forwardloop
30 Jun 2016
info G4S has climbed 15p to 179p as analysts at Credit Suisse raised their recommendation from neutral to outperform and their target price from 200p to 210p. They said there were four reasons for the upgrade:1) G4S is a significant beneficiary of sterling weakness, which we assume falls 10% across the board from its pre-referendum levels. 2) G4S has had more than its share of issues in recent years but the vast majority of its underlying business is stable and defensive. 3) We expect asset sales over the next 18 months, which combined with improved working capital management should lead to de-leveraging and free cash flow coverage of the dividend. 4) At 9.6 times 2017 estimated PE with a (covered) 5.4% dividend yield we view the valuation as attractive.
nk1999
29 Jun 2016
Credit Suisse "Credit Suisse upgraded security services company G4S to 'outperform' from 'neutral' and lifted the price target to 210p from 200p, pointing to four main reasons for the move.It said G4S would benefit greatly from sterling weakness, which the Swiss bank reckons will fall 10% across the board from its pre-referendum levels.In addition, it argued that while the company has had more than its share of issues in recent years, the vast majority of its underlying business is stable and defensive.CS said it expects asset sales over the next 18 months, which combined with improved working capital management, should lead to de-leveraging and free cash flow coverage of the dividend.Finally it said that at 9.6x estimated 2017 price-to-earnings with a covered 5.4% dividend yield, the valuation is attractive."The key risks are that the asset sale process is delayed by market uncertainty resulting in a protracted period of high leverage and a 2016E dividend yield that is only just covered by FCF."We continue to see structural headwinds in the cash solutions business, which will only be partially offset by growth in cash outsourcing in the US. We capture this in our sum of the parts valuation."From ADVFN.
nk1999
03 Apr 2016
From Telegraph Wal-Mart deal - seems to be quite a large one."G4S signs multimillion pound deal to handle Walmart's cashTroubled security company G4S has signed a $210m (£148.8m) five-year deal with Walmart to provide the US grocery behemoth’s cash services across a huge swathe of its American stores. The Sunday Telegraph can reveal that G4S has quietly begun the installation of its Cash 360 system, which reduces the need to handle cash and limits opportunities for theft through collection points at tills, in 900 Walmart stores, and has confirmed orders for 1,360 stores in total.In the future, the company could roll out the system to a further 2,750 stores, it has estimated.Cash360 works by requiring the cashier to deposit cash into an intelligent safe which detects and removes counterfeit notes, then counts and deposits banknotes into a cash bag.This cash bag is located inside a safe that is not accessible by the cashier, before later being picked up by G4S and transported in a secure vehicle. It is also possible to link the safe via an online connection to the retailer’s bank so that cash can be credited to the business’s account on a daily basis, improving a business’s cash flow....... "[link]
nk1999
10 Mar 2016
Barclays view From ADVFN:"Barclays downgraded G4S to 'equalweight' from 'overweight' and slashed the price target to 200p from 310p following the company's 2015 results on Wednesday.The security firm said pre-tax profit fell to £78m from £128m the previous year as it highlighted contract provisions of £65m, restructuring of £44m, losses on businesses being sold or closed of £40m and non-cash charges of £106m relating to the amortisation/impairment of goodwill.It also cautioned that it could lose a further £57m if the UK government decides to extend a contract to house asylum seekers in Britain.Barclays said that while weakness in the shares makes it tempting to be contrarian and argue this is a buying opportunity, the reality is that a tougher outlook for emerging markets and the UK is likely to mean G4S's underlying performance remains sluggish.In addition, it said the path to lower debt is a long one and likely to include a credit downgrade along the way."If we had the luxury of ignoring the near term challenges, the business should still offer defensive growth accompanied by self-help and the 12x PE is at the low end of those in the sector."However, trading challenges and a dented confidence in management's ability are likely to mean the shares stay cheap, for the time being."The bank cut its 2016 earnings per share estimate to 16p from 18.1p and its 2017 forecast to 16.6p from 20.7p."
WhoSparticus
09 Mar 2016
Re: % Drop In my experience the market always overreacts and tomorrow I expect (hope) the price will go up again. I expect by the end of the week the drop will still be around 7-8 % but there is scope to make a few quid on the way
tmcleanrfc
09 Mar 2016
% Drop would you say the drop is as expected with the results???
Eadwig
11 Dec 2015
Re: Police Austerity & G4S Thanks for the response Games. Funnily enough I heard a report this morning that, unbelievably, the polic austerity budgets had been worked out using the wrong data. "It would be funny if it wasn't so serious", said on MP on the Select Committee.I hadn't done anything about buying anyway, not least because of the potential fall from the FTSE 100 flagged up below, so thanks to tornadotony too.
gamesinvestor
27 Nov 2015
Re: Police Austerity & G4S "Any comments or guidance that might help me direct my limited research time"Eadwig, I sold this a long time back fortunately at a small profit on prices above where they are today. In terms of research, I stopped and sold when I realised it has operating margins down at the 3-4% level and a debt level of over 7 years it's average profit.To be honest, with these two stats I'd just walk away from it and put your money in a company with real IP strength, low debt and growth potential.Not saying G4S doesn't have growth potential, but it's not that clearly identifiable and one mess up like the tagging problem and back it all falls.Games -- Let's hope I never need their services after this review.
II Editor
24 Nov 2015
NEW ARTICLE: Solid State share price slump 'absurd' "When LSE:SOLI:Solid State won a three-year government electronic tagging contract worth £34 million, its share price rocketed over 60% inside a month. Sixteen months later, the shares were back where they started at around 400p.However, this is ..."[link]
tornadotony
23 Nov 2015
December 2 FTSE Relegation deadline FTSE review is 2nd December. FTSE 100 Relegation zone Smith Group 4013 (Probably now safe) RRS 3681 ---------- ---------- -------- Morrisons 3598 G4S 3387 (needs a 9% rally very soon) Meggitt ( Relegation). 3 FTSE 250 Companies are well set for automatic promotion. TT
Eadwig
19 Nov 2015
Police Austerity & G4S BBC radio today spoke to Lincolnshire police who have used G4S for a number of back office functions and made 22% in savings. This is being held up as a model for other forces to follow as massive cuts are on the way and other similar rural forces such as Cumbria have been warning that they are already down to the bone with something like one officer on duty for every 100 square miles of their area. I believe it was said that there are 41 separate Police forces in the UK (or was it just England?), all facing deep cuts to their budgets.I'd noticed G4S mentioned as a safe high yielder for a portfolio in an article a few weeks ago. However, a quick glance over the fundamentals doesn't suggest the yield is that safe and if they do drop out of the FTSE 100 the share price will definitely suffer - although that would mean a higher yield if the dividend is maintained, of course.I'll be doing more research as G4S would provide some good diversification for my SIPP, but I need more than yield, I would like to see growth also, and that looks far from guaranteed - although the example from Lincolnshire could provide further opportunities.I imagine they are quite vulnerable to the new basic living wage rules going forward as well?Any comments or guidance that might help me direct my limited research time or point out issues of concern or opportunity, I would be grateful to hear from.
tornadotony
16 Nov 2015
G4S in FTSE relegation zone [link]
II Editor
22 Oct 2015
NEW ARTICLE: Eight best blue chip yields for 'safe' income "It's not been an easy ride for cyclical stocks in recent years. According to broker UBS, their performance has been "nothing short of a disaster". They’re right. Instead, investors have swarmed to defensive yields since the financial crisis and ..."[link]
II Editor
11 Sep 2015
NEW ARTICLE: 20 top share picks "Stock-picking requires plenty of skill and patience. Most retail investors will also invest in some kind of computer software, or investment tools to help them at some point in their investing career. But the big investment banks have millions to ..."[link]
nk1999
13 Aug 2015
Broker views From ADVFN:"Outsourcer G4S was knocked lower on Thursday as analysts from Goldman Sachs and Exane BNP Paribas downgraded the stock the day after results.Looking across a range of brokers, Goldman Sachs cut its rating on G4S to 'sell' and Exane downgraded to 'neutral', while Jefferies cut forecasts but maintained its 'hold' rating and house broker JP Morgan took a more sanguine view and reiterated its 'overweight' rating.Goldman's main negative is that now G4S seemed unlikely to expand margins, even with its growing share of tech solutions, as the sector is now "intensely competitive" due to low barriers to entry and new rivals arriving thanks to software-enabled solutions, while clients face limited costs to prevent them switching to another provider."We expected G4S to see pressure from growing capital intensity in developed markets with slower-than-expected growth across its emerging market (EM) exposure."With the company trading at a 13% premium to business services peers, which based on a 2017 estimated multiple of enterprise value over EBITDA that "is not justified in our view, given the weakening free cash flow growth outlook".On lower estimates, Goldman has a new 12-month price target of 260p.Exane also zeroed in on the deteriorating EM backdrop, which led it to reappraise G4S's outer-year earnings potential."We had previously assumed that the benefits of procurement initiatives would offset EM-related deterioration, to the extent that our micro view on G4S was contrary to our macro views," the French equities broker stated.The weak EM macro and currency depreciation has capped earnings progression and offset potential positive gains from G4S’ strategic improvements."Given the inherent late-cyclicality of the industry and the evident, recent deterioration in EM macro conditions, this may intensify," Exane said, cutting 2015-2017 organic revenue estimates to 6% from 8% and trimming its earnings estimates by 3%-10% as higher margins are more than offset by higher forecast minority charges.Its discounted cash-flow derived price target was correspondingly cut to 290p.Other brokers taking a dim view included Jefferies, which downgraded its earnings per share forecasts by 4% but maintained its 'hold' saying a strong second half was required and as valuation offers "insufficiently favourable risk/reward relative to history and recovered earnings".House broker JP Morgan maintained its 'overweight' on G4S however after a good meeting with management, which focused especially on the cost initiatives being pursued, with the margin improvement plan expected to be "a long process and management think there could be at least three to five years of initiatives to work through". "G4S down 14.5p today to 255.4p after results yesterday.nk
