Taylor Wimpey Share Discussion Threads

[spennysimmo] 06/1/2011 09:37

If operting profits are higher though than the interest bill then overall a sale makes the company less profitable. Don't get me wrong I am very long here and have been for some time, I am just trying to think through what the results of any sale would actually be.

[imastu pidgitaswell] 06/1/2011 09:33

Yes, the future operating profits would obviously be lower - but so would the interest bill. The exact increase in OP and decrease in interest depends on the price paid and what they dow with the proceeds. Could result in higher earnings per share or lower - also depends on what the market expects to happen to future earnings and margins, current reported ones not being considered 'steady-state'.

If you take a business earning £80m pre-interest and £7m post interest, would you value it higher or lower than one earning £50m pre interest and £30m post-interest? It's difficult to see at the moment, as the last reported earnings figures are considered abnormally low (due to abnormally low volumes) and also because Net Asset Value is a major part of valuing builders, not just earnings.

[barf2] 06/1/2011 09:33

spenny
I tend to think f it as sentiment and analyst driven.Currently the perception is that the US is a millstone [obviously might look very different if housing continues to pick up]around TW's neck ergo getting shot of it and giving more flexibility by paying down debt is a big plus and will encourage buyers to feel happier to invest as the company would not be so leveraged.

It goes without saying that somewhere down the road,when housing in the US ticks up strongly,TW will be slated for the disposal by the analysts etc

[spennysimmo] 06/1/2011 09:31

moneysage, It's not if the US is sold. Surely there must then be an adjustment somehow. You can't sell a major part of your business and then have a more valuable company post sale when the part you are sellinig is profitable.

[abu azaan] 06/1/2011 09:30

Good question spennysimmo as I was wondering that yesterday. I don't think TW would use all of the sale funds to pay off debt but will also invest in land bank while still cheap IMHO

[imastu pidgitaswell] 06/1/2011 09:30

Not really - it would basically represent a de-risking of the equity. The business's value is actually the market value plus the value of the debt - the enterprise value.

With £600m-£700m of debt, albeit just rescheduled, there is a risk of the equity being diluted (rescue rights issue) if the market dips seriously - that's why we saw the hedgies screwing it in November prior to the refinancing. Disposing of the US business and using most of the proceeds to pay down debt (and some to buy more UK land) would result in a 'safer' company with much lower gearing - less risky, but also less potentially rewarding, ie its value would not quadruple should things go stunningly well, merely double...

It's one of the reasons why the shares fell so hard, as did BDEV, while the likes of BWY and BKG, with no debt and net cash, did not.

[spennysimmo] 06/1/2011 09:26

I have a question that I can't quite get my head around. If TW sell the US division then the perception is that the share price will rise as the funds will substantially reduce the current debt or even make the company debt free. However the dynamics of the company would then of course substantially change. Based on this, surely the structure of the company would need to change. Presently there are just over 3 billion shares trading at around 34p per share. If the US sold today then how could the share price rise to for example 50p (for round figures) which on the current share issue would value the company at an increased £1.6b after the sale but then with no US business. How does any sale get reflected in the valuation of the company. Surely there has to be some sort of adjustment/consolidation?

Any thoughts appreciated.

[sir rational] 06/1/2011 09:25

Not sleepless at all, NAV 60p helped lol

[ludlowe] 06/1/2011 09:24

37p, sheet you must of had a sleepless nov, good luck sir r

[shaws37] 06/1/2011 09:23

kfp - no problem at all. You do have a point though with momentum.

Additionally, It would be nice for TW. to update the market with an RNS. They have not said anything yet, only details are from news feeds.

[sir rational] 06/1/2011 09:19

37p breakeven for me but not selling until 44p & then I'll reassess in any case

[imastu pidgitaswell] 06/1/2011 09:17

I didn't know the Daily Express had a website - who told them that the internet exists?

The 'best' of my tranches from October 2009 has just dipped below a 20% paper loss. Makes me so happy...

[homeboy35] 06/1/2011 09:15

Woosh again!

[kfp] 06/1/2011 09:13

shaws37
Appreciate that, still means Express readers might help momentum,so whats the problem ?

[sir rational] 06/1/2011 08:35

Both. HMV in the wrong sector, books & music are now so low margin can't support high street shops, all online.

TW. NAV 60p and selling TM in the States, new focus on profitable UK, profits at high end of analysts' forecasts, official.

[kfp] 06/1/2011 08:35

Article in the Express

[imastu pidgitaswell] 06/1/2011 08:21

Wot, TW. or HMV?


Pity we can't get a rise such as happened in April 2009, but it's not bad...

[sir rational] 06/1/2011 08:10

One way bet now

[sequoia] 05/1/2011 22:41

Well there`s a bedtime story they say 20p could be 10p but retail is out of favour. so until next time .
seq

[shaws37] 05/1/2011 22:34

Is this the HMV thread or TW ? Im confused.

[sir rational] 05/1/2011 21:51

Summary: While adverse weather undoubtedly was unhelpful to the business in
the UK, albeit not quantified in the statement, the core UK HMV division
remains under considerable stress as a format and this must raise questions
over its long-term future. This has been evident for some time, but today's update
highlights a lack of improvement in LFL sales despite easier comparatives and
new product initiatives. The shares also go ex-dividend of 0.9p today, so the
shares are likely to weaken in our view. The market could debate whether a
break-up or further buying from Russia entrepreneur, Alexander Mamut,
might provide some support. For reference, net asset value stands at around
28p.BE
Trading details: The group (exc HMV Live) delivered an LFL decline of -9.3%
over the 5-week trading period to 1 January and -10.0% over the 10-week period
to the same date. Including HMV Live, these declines improve a little to -8.8%
and -9.1% respectively. The key driver was HMV UK & Ireland, where the LFL
declines were -13.6% and -14.1% respectively. Despite comparatives being
around 6% easier in H2, the division has shown little improvement from the
-16.1% decline reported in H1. Waterstone's performed somewhat better, with
LFL declines of -0.4% and -2.1% respectively, but this is still arguably
disappointing given the very weak comparative last year caused by hub
distribution problems affecting stock availability in store, which resulted in an LFL
decline of around 9%.BE
And here's Nick Bubb, who's been among those to argue that HMV will have to break upBE
And today, he downgrades.BE
HMV (move from Add to Neutral): After today's grisly Xmas trading update, we are downgrading our numbers and recommendation again...The news has been brought forward from the scheduled date of the 13th because HMV has had to warn that full year PBT will come in around the bottom of the new range of £46-60m...The culprit is the core HMV UK business, where LFL sales fell by nearly 14% over the key 5 week Xmas period to Jan 1st and though costs are being cut as fast as they can and Waterstones did quite well to just about hold LFL versus soft comps, that HMV shortfall will do a fair amount of damage to the bottom line. The snow disruption pre-Xmas is being blamed, slightly pathetically, but clearly there are other structural factors at work...note that HMV was one of the first retailers to moan about the impact of the snow in early January a year ago! BE
The market largely expected a profit warning, but the news is still depressing (we will probably come down from £52m PBT to £45m-47m on a 52 week basis)...because HMV has warned that it is now close to breaching bank covenants, which probably means a big pruning of the final dividend...Even after more downgrades, the rating is very low, but the yield support has gone and the programme of more radical store closures announced today (60 to go this year) is unlikely to stop the rot. We are moving from Add to Neutral and have our 33p target under review. We think something can be salvaged from the wreckage, as a break up involving the potential sale of Waterstones could keep HMV alive.NH
hmmNH
I reckon Bubb is correctNH
and this is where the Russian comes into playNH
Mr Mamut knows Tim WaterstoneNH
they set up a chain of bookshops in MoscowNH
which admitedly went bustNH
but even soBE
And let's not forget that it's just over a year since HMV bought Mama Group for £46mBE
That's now equivalent to half its market cap.NH
hmmNH
OkayNH
let's move on from the woes of HMVNH
to another retail storyBE
Oh – sorry – tehre was one more HMV note I wanted to shareBE
From Execution NobleBE
On the oft-discussed subject of its property portfolioBE
HMV is worth more to its landlords than shareholders
We have consistently written about our concerns over various elements of HMV's
strategy. In a music market where over half of sales (digital plus physical) are made
online, less than 10% of HMV's sales are online (and just 5% of Waterstones').
Management has alluded to the flexibility it has with short lease lengths (UK
average seven years), but no comprehensive store portfolio restructuring has been
announced yet.BE
We have raised concerns regarding the execution risk of taking fashion from 3% of
sales in FY10 to 6% in FY13 (and management has confirmed that the more fashion
oriented element of the offering has been slow to take off). In addition, the aim is
to grow technology, one of the most competitive segments of retail, from 6% to
12% of sales over three years. Again, we understand management's aim is to
replace lost entertainment sales with other (more profitable) categories, but
question how realistic this is, given the complexities involved.BE
We think a 'Plan B' is required, with the focus on reducing the store footprint,
possibly consolidating more HMV stores with Waterstones. HMV had a rent bill of
£162m in FY10, with a total future rental commitment of £1.2bn, or net present
value of £0.8bn. The business is worth six times more to its landlords than to its
shareholders as things stand.
Whether a viable business model is attainable is anybody's guess – the current
share price is suggesting not (EV/sales 0.1x, EV/EBITDA 1.9x, P/E 3.7x, yield even
on lowered DPS is 11%).BE
Could someone bid for HMV? – we think yes, but the shares could halve again
before that happens. A fundamental valuation of the business is, in our view,
difficult to support until greater clarity is achieved on what Plan B is. Meanwhile,
with the short term risks to consensus forecasts on the downside, given the widely
reported weather impact on high street footfall, we think share price momentum
will continue to be downwards. Hence we cut our price target from 50p to 20p and
maintain our Sell recommendation.

[sequoia] 05/1/2011 21:45

Well if You want to invest in HMV then do your own research. The clue`s are there.
seq

[sir rational] 05/1/2011 21:25

LONDON - British retailer HMV may need to close hundreds of stores and sell its Waterstone's book chain to provide the money to accelerate its shift away from declining CD and DVD markets and secure its long-term survival.

The 90-year-old group needs to get faster, and better, at moving into growth markets like ticketing, live music and technology products, or it risks going the way of failed rivals like Woolworths, Zavvi and Borders UK, analysts said.

"Put simply, the market is changing faster than HMV is changing. That is what they have to address," said John Stevenson, retail analyst at brokers Peel Hunt.

"Do I think HMV will still be around (in about 10 years time)? I think it probably will be. But it will be a considerably smaller business and whether Waterstone's and HMV will be in the same group is another question."

HMV said Wednesday that sales from United Kingdom and Irish stores open more than a year fell 13.6 per cent in the five weeks to Jan. 1, and it would close about 60 shops over 12 months as it battles to meet a test of its lending rules in April.

Its shares, down over 85 per cent since its flotation in 2002, dropped as much as 27 per cent to a new low of 23.75 pence