nick2name
08 May 2018
Re: Puzzle history states that paddy power did not take over betfairi prefer the word necklace to noose
sound money
08 May 2018
Re: Puzzle "Intangible assets only exceed shareholders' equity when the company has a high level of debt, which means they are not generating sufficient cash to justify the investment in intangibles. "You might want to rephrase that, it does not make sense.M
numberbiter
07 May 2018
Re: Puzzle Well Nickname, they say ignorance is bliss and so it proves in your case. Paddy Power bought Betfair not long ago and took on debt of £1 billion in the process. It's Balance Sheet went negative, but this company is highly cash generative and quickly wiped out the debt. The high figure of intangibles relates to the Betfair takeover, BUT, and this is the key, shareholders' equity exceeds intangible assets. So to reiterate for you:Intangible assets only exceed shareholders' equity when the company has a high level of debt, which means they are not generating sufficient cash to justify the investment in intangibles. There is absolutely no way that Melrose will clear their debt in two years. They paid too much for GKN; it will turn out to be a noose round their neck.
nick2name
07 May 2018
Re: Puzzled i am not surprised that you didn't name one company in ftse 350 with no debt i am surprised that you referred to paddy power, thinking of your aversion to intangible assets. paddy power's intangibles were 88% of assets in the last calcs that i have seen.it is likely that it has no long term debts as it has no assets on which to offer security of repayment. who's going to lend?
numberbiter
06 May 2018
Re: Puzzled Name a FTSE 350 company that has no debt.Happy to, Paddy Power plc has no current debt and cash in the Balance Sheet exceeds long term debt. Ok, if you are being pedantic I should have said 'net debt' rather than debt. If you look hard enough, there are quite a few companies with no net debt or little net debt. Taking about Paddy Power, they are a good investment at the current price of below £70. They are down because they had a relatively poor 1st Qu 2018, following a record 4th Qu 2017. In addition, investors are worried that the maximum stake on FOBT's will be reduced from £100 to £2. But these betting terminals only account for 6% of their profits while the percentage for many of their UK competitors is close to 50%. When the competition is forced to close hundreds of betting shops, PP will be the beneficiary. The good thing is that being so profitable and so big they are immune from asset strippers.
nick2name
05 May 2018
Re: Puzzled 'buy into companies that are making profits and have either no debt or little debt.'please name one company in ftse 350 with no debt
numberbiter
05 May 2018
Re: Puzzle 72, if you have read my previous posts you would know that I NEVER short shares because as far as I am concerned it is impossible (for me anyway!) to get the timing right. For example, having read Carillon's accounts three years ago it was obvious to me they would go bust. But when, I didn't know.Now, it is obvious to me that the Melrose directors have taken on too much debt and it will all end in tears (for Melrose shareholders, not for them). But, when, I just don't know.As I said earlier, I don't expect Melrose's share price to come under pressure until the next consolidated (including GKN) Balance Sheet comes out. Once it does I expect the share price to fall and the shorting to start. But not by me, because it may be several years down the line before Melrose Industries collapses. But collapse it will, just like the Hanson Trust before it. As in all types of investment, timing is the most important thing. This share is like buying tulips a few centuries ago. Many people made money, but those who hung on lost everything.
wonxheath
05 May 2018
Re: Puzzled Thanks all, particularly Sound Money and his/her advice. Let me explain. I bought into FKI after the millennium. Just a few hundred quid. They became Melrose who bunged money at me several times and I reinvested. Melrose are about to pay for a very swish kitchen so who is the mug? Melrose was a happy accident and has made a decent wad of cash for me.My brother's hobby if the horses in a low key way. A fiver here and a fiver there. That sort of gambling is not for me. Can't be bothered doing the research. My "hobby" is shares. And I have learned from my mistakes. Usually I go for Blue Chip-ish companies and re-invest the divis in an ISA. I have turned a few quid into a nifty pile (ie a kitchen) and perhaps an en-suite in the house refurb. I rest my case.There is room and profits for all in this game... from Red Braces to enthusiastic "amateurs". Thanks to all who contributed to the debate. Must dash. Got to get the Jaguar serviced!!Best wishes
72_fastback
04 May 2018
Re: Puzzled No doubt you've taken out a massive short then numberbiter...Perhaps you account for the whole 1.43% short interest.I await a re-hashing of Lupo's share price calculation, which pre-GKN was, I believe, 70p (or 150p if he was feeling generous). Strangely the Lupo Constant of Generosity didn't feature in my investment management exams - but then CAPM isn't as popular as it once was and DDM doesn't really work with MRO's business model - so perhaps I'm just out of the loop (or Lupo).
numberbiter
04 May 2018
Re: Puzzled Sound money; if you were such an expert you would know that the correct English for 'the knowledge gap is to large' should read 'the knowledge gap is too large'.I would have hoped that someone with the name 'sound money' would have some knowledge of accounting. For the benefit of those asking the question re 'being puzzled' this is the answer. In the past Melrose has raised equity, bought a business and then sold it at a higher price. It has then passed these profits onto shareholders. But there is a catch. Having distributed the profits from its last sale it left itself in a very weak position. Its latest acquisitions have not performed very well, so it was highly indebted before it bought GKN. Now, it has taken over GKN's assets and liabilities (including a massive pension deficit) at a significant premium, meaning that goodwill on its Balance Sheet will significantly increase. Its debt will also increase as the company will have to borrow more money to pay GKN shareholders 81p per share. In my view the Melrose directors have bitten off more than they can chew. What damage has been done will only become clear when the next accounts, which include the GKN consolidation, are published.Melrose's share price is currently holding up on its previous reputation, not on financial reality. I suspect its share price will collapse when the accounts (as per the previous paragraph) are published.I agree with Sound Money on one thing - those who don't understand what is going on should sell Melrose shares while they can and buy into companies that are making profits and have either no debt or little debt.
72_fastback
04 May 2018
Re: Puzzled I drink real ale but don't have red braces, so I consider that makes me about sufficiently qualified to say:What's in it for us MRO holders? We get ownership of GKN. We do this by giving GKN shareholders a bit of cash and some newly-minted MRO shares.In previous deals where you have had cash back it is because MRO have sold a previously acquired business e.g Elster. The share price falls because MRO, having sold a business, gives the cash received back to shareholders, thus the remaining part of MRO is smaller.Previously MRO has raised money from shareholders to buy businesses, rather than issue shares directly. It has done this via a method called a discounted rights issue and the share price will often fall to what is known as 'TERP' - theoretical ex-rights price.We are not getting any new shares - see above.Nortek has not yet been sold but if you see the latest report from MRO it is mostly performing better than expected and ahead of schedule.Patience is required but I see no reason why returns from both Nortek and GKN should be anything other than handsome.
EBloodaxe
04 May 2018
Re: Puzzled What's in it for us? The future is in it for us!We, well I, own Melrose shares because we believe in the buy, improve, sell message - backed by empirical evidence of the companies performance. Right now we have no tangible benefit - the asset base has increase, so has the number of shares in issue. We own a smaller slice of a bigger pizza. Some would argue that's a step backwards - except the slice I owned was so tiny that halving its size (or so) really doesn't make a difference. In the future, if our belief in Melrose' method is borne out, we will benefit because the pizza will grow even more. My slice will be the same proportion of the whole, but the whole will be bigger. Melrose will then sell a chunk of the enlarged pizza and give us the money (most of it at least) from the sale. The pizza will shrink. My slice of the pizza also shrink, but be proportionately the same - and I will have the dosh to do what I want with. Including buying more Melrose shares, so my slice gets bigger again.
soi
04 May 2018
Re: Puzzled Wijsound money was actually trying to be genuinely helpful.It is all too easy to be misunderstood on internet boards.I think he is a "sound investor ", not some Wolf of Wall Street.MRO have a good track record, followed their exploits for years yet never got involved.I think they will succeed in making money from their purchase as well as making money for their own investors.For clarity I have no investment or position in MRO currently.Slightly tempted.soi
WijMeister
04 May 2018
Re: Puzzled Sound money, I expected a better riposte from such a learned wolf of wall street. The discussion board is for all, not just red brace wearing over-hanging bellied real ale drinkers. You must have a lot on your mind, you'll forgive the overstatement.
sound money
03 May 2018
Re: Puzzled A fool and his money.......... No won't bother.M
