| Date | Subject |
|---|
09/12/2019
20:15 | careful: Interesting to think about labours take out nationalisation price.
they are taking about net asset value, not market value.
SVT and other utilities have to borrow huge amounts to build up world class infrastructure.
that means large assets but low net assets.
SVT shareholders will get about £1.6bn total, less than one third of the market value.
Theft.
...but RMG net assets are more than double todays share price, an interesting situation there.
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28/1/2015
16:44 | jeffcranbounre: Severn Trent Tesco is featured in today's ADVFN podcast.
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Justin
|
07/1/2014
11:52 | miata: JPM
We believe that Ofwat's decision to alter the price review timetable and
announce the key financial parameters on January 27th is likely to herald a
lower allowed WACC than the companies requested in their business plans.
We have reduced our vanilla WACC assumptions for the next regulatory
review period from 4.2% to 3.9%. We also see M&A this year as unlikely
given the degree of regulatory risk, with Ofwat's final determinations not due
until December 2014. We reduce our SVT price target by 8.6% to 1,535p;
downgrade our recommendation to Underweight and add it to the European
Analyst Focus list (AFL) replacing Snam.
Ofwat to publish key financial parameters on 27th January. On 19th
December 2013, the UK water regulator (Ofwat) announced that it had
changed the price review timetable. It will now publish its views on key
financial metrics such as the cost of capital and retail margins on 27 January
2014. Ofwat's rationale for the change was that "companies' views on risk
and reward...are not in alignment with market evidence".
Reducing our wholesale WACC assumption to 3.9%. Ofwat's Chief
Regulation Officer, Sonia Brown, stated in a presentation on 13 November
2013 that the "cost of capital will fall...there is a real opportunity for this
number to start with a 3." We therefore lower our wholesale vanilla WACC
assumption from 4.2% to 3.9%, this compares to 5.1% in the current
regulatory period.
We see M&A as unlikely until the regulatory review completes. In our
view, given the uncertainty over allowed returns, M&A is unlikely until
Ofwat publishes its final determination in December 2014. We have
therefore excluded any M&A premia from our price targets for all three
quoted water companies.
Update estimates for lower inflation and deferred price increases. We
have updated our earnings forecasts to take account of: lower UK inflation
and the deferral of allowed price increases in 2014/15 by Pennon and United
Utilities. UU will take this deferral as an exceptional item, so the EPS
impact is minimal. In Pennon's case we have reduced our March 15e EPS by
10%.
Reduce SVT price target by 8.6% to 1,535p and downgrade to
Underweight. We reduce our SVT price target from 1,680p to 1,535p,
which is 10% downside from the current share price and downgrade our
recommendation to Underweight. We retain our Overweight
recommendation for PNN and our Neutral recommendation for UU,
although we have reduced our price targets for both companies by 6.0% and
1.7% respectively to 700p and 735p.
|
15/11/2013
10:01 | careful: The key here is the return on assets allowed by the regulator.
the review is about 18months away, just at the time of the election.
last time the uncertainty drove the share price down to below £10.
|
12/6/2013
12:42 | careful: a rerun of sainsbury attempted takeover a few years ago.
the sainsbury family stuck out for well over 600p when 600p would clinch it.
they demandad a top up of the pension also.
the buyers walked and the share price is still only about 360p today.
one in the hand etc.
this could fall back to well below 1500p on regulatory concerns if this lot walk away.
trouble with these utilities is they it do not attract top managerial talent.
|
12/6/2013
09:19 | holts: I think the board have made a strategic error by not talking to the consortium , they now must perform to a very high standard to keep the share price up and at least if they had talked they could have perhaps squeezed out more money whilst also being able to point out to investors that they did try but unfortunately nothing came of it .
|
09/6/2013
22:14 | redartbmud: Share price headed south tomorrow?
|
14/5/2013
13:10 | miata: A bid approach for utility Severn Trent has been flushed out by a leak. Anyone with a taste for schoolboy puns is laughing like a drain. The mouths of investors are meanwhile watering at the prospect of a £5.3bn buyout.
Credit Suisse.
The price speculated in the press (£23) suggests a high valuation relative to historical valuations, at a 36% premium to the adjusted 2014E RAB, but in-line with the recent acquisition of Sutton and East Surrey Water. Historic transactions have been at average c25-30% RAB premia which would suggest a price of c£20-£21/share, on our numbers) It has not confirmed the offer price of c£23 speculated in the Telegraph, saying no proposal has yet been made.
The proposed price would reflect an EV of over £10 billion the biggest transaction in the sector's history. With a fair value of 1,530p and the stock closed at 1,825p/share suggesting a c45% probability of an offer is already priced in
Goldman
£22.50-£23/share valuation for Severn Trent is close to our M&A value of
£22.16, which is based on a 30% premium to the March 2014 RAV. A 30-35%
premium to RAV (the bid range) would be in line or slightly above historical
bids in the sector
Historically none of the previous approaches in the water sector that have
been announced in the last 10 years have failed in taking over the water
company. The main downside risk to the M&A outlook is whether Ofwat in
resetting regulated water prices next year makes gains from leveraging up
the water companies' balance sheets less attractive. The next main paper
from Ofwat is due in the summer (2013). In our view the upside risk from
M&A versus the downside risk in fundamental valuations is fairly reflected
in the share price of United Utilities, and more than fully reflected in the
share price of Pennon. We place our rating and price target on SVT under
review. Additional risks to our price targets for SVT and UU are a bid from
private equity/infrastructure fund, inflation above/below forecast. For
Pennon they are a bid from private equity/infrastructure fund, stronger
waste profits, inflation above forecasts.
Citigroup
With CEO Tony Wray due to leave in 2014 and, in our view, Severn Trent as the
best positioned publicly listed water company post the PR14 regulatory review in
2014, we expect a formal bid to materialise and given the timing and the current
rate environment, £23/share and 35% premium to RCV seems possible, in our
view.
|
26/1/2010
21:28 | miata: The share price did little after the company's trading statement this morning.
The water company said the decline in consumption by non-residential customers tailed off in the fourth quarter and now estimates that the cutback in consumption will now result in a year on year fall in revenue of around £5m to £10m in the current financial year, compared to its previous estimate of a £15m to £20m fall.
|
14/9/2009
15:22 | miata: "Right now, defensive stocks are out of favour. And one specific defensive sector is particularly despised. Utilities, such as power and water suppliers, have been shunned by investors. There are fears justified in some cases about falling demand and possible rights issues. But the same fears also threaten the profits of many of the cyclical companies whose shares have surged in recent months. Yet while other stocks have taken off, utilities have been "beaten up", says Alberto Ponti at Citigroup. They have been the poorest-performing market sector so far this year, seeing their worst underperformance (compared to the wider market) in five years.
But this could be about to change. "We think the process should now reverse", says Ponti. "Balance sheets are now stronger, and the sector valuation looks attractive on a 14% price/earnings discount to the overall market which compares with a 9% premium over 35 years". In other words, utility stocks are now looking unusually cheap. What's more, utilities' dividend yields are the second-highest in the market and "we could see earnings upgrades in coming months".
Four high quality stocks to buy now:
Severn Trent has been hit by fears that water regulator Ofwat will give the firm a tough time in its November 'returns review'. That could hurt the company's ability to maintain its dividend, and is why the stock is standing only a little above its four-year low on a 7%-plus yield. But even if the payout were cut by a third, which is now probably factored into the share price, the yield would still be a decent 5%.
Further, Severn Trent Services is booking bigger and bigger deals in China, including building and supplying a customised water treatment operation to serve more than 3.3m residents in Zhejiang Province. This is a bombed-out stock, with limited downside risk, which looks well worth snapping up while it's in the doldrums.
GDF Suez, E.ON, Cable & Wireless.
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PLUS1
