nothing about that .

or "31 bolt-on acquisitions in the nine months to the end of September" standing still is their weapon of choice ?

But you may say - all they have done is just bought turnover -
"on course to deliver our full year pre-tax net cost synergy guidance of $60m year over year." says that they are doing something about that as well.

Guess you will remain pretty fixed with your ideas despite evidence to the contrary though.....

[netcurtains] 19/10/2023 15:11

BBC:
"
Pest control company Rentokil said it saw a 65% jump in cases of bedbugs in the UK in the second quarter of 2023, compared with a year earlier.

And Luton Council issued guidance to local residents this week on how to handle an outbreak, after dealing with an "alarming number" of calls about bedbugs.
"

[netcurtains] 19/10/2023 15:06

Tristel:
"
Strongest ever outlook in Tristel's 30 year history driven by key North American regulatory approvals

Tristel plc (AIM: TSTL), the manufacturer of infection prevention products for hospitals, announces its audited preliminary results for the year ended 30 June 2023, showing strong revenue growth from continuing products well ahead of internal
"


Rentokil next!

[netcurtains] 19/10/2023 15:05

Tristel is flying (hygene)

[netcurtains] 19/10/2023 14:53

"if" any sort of outbreak of covid or pests or flu in USA or Europe this winter this stock might well fly....

[netcurtains] 19/10/2023 14:21

Trestil hygiene up 8% today (aim ) hygiene is back in vogue

[netcurtains] 19/10/2023 09:26

Yes in all seriousness RTO is at the forefront of saving humanity from extinction. With viruses and pests the right balance of hygiene and exposure to potential diseases is really important.
RTO is the only company that can save humanity from extinction. We will have all sorts of pandemics in the next ten years. RTO is our shield

[babbler] 19/10/2023 08:45

Yup... The COVID effect equivalent share..

[netcurtains] 19/10/2023 08:38

Come on you bed bugs. 😀🕺🌶️€526;🎂㈊4;‍🌾🥵

[smcni1968] 19/10/2023 08:34

You're right though, a gradual and hard fought grind up can disappear in an instant and then some. Come on bed bugs get spreading

[mortal1ty] 19/10/2023 08:29

A bond proxy is basically defined as a company with very stable revenues, low growth, sticky customer base. This means they generate very predictable cash flows.

Things which generate predictable cash flows are bonds (like a savings account).

The valuation of bonds go up when yields (interest rates go down) and vice versa.

Rentokil is a classic bond proxy, and its valuation has benefitted from lower rates over many years. The reverse should have happen recently, but as far as I can tell, Rentokil's valuation has stayed pretty high.

I think this move lower is just a catch-up... inspired by a mixed trading result.

[netcurtains] 19/10/2023 08:21

I'm guessing the bed bug story and others like it will slowly drag this baby back up...

[netcurtains] 19/10/2023 08:07

mortality: "bond proxy" - can you translate for people like me who dont do rocket science finance?? Thanks 😃