nk1999
05 Jul 2017
Telegraph- Questor "Update: Morrisons: The latest numbers from industry consultants Kantar Worldpanel offer grounds for optimism that Morrisons’ turnaround is on track, helped by the best industry-wide sales growth since spring 2012. The firm generated a 3.7% increase in revenues across the 12 weeks to June 18, outpacing Tesco, Asda and Sainsbury’s and even adding 10 basis points (0.1 of a percentage point) to market share, which rose to 10.6%. A market value of £5.6 billion and net debt of £1.2 billion by the year end combine to give an “enterprise value” of £6.8 billion. Compared with property on the balance sheet of £7.2 billion, the valuation looks well underpinned. Patience will be needed but Morrisons’ strategic initiatives do seem to be paying off. Questor says ‘Buy’."
gamesinvestor
19 May 2017
Asda [link] strugglingGames
Dhaka John
04 May 2017
Great results - shares down Great set of results but shares go down, conversely HBSC profits down but shares but shares up. Who can predict which direction they will go!
Ripley94
12 Apr 2017
Re: dead dog bounce... Long time since i looked in here record that i brought a few on 29th sold them 22/1/15.Moved on well since.Malcolm Stacey ( SP ) says best of big 3 British supermarkets. can they match the small German ones ?
lastminute-world
07 Apr 2017
SHORTS DATA hxxp://shorttracker.co.uk/company/GB0031274896/allBetting Against U.K. Retailers Hits 2-Year High Amid Brexit Jitters06/04/2017 12:45pmDow Jones NewsMarks & Spencer (LSE:MKS)Intraday Stock ChartToday : Friday 7 April 2017Philip WallerLONDON--Betting against U.K. retail stocks has hit a two-year high as investors fret about the potential impact on the sector of a "hard Brexit", a study released Thursday showed.Grocers including Ocado Group PLC (OCDO.LN), Wm Morrison Supermarkets PLC (MRW.LN) and J Sainsbury PLC (SBRY.LN) hold the top three places respectively in a list of the most-heavily shorted stocks in the sector compiled by research group IHS Markit.Marks & Spencer Group PLC (MKS.LN), Halfords Group PLC (HFD.LN), Sports Direct International PLC (SPD.LN) and Pets at Home Group PLC (PETS.LN) have also been targets of short-selling, in which investors bet on a downward movement in shares by borrowing and selling them in the hope of buying them back at a profit later.Online grocer Ocado is also the third most-shorted stock in the FTSE350 Index as a whole, with more than 15% of its shares out on loan.Investors keen to hedge against uncertainty caused by the U.K.'s vote to leave the EU have been shorting UK stocks with a heavy domestic revenue profile since the middle of last year, IHS Markit said.Shorting of retailers, many of which get most or all of their earnings from the U.K. market, has surged in the last few weeks as Britain has triggered Article 50, the EU's mechanism by which an existing member leaves the bloc.The bets now represent 3.3% of the total shares of the 43 retailers in IHS Markit's study, the highest average for the sector in more than two years.IHS Markit analyst Simon Colvin said a growing number of disputes related to the U.K.'s EU exit, such as last week's row over the sovereignty of British overseas territory Gibraltar, risks a so-called "hard Brexit", in which the U.K. would quit the EU without a trade deal after the official two-year negotiating period."Such an outcome could leave retailers paying more for imported goods, owing to both tariffs and a falling pound, while potentially limiting their access to the foreign staff who play an important role in the U.K.'s service industry," Mr Colvin said.While supermarkets have been shorted for a while due to competition from discounters, more bearish sentiment towards clothing and sport goods retailers in the last few weeks indicates the market is steeling itself for a slowdown in non-essential spending, he added.Short interest in M&S has more than doubled in the year to date to 9% of shares outstanding, while shorting of Sports Direct and Pets at Home has climbed by more than a third since the start of the year.Write to Philip Waller at [email protected](END) Dow Jones NewswiresApril 06, 2017 07:30 ET (11:30 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.Please do your own research.
Bill1703
03 Apr 2017
Re: Pension Risk "With MRW's pendion liabilities at 120% of market cap it should put some perspective on the balance sheet "strength""Games - all depends how much you want to worry about such things, on a relative basis.MRW pension schemes are comfortably in surplus overall - by some £272m, which actually went up from £186m the previous year. And the predominant scheme (with the vast majority of liabilities) has been closed to both new members and future accrual for some years.So it's an issue, as it is for pretty much all big companies... but IMHO, MRW is well down the list of stocks where it is anything like a major current concern.
gamesinvestor
03 Apr 2017
Pension Risk No mention of this in Merrill Lynch's upgrade report.With MRW's pendion liabilities at 120% of market cap it should put some perspective on the balance sheet "strength"[link]
Bill1703
31 Mar 2017
Re: Merrill Lynch upgrade "... Morrison has one of the strongest balance sheets in the sector, a capital light growth plan, self-help opportunities, is close to net cash and has one of the most attractive cash flow valuations in the sector.... the continued deleverage suggests the group could turn net cash in 2022, suggesting the price-to-earnings ratio will de-rate as debt continues to decline."No guarantee that any broker has got it right, of course... but as per previous posts, the view is very much in line with my own - it is the balance sheet and free cash generation profile that is key to both continuing earnings momentum and valuation support, on a short-to-medium term outlook. "We believe that its strong balance sheet position and resultant cash optionality deserves a premium," it said, adding that it looks as if the stock is trading on a 20% discount versus the sector."Even then, a 275p target is pushing it a tad IMHO, in today's money... probably top end of a reasonable sustainable range near-term, I would say. Not sure of the detail on the "20% discount vs sector" view - I cannot square this with the current SBRY valuation, though I certainly would agree vs TSCO, which I see as a good 20% expensive relative to MRW (and in absolute terms too).
nk1999
30 Mar 2017
Re: Merrill Lynch upgrade Some further details from ADVFN:"Bank of America Merrill Lynch upgraded Morrison to 'buy' from 'underperform' and lifted the price target to 275p from 220p.The bank pointed out that Morrison has one of the strongest balance sheets in the sector, a capital light growth plan, self-help opportunities, is close to net cash and has one of the most attractive cash flow valuations in the sector."We believe that its strong balance sheet position and resultant cash optionality deserves a premium," it said, adding that it looks as if the stock is trading on a 20% discount versus the sector.Merrill said chief executive officer David Potts' key strategic moves have included a new wholesale partnership with Amazon and Rontec and renegotiation of its Ocado contract. All of these moves should help to expand future earnings without the need for significant capital, it argued.Merrill said the continued deleverage suggests the group could turn net cash in 2022, suggesting the price-to-earnings ratio will de-rate as debt continues to decline.The bank's base case scenario is for EBIT margins to stay flat in 2018E at 2.6%.Its upside scenario is that Morrison moves to share profitability of its wholesale business and greater than expected efficiencies in store could mean operating margins rise to 2.75%, an increase of 0.15% from the base case.A downside scenario would see a sizeable amount of unpassable food inflation, which could lead to margin contraction to 2.5%."
Bertie Biddle
30 Mar 2017
Merrill Lynch upgrade "Bank of America Merrill Lynch upgraded its rating to “buy” citing an “unparalleled balance sheet”.The US investment bank crowned Morrisons, which trails market leader Tesco, Sainsbury's and Asda in annual sales, as the “winner of the supermarket sweep”.Analyst Kiranjot Grewal said: “Morrisons is the most attractive name amongst the UK food retailers on a cash flow measure.”Along with boasting one of the strongest balance sheets in the sector, the bank also said it has a capital light growth plan, self-help opportunities and has one of the most attractive cash flow valuations.The supermarket’s recent strategic moves, including a new wholesale partnership with Amazon and Rontec and the renegotiation of its Ocado contract, are will bolster future earnings, the bank said.The upgrade comes three weeks after the FTSE 100 firm delivered its first rise in annual profits in five years, but warned more expensive food imports were creating uncertainties. Shares closed 5.1p higher at 242.3p."
Bill1703
13 Mar 2017
Re: Results and valuation reflections "Bill - Not sure how you are calculating these figures.... £670M + £79M = £749M (you mentioned £652M)... If your definition of the term "adding back" means subtracting the figure then you get £591M... adding back a further £44M = £793M (you mentioned £696M)... "Games - apologies, was badly worded. What I meant was "adding back" these figures to MY FCF figure (ie. the £573m), in order to try to reconcile MY FCF vs THEIR published version. So 573+79 = the 652... then 652+44 = 696.As I went on to indicate, our figures do not reconcile exactly, as their approach means they include all sorts of (mostly minor) one-off and financial items which I would typically exclude, as either generally non-recurring and/or not pertaining to the cash flows of the actual operation of the business."Not sure what this is achieving since there seems to be so many definitions of Free Cash Flow, which is open to flattering the accounts depending on who is presenting them.."So yes, a number of different ways you can look at it, and it's at least open to such "flattering". But anyone so doing is only fooling themselves, particularly if it's the company themselves... the figures are almost always all there in black and white for anyone to cross-check and corroborate. I see very few cases of companies apparently "flattering" - but plenty of companies who provide good, granular disclosure as an insight into how they manage the finances of the business and allocate capital. So I think it's one of the most useful (and underappreciated) things an investor (actual or potential) can calculate and monitor. FCF will necessarily fluctuate from year to year, but companies generating at least reasonable FCF year in, year out have that valuable quality of flexibility - they can pay good dividends while still paying down debt (as required), while still investing in the business... they can also make important decisions on discretionary allocation of capital, whether to invest it incrementally in the business, in new growth opportunities, and/or returning it to shareholders, rather than have such decisions made for them. Conversely, consistently low or negative FCF generation can be an invaluable portent of problems to come... it is often behind the surprise negative revelations you see with dividend cuts, even rights issues, etc. The food retail sector is a great case in point... all the big players were generating minimal FCF at best for years, even when margins and profits were holding up, as they ploughed capital into a ruinous race for retail space in a mature, finite market. In retrospect, this was a major red-flag warning, and would have been noticed by anyone focusing on FCF... just as, as I have been arguing for a while, it is the (belated) shift to now-very-good FCF generation across the board - even after a negative step-change in margins/profits - which could mark then transformation of the sector as an investment proposition. I do say "could" mark...
gamesinvestor
13 Mar 2017
Re: Results and valuation reflections "Their FCF figure on this basis is £670m. If I added back £79 asset disposals, I would get to £652m... if I further added back £44m sale of businesses, etc, I'd get to £696m."Bill - Not sure how you are calculating these figures.£670M + £79M = £749M (you mentioned £652M)If your definition of the term "adding back" means subtracting the figure then you get £591Madding back a further £44M = £793M (you mentioned £696M)Again, If your definition of the term "adding back" means subtracting the figure then you get £591M - £44M = £547MGames - Not sure what this is achieving since there seems to be so many definitions of Free Cash Flow, which is open to flattering the accounts depending on who is presenting them.
Bill1703
12 Mar 2017
Re: Results and valuation reflections "Can you highlight here the two sets of "actual calculations", the companies and yours, to show the differences?"Games, it's a fair question - see below for the year just reported (ie. FY17):I have FCF as follows: £978m net cash inflow from operations + £6m interest received + £8m from j.v. dividends received, LESS £374m purchase of tangible assets and similar and £45m purchase on intangible assets = £573m.The company, unlike many others, does not disclose a detailed breakdown of its own calculation, full of adjustments to the statutory figures - but merely defines it as actual movement in net debt, then adding back dividend payments. Their FCF figure on this basis is £670m. If I added back £79 asset disposals, I would get to £652m... if I further added back £44m sale of businesses, etc, I'd get to £696m."... "I do not include acquisition spend - or other investment which is clearly discretionary."... Are you saying that the company does? If they do so, then that would be more conservative on the companies side...."Morrison's approach is actually quite "pure" and admirable, certainly less arbitrary than many - but it does mean that it will effectively include all sorts of one-offs and probable exceptionals (eg. movement in financial instruments), which many of us would not include in a calculation of recurring FCF. It also means that they would include acquisition spend - and so in some years their figures might well be lower than mine. That they are higher is essentially because the last 2 years have seen big disposals of both assets and other business investments. So this difference in approach is also why my figures and theirs do not exactly tally. As I've said before, their approach is consistent, less open to 'spin' and does reflect hard cash in and out, and so is hardly one to criticise. It is merely that I prefer mine as an inevitably-broad assessment of underlying FCF on a recurring basis. Once again... there are no rules, it's all about what you are trying to assess. If you are focused on the balance sheet and actual net debt levels, their approach is more direct... if you are thinking about the true net cash generating capacity for dividends and/or other discretionary investment, then mine might give a somewhat better picture.
gamesinvestor
12 Mar 2017
Re: Results and valuation reflections "Ultimately, there are no rules"Fair point.Can you highlight here the two sets of "actual calculations", the companies and yours, to show the differences?"I do not include acquisition spend - or other investment which is clearly discretionary."Are you saying that the company does?If they do so, then that would be more conservative on the companies side, as they will have a lower Free Cash Flow than your own calculations.Games
Bill1703
10 Mar 2017
Re: Results and valuation reflections "Bill - how are you calculating this (i.e. what formula are you using) and where are you plucking the data from to put into your formula?"All the data comes from the financial statements, as per yesterday's RNS - the vast majority of what I ever need is usually in these reports, and I've never found a third-party financial website I can trust with the data, with most of them riddled with errors and inconsistencies. The basic formula is net cashflow from operations (after tax and interest), then subtract capex. I do not include acquisition spend - or other investment which is clearly discretionary. I also do not typically include disposals - either investments or just normal asset disposals, as these are less likely to be achievable year in, year out, though many people will include them.Many companies now publish their own FCF calculations. I always look at these, but in comparison to my own calculations.. sometimes I prefer my own, sometimes I accept the company's view, sometimes they're the same anyway. There are always some elements which can be viewed as exceptional, or non-recurring, or purely discretionary, and good arguments why you might strip them out of a true, underlying FCF figure.FWIW most published company FCF calculations are perfectly reasonable, even if I don't always agree 100% on some of the detail. Rarely do you see anyone "trying it on" - they'd be fooling themselves anyway. Though I did see a company the other day reporting FCF before tax payments - at least they were reasonably upfront about it, I am sure they have their reasons, but it's not something I would ever leave out.Ultimately, there are no rules... it's all about what you find to be meaningful for your own purposes, whether you are a company or an investor. For me, as you infer, if at all in doubt, I tend to look to the more conservative figure.
