Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!



John Kingham
Posted: 25 October 2017 10:40:34(UTC)

Joined: 27/04/2015(UTC)
Posts: 1

Was thanked: 4 time(s) in 1 post(s)
Mr Helpful;52074 wrote:
At some price level the downside worst case scenario must surely be priced in!
But where on earth is that price level?

The last time I looked at BT (July 2016) the price was about 400p, so it's fallen by about a third since then to 270p today.

The things I didn't like before are all still there, i.e.:

  1. Zero long-term revenue growth
  2. Massive debts
  3. Massive pension deficit
  4. Massive capex requirements
  5. Potentially disruptive (in a bad way) acquisition/integration of EE

So personally I wouldn't touch it with a barge pole, although of course that doesn't mean the share price won't double in the next year (Mr Market is a very fickle fellow!).

However, if you put a gun to my head and told me that I had to buy BT based on valuation alone and ignoring the risks above, I would say that on price alone the current 270p is probably reasonably attractive.

Why? Because the dividend yield is now almost 6%, the company's average return on capital employed (ROCE) is almost 10% (not brilliant, but not terrible either) and the company is at least treading water in terms of revenues and profits. Perhaps there is a slim chance that the dividend can be maintained, in which case a 6% yield would eventually prove to be irresistible and the share price would probably increase to bring the yield back down to more normal levels.

Back in the real world, management keep putting the dividend up, which I think is bonkers given the lack of revenue and earnings growth. 10 years ago the company earned about 20p per share and paid a 6.5p dividend whereas today the company earns about 25p (normalised EPS) and the dividend is over 15p!

I think the most likely outcome is a pension/debt/EE acquisition crisis, leading to a dividend cut/suspension and that cash being used to pay down the pension deficit and debts. I think that would be the sensible thing to do, but of course investors wouldn't like it and I don't run the company anyway so it's not up to me (thankfully).

So that's my two pence. I wouldn't buy it, but if I was forced to then 270p seems like a reasonable price to me (as long as you ignore all the risks).
4 users thanked John Kingham for this post.
Rishan on 25/10/2017(UTC), Tim D on 25/10/2017(UTC), Mr Helpful on 25/10/2017(UTC), what me, worry? on 03/11/2017(UTC)
Hank Elvis Dobbs (texan)
Posted: 25 October 2017 13:43:40(UTC)

Joined: 19/08/2017(UTC)
Posts: 179

Thanks: 63 times
Was thanked: 194 time(s) in 93 post(s)

The kids don't remember the very first 'mobile' phones, they jokingly called 'bricks' cos they were just about the size of one.

Come to mention it, you'd be far better investing in some ...Bricks... I mean...

After all, they do come underpinned with Government back up... in fact, all party support, and for the foreseeable future.

Now what other materials and services are needed to build all those houses ..irrespective of who 'actually' constructs them...


"Sounds too easy that"


3 users thanked Hank Elvis Dobbs (texan) for this post.
Jeff Liddiard on 25/10/2017(UTC), IanL on 26/10/2017(UTC), what me, worry? on 03/11/2017(UTC)
Jeff Liddiard
Posted: 03 November 2017 12:50:17(UTC)

Joined: 20/01/2012(UTC)
Posts: 447

Thanks: 1268 times
Was thanked: 277 time(s) in 152 post(s)
BT now down to 250, how much lower can it go? 200? then a bargain for the 6% divi?
1 user thanked Jeff Liddiard for this post.
what me, worry? on 03/11/2017(UTC)
Posted: 03 November 2017 14:32:59(UTC)

Joined: 27/01/2013(UTC)
Posts: 1,796

Thanks: 793 times
Was thanked: 2686 time(s) in 1017 post(s)
Jeff Liddiard;52832 wrote:
BT now down to 250, how much lower can it go? 200? then a bargain for the 6% divi?

This is one where a look at the longer term chart will tell you what you want to know (yes it's me saying that!).
2 users thanked Micawber for this post.
what me, worry? on 03/11/2017(UTC), Jeff Liddiard on 03/11/2017(UTC)
Tony Peterson
Posted: 03 November 2017 14:35:55(UTC)

Joined: 10/08/2009(UTC)
Posts: 1,082

Thanks: 658 times
Was thanked: 1289 time(s) in 545 post(s)
I haven't done anything yet today, but I rate BT a bargain.

Pondering. The last serious sized and as yet unreplaced profit slice was taken in January 2015 at 407. Perhaps it is time to replace this chunk at today's brilliant prices.

2 users thanked Tony Peterson for this post.
what me, worry? on 03/11/2017(UTC), Jeff Liddiard on 03/11/2017(UTC)
Jeff Liddiard
Posted: 03 November 2017 16:40:37(UTC)

Joined: 20/01/2012(UTC)
Posts: 447

Thanks: 1268 times
Was thanked: 277 time(s) in 152 post(s)
Not many kind words around for BT prospects/management with most looking at 265 and only Numis way out front suggesting 390. Very long term has been down down to 90.
North Star
Posted: 03 November 2017 16:41:52(UTC)

Joined: 22/05/2014(UTC)
Posts: 39

Thanks: 109 times
Was thanked: 41 time(s) in 21 post(s)
Surely its the pension legacy which is the problem with BT even at the current price.
Anyone any ideas what this pension problem is going to cost?
Keith Cobby
Posted: 03 November 2017 17:56:22(UTC)

Joined: 07/03/2012(UTC)
Posts: 496

Thanks: 299 times
Was thanked: 775 time(s) in 314 post(s)
BT is ex-growth like the oil companies, banks and utilities. It is slowly eating itself. I liked it in 1984. I don't like it now!
3 users thanked Keith Cobby for this post.
North Star on 03/11/2017(UTC), Jeff Liddiard on 03/11/2017(UTC), Mr Helpful on 04/11/2017(UTC)
2 PagesPrevious page12
+ Reply to discussion


Other markets