Gamesinvestor1
11 Mar 2019
Accounting new rules Indeed markets are fickle. Therein lies some opportunities! Games
NewBill1703
10 Mar 2019
Accounting new rules Gamesinvestor1: we estimate that net debt will quadruple for Tesco and double for Morrison (MRW), and calculated earnings per share will decrease. Their operating lease commitments may also be bigger than previously disclosed. Income statements could also become more volatile.’ Stated net “debt†will definitely go up for many, Games - substantially so in some cases. It is less clear whether EPS will go down. In essence, you are moving an operating cost item and putting it into finance costs - so EBIT/EBITDA will be higher, but it may well be fairly neutral at the net profit / EPS line. Though there will be some implications for depreciation, etc, with new assets and liabilities reported, so hard to say exactly. But ultimately, there is no impact on cash flow - and we’ve known about all this for years now. So will be interesting to see what the market reaction is when companies start to report under the new rules - should be neutral, of course, but that hasn’t stopped markets overreacting before!
Gamesinvestor1
04 Mar 2019
Accounting new rules “â€"However retailers such as Tesco (TSCO) and Sainsbury (SBRY) which lease some stores instead of owning them directly will see a big change in the accounting treatment of their leases, leading to an increase in their liabilities and their net debt positions. ‘We predict the newly recognised lease liabilities will often be large,’says Dylan Whitfield, head of forensic accounting at HSBC. ‘For example, we estimate that net debt will quadruple for Tesco and double for Morrison (MRW), and calculated earnings per share will decrease. Their operating lease commitments may also be bigger than previously disclosed. Income statements could also become more volatile.’ Games
nettle124
09 May 2018
Re: ukvalueinvestor If you feel that mortality rates are going to increase generally, then betting on the stock market could make you a lot of money if you invest in shares of companies that support massive pension schemes. I think that I am right in saying that if the surplus gets large enough, the company can claim it back cant they?
Herald
08 May 2018
Re: ukvalueinvestor Yes unlike many in the FTSE 100 MRW can boast a pension surplus. The negative as perceived by Kingham is the absolute level of the liabilities is larger than he considers safe and is explained below.(I missed a link at the time of the initial posting of the lengthy explanation he gave at the time when he sold MRW in July 2017. [link] analysis of MRW pension situationPension liabilities are finally getting the respect they deserve from investors, largely due to high profile events such as the collapse of Carillion.Personally I look at a company’s total pension liabilities, rather than just the deficit or surplus.That’s because a 10% surplus today can easily become a 10% deficit five years down the line, and a 10% deficit on a big total pension liability is much more dangerous than a 10% deficit on a small total pension liability.If the total pension liabilities are more than ten-times the company’s recent average profits, that’s usually a red flag for me. A 10% deficit in such a large pension scheme would be equal to an entire year’s profits, and that could be a serious drag on a company’s financial flexibility.In Morrisons’ case, it has total pension liabilities of £4.3 billion, which gives it a pension to profit ratio of 12.6.That’s above my 10x pension ratio limit, so in my opinion Morrisons’ defined benefit pension scheme is a potentially serious risk to the company’s health.Having said that, the fund currently has quite a large surplus of assets over liabilities, to the tune of £600 million. That’s a 13% surplus, so it would take some very bad investment decisions for the scheme to turn from such a big surplus to a dangerous deficit.But stranger things have happened.
nettle124
08 May 2018
Re: ukvalueinvestor I just looked up the current information about pensions from the latest interim report. Here is the quote...."The net pension surplus was £594m at year end, up from £392m at the end of thefirst half and £272m at the end of 2016/17. "Am I missing something here? The word "Surplus" doesnt fill me with fear.
Herald
27 Apr 2018
ukvalueinvestor A lot of interesting stuff on this website run by someone called John Kingham.[link] he is not currently that keen on MRW."Fair value price: 150pAs things stand today, I wouldn’t invest in Morrisons. That’s because its:Growth rate is too lowProfitability is too lowPension liabilities are too large. "However if you go back to May 2013 MRW was added to his portfolio at 292p [link]
Herald
17 Apr 2018
Re: SHORTS DATA Shorters on the run before they are hit with that 8p+ divi/special next month. Publicly disclosed short figure now under 9%. [link] buying back their position over the last month and could soon be off register.Previous disclosures by Melvin Capital Management LPWM MORRISON SUPERMARKETS 0.58% 13 Apr 2018WM MORRISON SUPERMARKETS 0.66% 12 Apr 2018WM MORRISON SUPERMARKETS 0.74% 11 Apr 2018WM MORRISON SUPERMARKETS 0.87% 9 Apr 2018WM MORRISON SUPERMARKETS 0.97% 5 Apr 2018WM MORRISON SUPERMARKETS 1.12% 4 Apr 2018WM MORRISON SUPERMARKETS 1.24% 3 Apr 2018WM MORRISON SUPERMARKETS 1.32% 29 Mar 2018WM MORRISON SUPERMARKETS 1.49% 23 Mar 2018
Bertie Biddle
11 Apr 2018
Torygraph on Morries [link] above link is for premium subscribers but points out that the drop in bank debt to less than £1bn coupled with a pension surplus means that Morries can hunker down for a long fight with the discounters as well as the majors.Indeed on my last visit to Morries I noticed they have just introduced a range of low cost items at prices that will make the discounters eyes water!The Torygraph also point out that sales data from Kantar to March 25 put Morries best out of the big four supermarkets on a one and two year view. It said that the EPS of 13p covered the 6.08p divi more than twice over which suggests the payment is sustainable and further debt reduction may mean further special divis.They have strong asset backing with fixed assets of £7.3bn compared to a market value of £5.3bn, bank debt of £973m and a pension surplus of £594m.
Tenobas
06 Apr 2018
Re: Potts If >>A fair price for Morrisons is closer to a P/E of about 10-12.What is a fair price for Tesco?
Herald
04 Apr 2018
Re: SHORTS DATA Further to the recent Bernstein comments below the company does not fit (net debt...zero) the profile of a company where you would want to be short not least since you will have to pay out for all those divis and specials forecast. Retail is still hyper competitive but the self-inflicted wounds under the previous regime which first attracted the hedge hyenas have stopped."....lowest gearing in the sector.Adjusting for leases its net debt was at just twice operating earnings and if you credited the £600m pension asset then its net debt was zero, the analysts also said.Hence the analysts' projection for the firm to ramp up its pay-out ratio from 83% last year to 100% over the next few years.On Bernstein's estimates, Morrisons was set to see its dividend yield rise to 6.3% next year, followed by growth of 7.0%, 7.4% and 9.0% in successive years."
Bill1703
30 Mar 2018
Bernstein upgrades MRW For the first time in years, apparently... edited highlights below.FWIW I agree with them... they have been quietly delivering for some time now, and with a number of stand-out advantages over the quoted peer group."MRW is a perennial underdog in our sector, unloved by the sell-side but with best long term historical TSR and a favourite of value investors. We think it makes for great income stock... We expect them to take it [payout ratio including "specials", now 83%] up to 100% for the next few years. Even with higher pay-outs, they are still deleveraging, providing plenty of downside protection. That means divi yield of 6.3% next year, followed by 7.0%, 7.4% and 9.0%...Earnings are steadily being revised upward. That has actually been Morrisons' fate for the last 20 years: it is the only stock where sell-siders systematically upgrade earnings. It is the underdog of food retail, where execution beats strategy."
latife
26 Mar 2018
Whitefield Visited Whitefield , Great improvement to their store, It was very busy too. Shame I dont live nearer....
gamesinvestor
23 Mar 2018
Re: Potts "True they have had a big wakeup call and in the case of Morrison’s they have pulled out all the stops."SAG -- They have indeed, but I think it goes far beyond that - in the old days the margin on the business was much higher.I think that's changed for ever - it's not just a wake up call it's a tacit realisation that the competition has grown, is growing and will continue to grow. Aldi and Lidl are still growing at double digit rates despite many suggesting that it's tail off - it's been going on for years.Bill - I did my back in m8 hopping over the fence - so I'm going to buy some of MRW's excellent produce next time I fall out of the car -- you see I do care about your shareholding.On a more realistic front, and despite the healthier bottom line, if the top line continues to be challenged the bottom usually follows -- I recall an old northern saying regarding the entrance of a portly person into a room -- "ere's me ed, me arxe is on it's way"I think a fair price for Morrisons is closer to a P/E of about 10-12 -- so some way to go yet.Games
Special A Gent
19 Mar 2018
Re: Potts Hi John Fully agree with yuor comments.This is not a company to hold and sit and watch the value grow.Typical trading range has been below £2.00 up to £2.65.Cannot see the SP exceeding the upper range in the short term.In hindshight I bought too soon as todays SP clearly show.I have both BP and RDSB dividends paying out at end of this month.If the SP remains at or below todays price when I recieve said dividends will consider another buy for the short term.MRW ex-divi date is not until May therefore between now and ex-divi date I am expeting the SP to rise more than the value of the MRW divi, which would then make it a sell from me.Good luck with your investing.Regards S.A.G.
