LK Hyman
24 Feb 2017
Re: Valuation Games,3.5%LKH etc
gamesinvestor
24 Feb 2017
Re: Valuation LK - What % of your expanding wad does FSTA constitute?Games
LK Hyman
24 Feb 2017
Re: Valuation Games,"As regards the B shares, of which there were 89.1 million in issue at the time of the last annual report, they attract one tenth of the divi per share paid on the A and B shares"The last bit should of course read ".... on the A and C shares"LKH on the flybridge dashing over to the JMAT board
gamesinvestor
24 Feb 2017
Re: Valuation LK - Excellent and detailed response -- saves me digging all through the mud to get to the answer.So the real market capitalisation, taking into account equivalent A shares, is £552.12MThat puts a whole new slant on this for me in that the net assets, last recorded at £300M gives a ratio 1.84X -- OK some put little store on this ratio, but with a P/E of 16 this puts my magic figure of 23 ((mkt cap*P/E)/Net Assets) out of kilter at 29.44 and it's not such a bargain I first thought.Oh to do research first and foremost.I may reconsider this money for something else -- but then there is the factor we have discussed before regarding the real Net Asset value, given that there seems to be a low valuation on the freehold properties in the prime London area.Games -- pop over to JMAT it seems to be sinking like a stone.
LK Hyman
24 Feb 2017
Re: Valuation Games,"are the unlisted shares taken into account?"An excellent and often overlooked question, m8.The straight answer is that they are not taken into account for the purposes of the normal ratios for the simple reason that the B and C shares are not listed on the stock market. Only the A shares are listed.The B and C shares only exist to enable the families to keep control of the company and enable them to block any unwelcome takeover bid. No-one should be in any doubt about that.I think the sensible way to look at the market value of the B and C shares, which needs to be borne in mind by anyone holding the A shares, is that the C shares, of which there were 14.5 million in issue at the time of the last annual report, are worth exactly the same as the A shares. This is because they attract exactly the same dividend and can be converted into A shares at the whim of the holders of the C shares by giving a short amount of notice.As regards the B shares, of which there were 89.1 million in issue at the time of the last annual report, they attract one tenth of the divi per share paid on the A and B shares, so they are equivalent, in my view, to 8.91 million A shares.So, for the purpose of valuing the company on any traditional ratios, one should really think that there are 32.36 million A shares (your figure) + 8.91 million "A equivalent" B shares + 14.5 million "A equivalent" C shares equals 55.77 million shares.Anyone who wanted to buy the whole company (which is how I always view my own attitude to investments in any company) would need to reckon on having to buy 55.77 million "A equivalent" shares, not just 32.36 million A shares.The company is not cheap but I still view it as a solid hold.LKH on the flybridge
gamesinvestor
23 Feb 2017
Valuation When looking at the valuation of Fullers, are the unlisted shares taken into account?Games""""Fuller, Smith & Turner, for example, has 32.36m shares on the London stock exchange, currently priced at 1,030p. This would give us a “P” for our P/B calculation of £333.3m, with the “B” being last reported net assets of £277.7m: so, a P/B of 1.2 — which looks very attractive relative to a peer such as Greene King on a P/B of 1.8.However, Fullers has two classes of unlisted shares, which bring the total number of shares to 55.66m, making the “P” £573.3m and the true P/B a rather less attractive 2.1.""""
gamesinvestor
06 Feb 2017
Re: It's getting there "And now I have forgotten even that ... wait a moment .... Common Business Oriented Language? ... Formula Translation? ... summat like that. Anyhoo, it taught me to leave computers to the geeks."LK -- you are lucky to have to stop there, I used to have to code in the damn stuff!!Bill -- don't worry m8 I shan't get upset. Well at least not if I don't lose all my wedge, which couldn't be the case on Fullers as I've just 1.1% of my wad tied up in it -- innit!!The value of the property is indeed an interesting topic, and in some respects it not being fully valued according to Mr Market is possibly a comfort.At the end of the day, when all's said and done and the chips are down, they could always rent them out to 50,000 migrants and claim housing benefit.Games -- That should swell the P&L, no?
Bill1703
02 Feb 2017
Re: It's getting there LKH - I THINK such a gain would be taxable, but I am not as up on tax rules as I could be - there are all sorts of exemptions and allowances, etc, but I suspect such a reported gain would be taxed as ordinary course profits. But don't hold me to it... At least you get at least what you pay for on these boards!I should have added, I don't think it would have any impact on cost of debt etc. Rating agencies don't have any truck with reported asset values either - they are most concerned with debt to EBITDA, and then interest cover (generally also on EBITDA basis). They would likely consider asset backing to an extent, but as you infer, they would do their own sums on this.Also, a big uplift in asset values would lead to (much?) higher depreciation charges and hence lower reported profits and EPS.. Again, wouldn't affect the cash flow position so the market should look through it, but it's another reason they may shy away from it... Possible impact on share options, if linked to EPS??!All in all, it's a reminder that you can only properly value stocks on cash flow and the rest is just smoke and mirrors, and more open to accounting shenanigans than it probably outta be...
LK Hyman
01 Feb 2017
Re: It's getting there Bill,"If they formally revalued, they'd have to pay tax on the gain taken through the P&L."Ah! I think you've hit the nail on the head, m8. I hadn't thought of that ... just naively assumed that that they could whack up the balance sheet assets without bothering about the P&L. Silly boy!That's what comes of one's bean counter training being limited to a one week course on "Finance and accounts for the non-financial manager". Mind you, that was of infinitely more use than the nightmare week's course in the Hague that fruitlessly attempted to teach me about COBOL and FORTRAN. At the end of that week the only thing I had learned was what them acronyms stood for.And now I have forgotten even that ... wait a moment .... Common Business Oriented Language? ... Formula Translation? ... summat like that. Anyhoo, it taught me to leave computers to the geeks.LKH on the flybridge
Bill1703
01 Feb 2017
Re: It's getting there LKH, Games - as invited, a few thoughts:One reason I don't have much truck for reported asset values is precisely this latitude available to companies - you never know just how "historic cost" they are. Likewise with ROCE... Before I incur the wrath of Games, I like the principal of measuring ROCE, just not the practice - hence my practical preference for market based measures such as ROIC, CROIC, etc. As you infer, the market is usually pretty quick to see through optically high ROCE on very old asset values. If they formally revalued, they'd have to pay tax on the gain taken through the P&L... Unless there is some such exemption I have forgotten about? And of course, London property values are a fragile feast, particularly in recent times... Shame to revalue only to have to declare a big loss should the oft-mooted crash come to pass (though at least it might be tax-deductible). I also know that planning issues for pubs, etc - getting "change of use" etc - can be a minefield, in London and elsewhere. Another reason they may be reluctant to show a hand that could turn out a bad bluff? No reason why they still couldn't publish an informal revaluation - i can think of a few companies who have done just that. Might impress one or two investors at the margin... But ultimately, I doubt it would move the SP needle much, if at all. The market doesn't put much store in reported NAVs (in most sectors), you have some stocks trading below NAV, and some on 5x, even 10x NAV, and more... If there is a latent value story there (which I doubt, admittedly from the little I have heard on here) the market would 95 times out of a 100 have spotted it by now.Though it might just be one of those 1 in 20...?!
gamesinvestor
01 Feb 2017
Re: It's getting there "An interesting topic."Are there tax implications for revaluation?I can't imagine what they may be, given that a business like this is taxed on VAT, Profits, and Business Rates.Maybe the latter is the concern as the good old local authority would have a reason to wind up the business ratable value.Games -- be nice to understand this -- maybe make the effort to turn up to one of the meetings and get some free samples while I'm asking the questions.
LK Hyman
01 Feb 2017
Re: It's getting there Games,"Could they restate the £4XXM by at least 4X comfortably do you think?"I imagine that they could do if they had a formal revaluation done by a surveyor on all their pubs and hotels. Another fave among my investee companies, Treatt, says every year in its annual report that: "The Board has chosen not to avail itself of the option under IFRS to revalue land and buildings annually and, therefore, all the group's land and buildings are held at historical cost, net of depreciation, in the balance sheet."I've often wondered why they choose not to have the occasional revaluation, because that would boost the "book to share price" ratio and would enable shareholders to have a better handle on the value of their assets. I would also have thought that it might enable them to get a better deal on any new debt because the "security" for the new debt would be valued at a higher level than it is now. Though perhaps the banks do their own due diligence.FSTA's pubs and hotels are FAR more important to FSTA shareholders, relatively speaking, than Treatt's land and buildings are to their shareholders so it does indeed seem a little strange that FSTA also (I think) just leave the value of the pubs and hotels on the balance sheet at historical cost.The only positive reason I can think of for leaving 'em at historical cost is that the ROCE is much higher on that basis. It would fall sharply if the property was revalued to current market levels.I don't know to what extent many shareholders worry about ROCE (they as sure as sheeit oughta!) but a "lower" ROCE might risk a load of tedious shareholders regularly pestering the board to sell some of the pubs in order to crystallise the supposed value and I imagine that the Board's attitude is "Leave that decision to us, thank 'ee very much".And, although the current balance sheet is totally useless in terms of telling the punters what the 400 odd properties are worth, I imagine that the institutional shareholders and some private shareholders (I name no names) are fully aware that the properties are worth FAR more than the balance sheet implies, so the share price would, in all probability, not be much affected if a revaluation was done .... Mr Market already KNOWS the value of the pubs and hotels (and the brewery site).Having said that, it would be nice if the Board had the occasional revaluation done even if only to be able to punch out an RNS saying that, although they don't propose making any changes to the balance sheet, the properties have a market value of £4X compared to the balance sheet value of £X (or whatever the multiple was).Having said THAT, it may be that, for competitive reasons, they prefer to keep the true value of their ... our! ... properties under wraps I dunno.An interesting topic.LKH on the flybridge happy to hold FSTA at 3.6% of his wad
gamesinvestor
01 Feb 2017
Re: It's getting there ""Perhaps that is one reason why the Fullers share price has been pretty weak.""Yep - getting bored waiting for this one, should have slapped it all in my J2O swilling company.I'm still intrigued by this London property aspect only being on the books at about £1.5M per property, which is the new price for a parking space these days.Could they restate the £4XXM by at least 4X comfortably do you think?Games
LK Hyman
31 Jan 2017
Re: It's getting there Games," FSTA seems compelling value at under £10. Costs mainly incurred in £ so Sterling fall not that important."There was an interesting interview on Radio 4 yesterday with the head honcho in Weetabix, which is investing in new production facilities somewhere in Blighty. He said that the main ingredient ... wheat ... is priced in US dollars even though Weetabix gets its wheat from an area within 50 miles of the Weetabix plant.The same must surely apply to the barley that Fullers buys for its beer, so what I said about costs is cobblers. Perhaps that is one reason why the Fullers share price has been pretty weak.LKH on the flybridge holding FSTA nevertheless
gamesinvestor
03 Jan 2017
added some moreGames - 1.1% of my wad
