Royal Mail Share Discussion Threads

[angersharkz] 29/9/2021 08:08

Bartyb - yes it’s current, here’s a link to the info hxxps://research.ibb.ubs.com/openaccess/compliance/3929352_1_new.html

Not to be ignored but broker ratings aren’t the be all and end all.

[bartyb] 29/9/2021 08:01

Are you sure ubs downgrade is current date. I cant find it

[angersharkz] 29/9/2021 07:45

Just seen the downgrade from UBS, thanks for the info, would explain the drop this morning. I take broker or institutional ratings with a pinch of salt….for everyone that downgrades to
A sell another one has it as a strong buy with a 400p difference in the price target!

I’ve added a few more this morning, still seems very under valued by the market at the moment in my opinion

[cwa1] 29/9/2021 07:35

Supposedly a double downgrade to sell by UBS

[charlie9038] 29/9/2021 07:23

What happened this morning 5% drop, but the numbers don't show atm
time to add

[angersharkz] 29/9/2021 07:16

Bizarre drop this morning, I will help myself to a few more at this price, unbelievably cheap at the moment

[angersharkz] 24/9/2021 08:59

I’ve just been back to previous statements and I will agree that you are correct about the current guidance and it remains unchanged. I have been in and out of RMG a few months back and I was pretty certain that they had said they would not be issuing guidance until the next update but you are quite right it remains unchanged.

With regards to the way companies word their statements, I think they are very careful about their wording as often times they are treading on very thin ice. They way in which we (the investors) interpret these statements and figures is what creates a market I suppose.

I still see RMG very cheap at the current price and they are still bullish with regards to H2 and beyond….with an air of caution, as are most recent company reports coming out of an unprecedented pandemic.

[rmillaree] 24/9/2021 08:26

"From what I can gather they were reluctant to give any guidance with regards to future earnings until the latest update"

imho this isn't correct - they clearly stated they are "maintaining the outlook"- you cant get simpler than this statement - they had a prior outlook and that outlook is unchanged as confirmed in the text below. You do have a point here though - it gets over complicated when companies use sketchy wording and or rely on brokers to do their job for them . Even if the company is sketchy there are 14 brokers that fill in the blanks and if the average of those differs materially from what the company expect they reaally should update everyone accordingly - that being the case with large caps current brokers forecasts should cloesely match expectations of the company even if the company is reluctant to say it!. Hopefully there is a decent chance here they are sandbagging somehwat which i don't like - but with covid and teh like i will give them a pass in that hopefuly its sensible caution. To me i am keeping it simple and going with what they said below and the average of what brokers think - nothing more and nothing less. i much prefer it when companies (Next gold standard) simplsy give a range of numbers and update that range during the year - saves all the hassle of trying to work out what is and isnt being said that matters - i dont matter if its a huge range just give me the high and low estimates of what you think may happen.


" we maintain our outlook for the full year of low single digit % revenue growth and c. 8% operating margin.""


"It does seem strange that you presume profits will not resume at current levels for whatever reason as you put it seems overly bearish without evidence but each to their own. Good luck."
I didn't actually mean to say that at all - what i was trying too say that the market in general has this on cheap rating which suggests the market thinks profits are likely to drop in the future or stay static and decrease in real terms - i have no idea what will happen medium to long term. You think (i preume) they will be fine - others seem them as structurally weak - me i simply am clueless and own due to the curernt cheap rating for this year and next (i also did follow someone who i respect into this share if i am being honest - but it was solely my choice to buy and not theirs) .

[angersharkz] 24/9/2021 07:48

From what I can gather they were reluctant to give any guidance with regards to future earnings until the latest update in which they seemed confident H2 would be stronger than H1, so to me that is raising the profit guidance. It does seem strange that you presume profits will not resume at current levels for whatever reason as you put it seems overly bearish without evidence but each to their own. Good luck.

[rmillaree] 24/9/2021 07:01

To me the main takeaway from the update was that they simply maintained previous guidance ref sales and margins. So there was zilch change with regard to where they expect to be at year end - they had the chance to upgrade expectations and made a point of not doing so. I do agree this is somewhat puzzling as the h1 numbers seem to be half of the current year end expectations. I do not know if they are leaving something in the tank for the next update hope so) or if h2 may be less better than normal - I simply default to presuming the worst albeit I am hoping for the best.

With regard to shares being cheap or a value trap - on current and next year numbers they are stunningly cheap - must admit i never thought I would be buying here (too unionised and they seem to be behind the game on tech) but here I am (I only bought in the last month or so) due to the current cheapness. Ref value trap the market has priced these shares at an el cheapo price so imho it could be me that is wrong thinking there is value here - if that is the case my presumption is that future profits will not remain at current levels for whatever reason. To me the recent update was fine as there was no specific bad news and they did say ref parcel volume they do now expect volumes will not return to pre covid lower levels which is good news. In summary my investment here is semi punt with low level of confidence - that tactic may seem strange to some but it is what it is.

[angersharkz] 23/9/2021 18:32

Rmillaree - I understand what you are saying, there will be a lot more demand on the postal services during the winter months given the various seasonal festivities and Christmas…..would it not be logical too assume then that given the optimistic statement and strong H1 performance that this years H2 will follow suit?

Also you mentioned that you were concerned that RMG is a value trap? With a market capitalisation of 4.8bn and a FY profit of circa 800-900m RMG shares at the current price are extremely cheap, would you not agree?

[rmillaree] 23/9/2021 17:07

AngerSharkz
"Rmillaree - ‘it’s not a given that profits will be higher in H2 to H1’ nothing in the markets is absolutely certain? Only a fool would think that."

Sorry you are 100% right nothing is a given - my choise of wording was poor.

Note i didnt make up this presumption without checking back through the past and revenue splits for last 5 years are as follows. So certainly in recent past it has been reasonably clear that the income and (normally) profit generation have been H2 weighted. which makes sense with cyber modany black friday and xmas all falling in H2

ye march 2017 H2 sales were 10% more than H1
ye march 2018 H2 sales were 10% more than H1
ye march 2019 H2 sales were more than 10% more than H1
ye march 2020 H2 sales were 10% more than H1
ye march 2021 H2 sales were over 20% more than H1

[rmillaree] 23/9/2021 17:07

AngerSharkz
"Rmillaree - ‘it’s not a given that profits will be higher in H2 to H1’ nothing in the markets is absolutely certain? Only a fool would think that."

Sorry you are 100% right nothing is a given - my choise of wording was poor.

Note i didnt make up this presumption without checking back through the past and revenue splits for last 5 years are as follows. So certainly in recent past it has been reasonably clear that the income and (normally) profit generation have been H2 weighted. which makes sense with cyber modany black friday and xmas all falling in H2

ye march 2017 H2 sales were 10% more than H1
ye march 2018 H2 sales were 10% more than H1
ye march 2019 H2 sales were more than 10% more than H1
ye march 2020 H2 sales were 10% more than H1
ye march 2021 H2 sales were over 20% more than H1

[lefrene] 23/9/2021 17:03

billzj, go and take a job in a Parcel Force depot for a couple of nights, you'd be amazed to see that things haven't changed very much since the days of horses and carts, save for the internal combustion engine and the size of vehicles. The only sophistication is at the hub, where the bar code is read to operate a flipper on the conveyor belt, to divert the package to the correct door. The trailers are loaded and unloaded by hand, the parcels simply being stacked on the floor of the trailer.

I've supplied drivers to UPS, Securicor (now gone) Royal Mail/Parcelforce, Night Freight, Blue Band, G4, TNT, and others that I've forgotten. Behind the scenes it's the same process, but others are less wasteful than RM. RM benefits from being a quasi gov dept in having inherited an established network. If it were having to build from scratch it simply wouldn't make it with the way they currently operate, their staff costs would be too high. On the plus side they are likely to hang on to most of their truck drivers, since they train a lot of them themselves, and those drivers are largely only capable of driving set routes. I have had to go out and rescue quite a few when there have been incidents that close a motorway. They just pull into the first layby they see and call their depot to get recued, as they only know their set routes and are too nervous to drive off route.

RM with some proper hands on management could improve profits significantly, perhaps one day that will happen, but I counted 12 areas where their lack of attention to detail was costing them money, and with 40,000 vehicles you only have to save £1 a day per vehicle to make a significant difference. But from my experience the junior managers are more focused on petty internal politics, than much else.

[billzj] 23/9/2021 16:21

Low barriers to entry? .... Expenditure of hundreds of millions on automation by major players would seem to suggest otherwise. Amazon and the other players will run into various problems and eventual costs around employee status of random blokes in cars / vans.. not to mention vertical integration competition policy issues.

[angersharkz] 23/9/2021 15:15

Rmillaree - ‘it’s not a given that profits will be higher in H2 to H1’ nothing in the markets is absolutely certain? Only a fool would think that. The statement clearly states that they are confident H2 profits will be greater than H1 and expecting overall profit in H1 to be around 400m…… it doesn’t take a brain surgeon to figure out they are on course to smash previous years profits. They also stated that they are confident that there has been a rebasing on revenue and the need for parcel delivery based on the figures for this year in comparison to pre pandemic levels. They also acknowledged rising costs but they seem to be mitigating that and factoring it into their positive outlook in H2 and beyond.

You can be a bear about any share and run and hide in the markets all day long….sell your shares and move on? The statement was clearly a bullish one if it’s not for you sell up, simple.

[lefrene] 23/9/2021 14:42

Low barriers to entry, and the likes of Amazon who generate by far the lions share of demand for parcels, are likely to increase their dominant position. Amazon will run more and more of their own transport, and they are way more efficient than RM. RM is still hide bound with a civil service mentality, where management protocols can and do overide commercial common sense.

[jqb1] 23/9/2021 14:29

Angersharz you are right it's had a great run and has recovered well, but long term it's losing its protected position within a very crowded and competitive market place.I am happy to be proved wrong of course.

[rmillaree] 23/9/2021 14:09

AngerSharz
"the profit guidance for H2 is up,"
H2 is seasonal presumably so is it not a given that H2 profits will be higher than H1?

My take on what they said today is that year end expectations are pretty much as they were that is based on the folowing.

"Whilst we are seeing upward pressure on costs in a number of our markets, we maintain our outlook for the full year of low single digit % revenue growth and c. 8% operating margin.""

with regard to whether this is a fundamentally a business in decline i certainly don't know and we may not find out till 3-4 years time so there is scope for them doing really well shoprt term and really poor after that - at present it looks like the market has them in the bracket - "they will struggle to increase profits" based on the pe of 7.8. I have had apunt herre but i am aware i might be stupidly buying into a value trap despite the reasonably positive short term noises.

[angersharkz] 23/9/2021 11:47

Jqb1 - you’ll have to run that one by me, revenue is up, profit is up, the profit guidance for H2 is up, reinstated dividend, increasing earnings per share. How is that a declining business?

[jqb1] 23/9/2021 11:10

It's fundamentally a business in decline, someone needs to buy it and break it up.

[moorsie2] 23/9/2021 10:34

Narrative by a lot of financial sites is about parcel growth slowing...

Think, with respect, they are fundamentally missing the point...

900m operating profit is phenomenal for a company with market cap under 5bn.

Will take a while for majority of market to see this value