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BT
John Kingham
Posted: 25 October 2017 10:40:34(UTC)
#19

Joined: 27/04/2015(UTC)
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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).
5 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), mcminvest on 28/03/2018(UTC)
Hank Elvis Dobbs (texan)
Posted: 25 October 2017 13:43:40(UTC)
#22

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.


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...

..Cosy

"Sounds too easy that"

mmmm






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)
#23

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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)
Micawber
Posted: 03 November 2017 14:32:59(UTC)
#24

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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)
#25

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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)
#26

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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)
#27

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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)
#28

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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)
Dian
Posted: 25 March 2018 04:17:19(UTC)
#29

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Could there be light at the end of the tunnel for this overlooked stock?

https://simplywall.st/st...rading-at-a-50-discount/
Tony Peterson
Posted: 25 March 2018 07:35:34(UTC)
#30

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I don't exactly think it has been overlooked.I certainly haven't, though I have not traded any since it contributed a good chunk of our cgt exempt gains exactly a year ago, selling all our nominee holdings at 3.23 and not replacing them.

Since then (I'm currently engaged in totting up the current tax year) the remaining shares in and out of ISAs have paid us over £7000 in dividends I have resisted the temptation to rebuy those share I sold last year, BT has provided me with excellent telephone and internet coverage, (and charged me less than a thousand) while its share price has gratifyingly subsided to the point that, yielding over 6% it could be potential candidate for our ISA top ups in a fortnight.

I take no notice of our in-house doomsters, or preoptifloccularists.

Inderpal Singh Khalsa
Posted: 25 March 2018 07:49:09(UTC)
#32

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One of my worst performers stock in a monthly investment with Selftrade. Since last 20 months it has dropped by nearly 36%. There seems to be no positive news at all. It has turned from a growth to an income stock. Despite this I'm holding on to it for fear of losing a lot if I sell it now.
Sara G
Posted: 25 March 2018 11:15:17(UTC)
#33

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I appreciate concerns over lack of growth prospects, but brokers are significantly more positive than they were a few months back.

In terms of the pension liabilities there should be some clarity later this year following the actuarial revaluation, with scope for an upside surprise. I was surprised there wasn't a bit of a bounce when they announced closure of the FSP, but the company is so hated at the moment and of course the wider market context will have an impact.

I bought back at around 270p and 235p and may add via next month's regular contribution. The dividend is nice while it lasts but it's mainly a recovery stock for me so would probably sell if it got back to 300p. I'm monitoring it closely though and will cut the loss if the scope for recovery reduces.

3 users thanked Sara G for this post.
Tony Peterson on 25/03/2018(UTC), neville dwards on 25/03/2018(UTC), gillyann on 01/04/2018(UTC)
Tony Peterson
Posted: 25 March 2018 11:37:25(UTC)
#34

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Sara

The best bargains for me often seem to be the most hated stocks.

Which is why I welcome the derision of the mantra-quoters. I would be happy to have much more ridicule heaped upon BT at least until April 6th.

This message comes to you from a BT landline.
1 user thanked Tony Peterson for this post.
Sara G on 25/03/2018(UTC)
King Lodos
Posted: 25 March 2018 12:37:37(UTC)
#35

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BT looks like fairly distressed investing.

My returns calculation estimates about 20% (growth estimates + earnings yield + dividend, with a bit of weighting), but it also looks like the company's potentially close to bankruptcy.

https://www.gurufocus.com/stock/BT

Altman Z-score of 1 means it might struggle to repay debt .. I'd have to look more into the workings – it may be (like Unilever) they're spending strategically at the moment .. But falling ROIC and growing debt means it's might not be creating much value.

And the share price is where it was in 1987, so it's not got a good record of creating value.

Not a Buffett stock, but it might be a Graham stock .. I'd be interested to see what it does

2 users thanked King Lodos for this post.
Sara G on 25/03/2018(UTC), Tony Peterson on 25/03/2018(UTC)
Tony Peterson
Posted: 25 March 2018 14:05:10(UTC)
#36

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KL

Thank you for an interesting link, and for providing the view that BT could be approaching bankruptcy. Very helpful.

I am really obliged. If you can persuade people like Inderpal to cut their losses before the end of the current tax year, and sell up now before BT shares fall to nothing and my landline evaporates i will be permanently grateful.

King Lodos
Posted: 25 March 2018 14:16:15(UTC)
#37

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Hah

I'll get to work on that.

I do still use my BT landline .. But I'd be interested to know at what point a younger generation, and generation rent – who think of landlines like Ticker tape (many of whom experience anxiety at the thought of talking rather than texting) – leaving the market turns BT into a bespoke operation for retirees .. What that does to margins?
Fell Walker
Posted: 25 March 2018 14:31:01(UTC)
#38

Joined: 15/12/2017(UTC)
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Personally speaking, I have an EE land line, I change providers every few years when a rival outfit offers a good enticement.

However, I haven't actually had a phone plugged in for about 8+ years as we only use mobile for calls, plus it eradicates nuisance calls. I think EE even do a package with no calls included now.

When I can get a mobile package with unlimited data for a competitive price I will finish with the land line and work off mobile hotspots or a sim modem.
Tony Peterson
Posted: 25 March 2018 14:40:19(UTC)
#39

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Fell Walker.

You do realise that EE is a division of BT???

Fell Walker
Posted: 25 March 2018 14:52:32(UTC)
#40

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Tony Peterson;59375 wrote:
Fell Walker.

You do realise that EE is a division of BT???



I'm just highlighting the changing market and how (hopefully) landlines will become a thing of the past, not passing a comment on BT or any particular company! I was with BT directly until I changed to EE around a year ago FWIW.

Tony Peterson
Posted: 25 March 2018 15:08:24(UTC)
#42

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Fell Walker


You are still a customer of BT, and even if you change providers for your landline again you will still be contributing to my share of BT's profits from our ownership of the infrastructure you use.

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