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Greene King RNS

Practical discussions about equity High-Yield Portfolios (HYP) for income
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MDW1954
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Re: Greene King RNS

#129362

Postby MDW1954 » April 1st, 2018, 8:31 pm

For my part, I have mulled buying Greene King shares for almost a decade, and years ago had a spat with Luni over their value characteristics.

I finally bought in at the beginning of March. I do so like it when sectors fall out of favour!

MDW1954

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Re: Greene King RNS

#129731

Postby westmoreland » April 3rd, 2018, 4:16 pm

returns on capital are so low in the pub trade that it's not worth above book value IMO.

if i was seeking exposure to the hospitality sector, i'd do it through either whitbread or domino's pizza. whitbread (both 2.6% yield) is more reasonably valued at the moment. a more speculative play would be restaurant group, which has been poorly managed recently and is in the middle of a turnaround, and is yielding 6.7% covered by free cash flow.

edit: just checked, book value is currently just over £2bn, compared to current market cap of £1.46bn. if they cut underperforming sites maybe there is scope for a revaluation. problem is that no-one wants them...

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Re: Greene King RNS

#129792

Postby Arborbridge » April 3rd, 2018, 6:46 pm

westmoreland wrote:returns on capital are so low in the pub trade that it's not worth above book value IMO.

if i was seeking exposure to the hospitality sector, i'd do it through either whitbread or domino's pizza. whitbread (both 2.6% yield) is more reasonably valued at the moment. a more speculative play would be restaurant group, which has been poorly managed recently and is in the middle of a turnaround, and is yielding 6.7% covered by free cash flow.

edit: just checked, book value is currently just over £2bn, compared to current market cap of £1.46bn. if they cut underperforming sites maybe there is scope for a revaluation. problem is that no-one wants them...


Well, there's no doubt that Whitbread's price has held up better, but I doubt the yield would tickle the fancy of a HYPer. And the share price is also in decline, so hardly a great recommendation.
Restaurant Group (how do you concluded it's badly run? BTW) is also suffering with the general malaise about eating out, so probably not a great deal safer as a "bet".

As for selling off sites: how do you know "no body wants them". To me that seems much too black and white as they will find uses for pubs eventually. For instance, one near me was closed down and has now been redeveloped for housing.
They'll go, and Greene King has usually profits from such sales, because: "land? their not making it any more"

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Re: Greene King RNS

#129804

Postby westmoreland » April 3rd, 2018, 7:22 pm

Arborbridge wrote:
westmoreland wrote:returns on capital are so low in the pub trade that it's not worth above book value IMO.

if i was seeking exposure to the hospitality sector, i'd do it through either whitbread or domino's pizza. whitbread (both 2.6% yield) is more reasonably valued at the moment. a more speculative play would be restaurant group, which has been poorly managed recently and is in the middle of a turnaround, and is yielding 6.7% covered by free cash flow.

edit: just checked, book value is currently just over £2bn, compared to current market cap of £1.46bn. if they cut underperforming sites maybe there is scope for a revaluation. problem is that no-one wants them...


Well, there's no doubt that Whitbread's price has held up better, but I doubt the yield would tickle the fancy of a HYPer. And the share price is also in decline, so hardly a great recommendation.
Restaurant Group (how do you concluded it's badly run? BTW) is also suffering with the general malaise about eating out, so probably not a great deal safer as a "bet".

As for selling off sites: how do you know "no body wants them". To me that seems much too black and white as they will find uses for pubs eventually. For instance, one near me was closed down and has now been redeveloped for housing.
They'll go, and Greene King has usually profits from such sales, because: "land? their not making it any more"


restaurant group - they state in their reports that they messed up on menus and pricing. basically, they were too complicated.

e.g.

Mr McCue said the group’s sluggish performance for the year was driven by each of its three major leisure brands - Frankie & Benny’s, Chiquito and Coast to Coast. He said F&B had “substantially” underperformed the market and menu trials were now being undertaken in a bid to reinvigorate the chain.

Chiquito also suffered from “poor proposition changes” and issues affecting the speed of service while a “radical” change to Coast to Coast’s menu in January last year was “received poorly”.


whitbread on the other hand is a very well run company, with a long term approach. it's share price has held up better because they have two excellent businesses that are growing. the decline in the SP brings it back on to my radar.

"no body wants them" - they can't get a premium price for their pubs in this environment as they would have 3-4 years ago. some pub groups have offloaded pubs at a slight premium recently, to be fair.

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Re: Greene King RNS

#129830

Postby Arborbridge » April 3rd, 2018, 8:55 pm

westmoreland wrote:
restaurant group - they state in their reports that they messed up on menus and pricing. basically, they were too complicated.
whitbread on the other hand is a very well run company, with a long term approach. it's share price has held up better because they have two excellent businesses that are growing. the decline in the SP brings it back on to my radar.
"no body wants them" - they can't get a premium price for their pubs in this environment as they would have 3-4 years ago. some pub groups have offloaded pubs at a slight premium recently, to be fair.



Thanks for that. I notice no mention of Garfunkels in that respect, which always seems to be busy. Saying he could improve things does not, of itself, show that it is "badly run" - but just that it could do better. I do wonder if they have been hit by the general problem with going out. For instance, F and B are on entertainment sites where there are cinemas - one is symbiotic with the other. The cinemas I visit seem fairly lacking in footfall.
Then there's the other problem: just too many restaurants and cafes to be sustainable. One can't help feeling that even Costa Coffee is beginning to reach the stage where it is cannibalistic, and certainly prey to other concepts coming along.

If Greene King need to shift sites, my feeling is they may not get a premium, but provided the get a suitable price, that's fine. I my view, your position on that is too gloomy and too binary.


Arb.

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Re: Greene King RNS

#129842

Postby westmoreland » April 3rd, 2018, 9:55 pm

Arborbridge wrote:
westmoreland wrote:
restaurant group - they state in their reports that they messed up on menus and pricing. basically, they were too complicated.
whitbread on the other hand is a very well run company, with a long term approach. it's share price has held up better because they have two excellent businesses that are growing. the decline in the SP brings it back on to my radar.
"no body wants them" - they can't get a premium price for their pubs in this environment as they would have 3-4 years ago. some pub groups have offloaded pubs at a slight premium recently, to be fair.



Thanks for that. I notice no mention of Garfunkels in that respect, which always seems to be busy. Saying he could improve things does not, of itself, show that it is "badly run" - but just that it could do better. I do wonder if they have been hit by the general problem with going out. For instance, F and B are on entertainment sites where there are cinemas - one is symbiotic with the other. The cinemas I visit seem fairly lacking in footfall.
Then there's the other problem: just too many restaurants and cafes to be sustainable. One can't help feeling that even Costa Coffee is beginning to reach the stage where it is cannibalistic, and certainly prey to other concepts coming along.

If Greene King need to shift sites, my feeling is they may not get a premium, but provided the get a suitable price, that's fine. I my view, your position on that is too gloomy and too binary.


Arb.


the problem with all retail roll outs is that management rarely have the discipline to stop opening new outlets. 10 years ago an express supermarket was popping up on every high street - now they are closing some of them.

like for like sales so far this financial year for costa are up 1%. however, the express machines they have are being rolled out at a rate of a thousand or two a year, and these are very high margin.

the brand is very strong, and it is survival of the fittest in an oversupplied market. my gut feeling is that costa (and others like greggs, mcdonalds) will continue to win / maintain market share. whitbread talk of a 'third wave' of coffee drinking - basically people willing to spend more on higher quality coffee. they are also innovating with things like app ordering. plenty of others with weaker offerings will suffer.

the majority of whitbread's profits come from premier inn. there is plenty of room for them to grow in the UK, and they are targeting the german market, which the research shows will be receptive to PI.

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Re: Greene King RNS

#129844

Postby Arborbridge » April 3rd, 2018, 10:24 pm

westmoreland wrote:the problem with all retail roll outs is that management rarely have the discipline to stop opening new outlets. 10 years ago an express supermarket was popping up on every high street - now they are closing some of them.

like for like sales so far this financial year for costa are up 1%. however, the express machines they have are being rolled out at a rate of a thousand or two a year, and these are very high margin.

the brand is very strong, and it is survival of the fittest in an oversupplied market. my gut feeling is that costa (and others like greggs, mcdonalds) will continue to win / maintain market share. whitbread talk of a 'third wave' of coffee drinking - basically people willing to spend more on higher quality coffee. they are also innovating with things like app ordering. plenty of others with weaker offerings will suffer.

the majority of whitbread's profits come from premier inn. there is plenty of room for them to grow in the UK, and they are targeting the german market, which the research shows will be receptive to PI.



I have no argument with WTB : in fact there are in my wife's HYP. However good they are as a share to hold, that does not make them currently a HYP share. The yield is much too low, and therefore to promote them as an alternative to Greene King in a HYP discussion is not tenable. End of, I'm afraid!

Arb.

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Re: Greene King RNS

#129849

Postby moorfield » April 3rd, 2018, 10:51 pm

Arborbridge wrote:I have no argument with WTB : in fact there are in my wife's HYP. However good they are as a share to hold, that does not make them currently a HYP share. The yield is much too low, and therefore to promote them as an alternative to Greene King in a HYP discussion is not tenable. End of, I'm afraid!


... quite so, and those who do hold in their HYPs (I do, having bought only once in 2008) and are finding their overall income not keeping up with inflation should obviously ask themselves why they continue to do so. We can put Unilever in the same bucket too currently ;)

My own benchmark yield, that of CTY.L, being the minimum I am looking for from any new HYP buy, is 4.3% today.

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Re: Greene King RNS

#129902

Postby kempiejon » April 4th, 2018, 9:56 am

moorfield wrote:My own benchmark yield, that of CTY.L, being the minimum I am looking for from any new HYP buy, is 4.3% today.


I know this way off Greene King now but I notice that CTY yield has come up a few times boardwide so thought this a good moment to pop in my comment. I bench mark new buys above my current portfolio yield as per HYPTUSS currently 4.3%. This would hopefully show an increase on yield on new investments.
The ftse100 as per dividenddata.co.uk has a current yield of 4.1%, if starting a new HYP I would hope to beat that for each pick, in fact for much of my portfolio building that was the number I worked to. It struck me as obvious that I could increase my own income generation by using my portfolio average.
CTY as a one stop show for high yield ftse100 shopping has a place, if you can't beat it buy it but that's against my HYP guidelines and with a mature portfolio diversified over more than adozen sectors 20 or more shares isn't there always something to top up or even buy that isn't CTY?

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Re: Greene King RNS

#129993

Postby mike » April 4th, 2018, 4:57 pm

And a couple of some upcoming dates for the diary, one next Thursday.

Ahead of its preliminary results on 28th June, Greene King will be announcing a pre-close trading statement for the 49 weeks to 8th April 2018 on Thursday 12th April 2018.

https://www.investegate.co.uk/greene-king-plc--gnk-/rns/notice-of-pre-close-trading-statement/201804041617028527J/

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Re: Greene King RNS

#130004

Postby Arborbridge » April 4th, 2018, 5:39 pm

kempiejon wrote:CTY as a one stop show for high yield ftse100 shopping has a place, if you can't beat it buy it but that's against my HYP guidelines and with a mature portfolio diversified over more than adozen sectors 20 or more shares isn't there always something to top up or even buy that isn't CTY?


As you say O/T, but since you mention it.... You are probably correct: there is usually something to top up. The problem comes when people look at yields below that level (or maybe, even equal to it). One has to think hard to build a case for buying a single share offering far lower yield compared with an IT in which the risk is shared betwixt many share holdings.

Like you, I aim to buy around about my average yield, though I have a nominal tolerance down to 90% of that. My average is forecast yield is 5.3%

Arb.

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Re: Greene King RNS

#131726

Postby maximan » April 12th, 2018, 5:17 pm


bjmarren
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Re: Greene King RNS

#132426

Postby bjmarren » April 16th, 2018, 7:30 am

Hi All,

Well, I sold my holdings in Greene King on the 27th March (see my post on this thread) after stating that I'd lost faith in the management and predicting further falls in like-for-like sales and a possible cut in the dividend, despite more knowledgeable posters here suggesting that I was being rash in my decision. The trading statement certainly pleased the market, despite stating a predicted fall in overall profits, and certainly perhaps demonstrating that the price fall had been overdone, together with a commitment to the company dividend policy. This has been an expensive lesson for me but one that I have certainly learnt from. Whilst paper price falls can be worrying, particularly for a relatively novice Hyper, like myself, I shall in future focus on why I invested in the company in the first place, the dividend and try to ignore the background noises on the market. Well, that's the plan anyway.

Cheers,

Brendan

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Re: Greene King RNS

#132431

Postby maximan » April 16th, 2018, 7:58 am

Hi Brendan

Sorry to hear it turned into an expensive lesson for you. I must confess I nearly pressed the sell button several times especially after Carillion.

On a happier note I noticed the short position on the Castellain site nudged down a little last week to 9.9% from 10.1%.

Good luck with your HYP.

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Re: Greene King RNS

#132500

Postby absolutezero » April 16th, 2018, 11:20 am

I was sitting on a 32% loss with GNK.

Doing nothing is not an option. (Let's not get into that again. I manage my HYP with capital also in mind.)

I was faces with a sell or top up decision. Saw nothing fundamentally wrong with the company so I topped up before I went to China last week.
My 32% loss is now a 7% loss. Still a loss, but not in the stop loss area any more.

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Re: Greene King RNS

#132508

Postby Itsallaguess » April 16th, 2018, 11:59 am

absolutezero wrote:
I was sitting on a 32% loss with GNK.

Doing nothing is not an option. (Let's not get into that again. I manage my HYP with capital also in mind.)

I was faced with a sell or top up decision. Saw nothing fundamentally wrong with the company so I topped up before I went to China last week.
My 32% loss is now a 7% loss. Still a loss, but not in the stop loss area any more.


I've topped up some shares myself in the past where I've seen continued value in doing so, but I'm not sure how relevant moving from a 32% loss to a 7% loss is in justifying such a move....

If you top-up enough extra capital, you can get that loss even lower with a fair wind, but it might not actually have anything to do with a recovering share-price, or better fortunes for the company - it might simply be a function of the size of extra capital you might have deployed, compared to the original capital invested....

After all, often what we're doing with top-ups when share-price drops are involved, is bringing the overall average buying-price down towards the second top-up price, and merging the original capital loss into a new capital injection at the new share price.

This in itself will change the 'overall percentage capital loss' all on it's own - without any actual recovery in the share price from the price you've injected the second lot of capital into.

This isn't at all trying to suggest that you've been wrong to do this, but it's just to point out that simply stating an improved movement in a capital-loss position doesn't in itself justify the top-up. It's almost guaranteed to do that even if the share-price doesn't move from the new top-up price....

This is sometimes an area where top-ups can be a dangerous thing, especially following large drops in the originally-invested price. If we get too emotionally tied to a share, we can sometimes allow such mathematical improvements to convince ourselves that it's the right thing to do, and place too much emphasis on trying to 'hide' a loss on our portfolio's that we're a little too keen to bring down a bit....

I've done this myself in the past, and whilst I've lived to regret it, I do try to point out the dangers of it unless there's also a really convincing reason to top-up above and beyond simply bringing down these types of percentage-loss figures.

Cheers,

Itsallaguess (owns GNK...)

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Re: Greene King RNS

#132521

Postby absolutezero » April 16th, 2018, 12:57 pm

Itsallaguess wrote:
absolutezero wrote:
I was sitting on a 32% loss with GNK.

Doing nothing is not an option. (Let's not get into that again. I manage my HYP with capital also in mind.)

I was faced with a sell or top up decision. Saw nothing fundamentally wrong with the company so I topped up before I went to China last week.
My 32% loss is now a 7% loss. Still a loss, but not in the stop loss area any more.


I've topped up some shares myself in the past where I've seen continued value in doing so, but I'm not sure how relevant moving from a 32% loss to a 7% loss is in justifying such a move....

If you top-up enough extra capital, you can get that loss even lower with a fair wind, but it might not actually have anything to do with a recovering share-price, or better fortunes for the company - it might simply be a function of the size of extra capital you might have deployed, compared to the original capital invested....

After all, often what we're doing with top-ups when share-price drops are involved, is bringing the overall average buying-price down towards the second top-up price, and merging the original capital loss into a new capital injection at the new share price.

This in itself will change the 'overall percentage capital loss' all on it's own - without any actual recovery in the share price from the price you've injected the second lot of capital into.

This isn't at all trying to suggest that you've been wrong to do this, but it's just to point out that simply stating an improved movement in a capital-loss position doesn't in itself justify the top-up. It's almost guaranteed to do that even if the share-price doesn't move from the new top-up price....

This is sometimes an area where top-ups can be a dangerous thing, especially following large drops in the originally-invested price. If we get too emotionally tied to a share, we can sometimes allow such mathematical improvements to convince ourselves that it's the right thing to do, and place too much emphasis on trying to 'hide' a loss on our portfolio's that we're a little too keen to bring down a bit....

I've done this myself in the past, and whilst I've lived to regret it, I do try to point out the dangers of it unless there's also a really convincing reason to top-up above and beyond simply bringing down these types of percentage-loss figures.

Cheers,

Itsallaguess (owns GNK...)

I hear what you're saying here with the maths.
But I had a definite plan in mind with this.
If the loss got back to around 20% it was a definite sell. No questions asked. Good money after bad and all that.
Like I said, I saw nothing fundamentally wrong with the company.

GNK is a remnant before I discovered the stupidity of never selling. Basically, avoiding any portfolio management.
I now have a strict 20% stop loss. The exception being if the FTSE All Share Index also falls.
I.E. Company specific falls trigger stop losses.

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Re: Greene King RNS

#132568

Postby westmoreland » April 16th, 2018, 3:25 pm

decent uptick but i'm resolutely trying to stick to my resolution to only buy shares in companies that i'd be happy to lock away for 5-10 years.

GNK may be undervalued but it operates in a super competitive, low return sector. ultimately it is unlikely to create value for shareholders over the long term. that's not to disparage their management, they are just handicapped by the industry they operate in.

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Re: Greene King RNS

#132607

Postby Walrus » April 16th, 2018, 5:03 pm

westmoreland wrote:decent uptick but i'm resolutely trying to stick to my resolution to only buy shares in companies that i'd be happy to lock away for 5-10 years.

GNK may be undervalued but it operates in a super competitive, low return sector. ultimately it is unlikely to create value for shareholders over the long term. that's not to disparage their management, they are just handicapped by the industry they operate in.


It just goes to show how different views make the market. I'm a holder, very happy to hold, confident the pub business will long outlast me, and actually at current valuations fairly bullish to the upside. And it gives me a nice 20 percent discount on my family meals which is a decent saving :)

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Re: Greene King RNS

#132614

Postby Arborbridge » April 16th, 2018, 5:51 pm

Interesting comments, showing a range of views as one might expect. You win some, and lose some, and whether it's win or lose sometimes depends on exactly which time scale one is looking at. And above all, I keeping thinking that the fascinating thing about investment is that it is a never ending story with many twists and turns.

I see GNK shorting has turned from the peak a little: only marginally lower however at 9.7%, so some shorters are still thinking there's more to come.

Arb.


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