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Centrica and SSE

Practical discussions about equity High-Yield Portfolios (HYP) for income
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spiderbill
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Centrica and SSE

#85654

Postby spiderbill » October 4th, 2017, 12:24 pm

Centrica and SSE fall on government energy price caps

https://www.bloomberg.com/news/articles/2017-10-04/centrica-falls-most-since-june-as-may-targets-energy-price-cap

Thank heavens my holding of Centrica is small, cos it's now 51% down on capital value. SSE merely 10% down.

Spiderbill

Arborbridge
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Re: Centrica and SSE

#85657

Postby Arborbridge » October 4th, 2017, 12:33 pm

I doubt whether price caps will be a tremendous problem for us - the government will have to come to a reasonable compromise otherwise CNA and SSE will not be able to deliver what is required by society.
No, the bigger worry is the threat of a nationalisation robbery from Labour.


Arb.

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Re: Centrica and SSE

#85660

Postby idpickering » October 4th, 2017, 12:38 pm

spiderbill wrote:Centrica and SSE fall on government energy price caps

https://www.bloomberg.com/news/articles/2017-10-04/centrica-falls-most-since-june-as-may-targets-energy-price-cap

Thank heavens my holding of Centrica is small, cos it's now 51% down on capital value. SSE merely 10% down.

Spiderbill



Thanks for that spider. I was wondering? It seems that CNA are totally unreliable as a HYP share. OK this matter is out of their control, but the stock's performance is still disappointing nonetheless. They are my largest bet in the utility sector, and worst performer. Having said all that, if I had the cash available I would probably by the stock today. But as a HYPer I'm going to accept the fact that I can do nothing about government policy, and with the warm glow of the fact that they are only one of twenty eight holdings in my HYP, I'm going to adopt strategic ignorance on this, and do exactly that.

Ian.

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Re: Centrica and SSE

#85667

Postby moorfield » October 4th, 2017, 12:47 pm

spiderbill wrote:Centrica and SSE fall on government energy price caps

https://www.bloomberg.com/news/articles/2017-10-04/centrica-falls-most-since-june-as-may-targets-energy-price-cap

Thank heavens my holding of Centrica is small, cos it's now 51% down on capital value. SSE merely 10% down.

Spiderbill


... and Theresa May has just announced the draft legislation in her speech (in a very croaky voice). Red Ed must be spinning.

I've tried not to be influenced by politics and smell tests as such, but with my utilities (CNA, SSE, UU.) collectively accounting for 15%, 17.8% capital and income respectively of my HYP - within my own limits - I think it's time to pass on further top ups for the foreseeable future. SSE and CNA's dividends are now starting to look boxed in by both political parties.

[Edit: but I am investing now for hamburgers in 15-20 years time, so there is the counter argument that we might now anticipate hamburgers are getting cheaper.... :? ]

idpickering
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Re: Centrica and SSE

#85673

Postby idpickering » October 4th, 2017, 12:56 pm

moorfield wrote:
[Edit: but I am investing now for hamburgers in 15-20 years time, so there is the counter argument that we might now anticipate hamburgers are getting cheaper.... :? ]


What's the yield on hamburgers currently? :lol:

Julian
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Re: Centrica and SSE

#85676

Postby Julian » October 4th, 2017, 1:01 pm

idpickering wrote:
moorfield wrote:
[Edit: but I am investing now for hamburgers in 15-20 years time, so there is the counter argument that we might now anticipate hamburgers are getting cheaper.... :? ]


What's the yield on hamburgers currently? :lol:


I'm not sure about the yield but if you eat enough of them you'll end up very well covered. :)

- Julian

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Re: Centrica and SSE

#85679

Postby Arborbridge » October 4th, 2017, 1:29 pm

It seems that CNA are totally unreliable as a HYP share.


As Ian wrote above - but how times change! Until 2014 CNA was regarded as a reliable share, indeed it was one of the most widely owned amongst amateur investors - the one which everyone should have.

Is this one story which hints that LTBH is dead as some believe?

Political intereference, unfortunately, can never be ruled out. We just have to live with it - possibly even in sectors which are not obvious candidates for intereference.

It's beginning to look like revolving doors - how many companies have taken their turn at going through the door marked "failure"? How many have eventually walked back through the door "healed" while some other company walks out?

I'm just beginning to feel I've seen it all before.

Arb.

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Re: Centrica and SSE

#85682

Postby moorfield » October 4th, 2017, 1:31 pm

idpickering wrote:
moorfield wrote:
[Edit: but I am investing now for hamburgers in 15-20 years time, so there is the counter argument that we might now anticipate hamburgers are getting cheaper.... :? ]


What's the yield on hamburgers currently? :lol:


Well both the "burger king" and "mcdonalds" varieties (I'll let you decide which is which Ian ;) ) yield 6.7% as I type.
Last edited by moorfield on October 4th, 2017, 1:35 pm, edited 1 time in total.

BreakoutBoy
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Re: Centrica and SSE

#85683

Postby BreakoutBoy » October 4th, 2017, 1:34 pm

Just looked at Centrica for the first time ever.

Looks amazing value, totally unloved. Low PE, high yield, a product that everyone has to buy, and a market that is poised to need a lot more of the company's output.

It looks like an open goal: The politicians are going to talk tough but cannot actually cripple the companies without a response that would impair GDP significantly (GDP is linked to electrical use with a very high degree of correlation, I highly doubt May wants brownouts or supply disruptions, especially given the increasingly precarious state of the power grid at present with all the renewable loads ....)

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Re: Centrica and SSE

#85684

Postby moorfield » October 4th, 2017, 1:39 pm

BreakoutBoy wrote:Just looked at Centrica for the first time ever.

Looks amazing value, totally unloved. Low PE, high yield, a product that everyone has to buy, and a market that is poised to need a lot more of the company's output.

It looks like an open goal: The politicians are going to talk tough but cannot actually cripple the companies without a response that would impair GDP significantly (GDP is linked to electrical use with a very high degree of correlation, I highly doubt May wants brownouts or supply disruptions, especially given the increasingly precarious state of the power grid at present with all the renewable loads ....)


And to correct my "Red Ed" comment he offered a price freeze, rather than a cap so the Tories have given themselves a little wiggle room.

Maybe a wafer-thin top up then monsieur. :?

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Re: Centrica and SSE

#85687

Postby BreakoutBoy » October 4th, 2017, 1:49 pm

If anything I think the company has been under-distributing as its dividend cover has been >2 for 4 of the last 5 years. Lots of debt but the interest cover is nearly 7x based on 2016 results so not a big worry, provided earnings stay stable.

I should imagine destabilizing the nations power supply will be the last thing a Conservative government will want to do.Labour are another matter, their nationalization plans are barking mad and guarantee a recession as the grid supply could be allowed to fail by the expropriated parties. I would hope when the National Grid guys sit down and explain it to Corbyn with words of one syllable or less, he may relent.
Moderator Message:
edited to remove remarks that are not applicable to this forum. Raptor

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Re: Centrica and SSE

#85701

Postby Gengulphus » October 4th, 2017, 2:31 pm

spiderbill wrote:Thank heavens my holding of Centrica is small, cos it's now 51% down on capital value. SSE merely 10% down.

Commiserations - but people should note that this is a comment on your personal investment fortunes and how unfortunate your past buying decisions have been, not on the HYP merits or otherwise of the two shares.

My own capital value figures are quite different at 17% down on Centrica and 18% up on SSE, in both cases averaged over purchases since 2005 in the non-tax-sheltered portion of my HYP (*), which include significant top-ups in the last couple of years. And other people's figures will mostly be quite different again - and my and their figures will all be just as useless for decisions about the current HYP merits of the two shares... Good thing too, otherwise how on earth would one decide whose figures to use in one's purchase decisions?!

(*) Purchases before 2005 are complicated by some CGT-planning manoeuvres, and also by some of the SSE shares deriving from purchases of Scottish Hydro-Electric made in the early 1990s, on privatisation and shortly afterwards - purchases that I cannot pretend were HYP purchases! And I'm currently re-organising my records of the tax-sheltered part of my HYP and don't have ready access to capital performance figures for it - but that won't make much difference, as it contains no SSE shares and only about 3.5% of my CNA shares.

Gengulphus

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Re: Centrica and SSE

#85702

Postby moorfield » October 4th, 2017, 2:40 pm

BreakoutBoy wrote:If anything I think the company has been under-distributing as its dividend cover has been >2 for 4 of the last 5 years.


Your analysis may be distorted by that £700m equity raising CNA did last year, IIRC institutional investors took it all at 200p with Sid not given the option of being diluted by a rights issue.

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Re: Centrica and SSE

#85704

Postby 77ss » October 4th, 2017, 2:47 pm

Arborbridge wrote:....
No, the bigger worry is the threat of a nationalisation robbery from Labour...


Arb.


Yawn!

Robbery? Do you seriously think that this is a big worry?

Want to focus on political threats? Focus on Brexit Blight. Far more reaching than any proposals by a party that may not even be elected.

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Re: Centrica and SSE

#85738

Postby Dod1010 » October 4th, 2017, 4:31 pm

BreakoutBoy wrote:Just looked at Centrica for the first time ever.

Looks amazing value, totally unloved. Low PE, high yield, a product that everyone has to buy, and a market that is poised to need a lot more of the company's output.

It looks like an open goal: The politicians are going to talk tough but cannot actually cripple the companies without a response that would impair GDP significantly (GDP is linked to electrical use with a very high degree of correlation, I highly doubt May wants brownouts or supply disruptions, especially given the increasingly precarious state of the power grid at present with all the renewable loads ....)


Centrica is a share I held but no longer after its stumble. This is a well researched share and if it were such an open goal I would not have thought it would be not be open for very long. I would be very cautious and much prefer SSE. SSE is also very capable of fighting its corner with any price cap, and of course they have got many more strings to their bow than simply selling to retail customers (So of course does Centrica)

I am much more concerned about Corbyn, not just for the utilities but the general mayhem in the stockmarket which will ensue if he is ever elected PM.

Dod

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Re: Centrica and SSE

#85841

Postby Gengulphus » October 4th, 2017, 10:37 pm

Arborbridge wrote:Is this one story which hints that LTBH is dead as some believe?

Dunno - but I do know that's a topic for a strategies board, not this one...

Gengulphus

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Re: Centrica and SSE

#85855

Postby Wizard » October 4th, 2017, 11:43 pm

Gengulphus wrote:
Arborbridge wrote:Is this one story which hints that LTBH is dead as some believe?

Dunno - but I do know that's a topic for a strategies board, not this one...

Gengulphus

Really? The Board Use thread had 126 replies debating what is on and off topic for this board, but after that thread was closed there was no follow up clarification. There was a lot of debate about the extent to which selling was or was not a valid topic for this board, but no conclusion and no definitive statement. So I struggle to see how anyone can know the answer.

Terry.

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Re: Centrica and SSE

#85866

Postby vrdiver » October 5th, 2017, 1:24 am

From DividendData.co.uk:
%Yield, 5 and 10 year dividend CAGR

EPIC    Yield    5YR    10YR 
CNA 6.69 -5.27 1.74
SSE 6.68 2.65 5.20


So, even before Theresa's speech, the yields looked high for a regulator-constrained, predictable business, whilst the CAGR values are deteriorating. Suggests to me that Mr Market has already priced in a bit of political turbulence whilst the regulator / management have been frugal with increases to shareholders

With electric powered cars being politically favoured, as well as more and more "stuff" that needs charging, not to mention older power stations needing to be replaced by newer, cleaner ones, I'm not sure where the government are going to get their price caps from without crucifying either the shareholders or investment in the infrastructure.

To further complicate the issue, EDF has a contract (for Hinckly Point C) for £92.50 per MWh of electricity (vs current wholesale price of about £42). That's supposed to add £10pa to household bills for the first 35 years of output (£10 in 2012, rising by CPI)

I'm wondering if the price "cap" will be devolved to the regulator and set as some function of RPI, so essentially business as usual?

It would take a lot more analysis to figure out what the real story is, and then politics will change the game again.

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Re: Centrica and SSE

#85871

Postby BreakoutBoy » October 5th, 2017, 2:43 am

Reading further about what was said in this speech, it is clearly a piece of political posturing, without any signifiers of real intent to change: It was clearly designed to sound like action without actually acting, to generate headlines without actually changing Ofgem at all.

Actions speak louder than words, and I believe we will see play-moves towards a cap, without actually imposing a meaningful change.

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Re: Centrica and SSE

#85886

Postby Arborbridge » October 5th, 2017, 8:03 am

Gengulphus wrote:
Arborbridge wrote:Is this one story which hints that LTBH is dead as some believe?

Dunno - but I do know that's a topic for a strategies board, not this one...

Gengulphus


Quite agree, Gengulphus. It was a one-line comment, not an invitation to open a whole new discussion - and I hope it won't!


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