The Lemon Fool

Sector thoroughly devastated. Looking at one-month figures in my own portfolio:
SSPG (travel catering): down 76%
WTB (hotels): down 54%
SGC (public transport) : down 61%

Not surprising when their businesses have been largely closed down. But are there any counterexamples that have bucked the trend? And is anyone tempted yet by their inner vulture to go bargain-hunting in the sector?

UncleEbenezer wrote: And is anyone tempted yet by their inner vulture to go bargain-hunting in the sector?

Not me

John

SGC (public transport) : down 61%

Ouch! I hadn't looked at that one again since I sold it @ 159p last spring. And now it's bobbing around 56p?

But SGC is an odd company, and I'm not sure that it's properly understood, because there have been some big price anomalies along the way. I picked up a wodge of it in 2002 for 22p, after its Hong Kong bus operation had come right off the rails. The drop in market cap had vastly exceeded the total write-off costs of the HK enterprise! - which I could only see as a vote against Souter and Gloag, who not everybody liked. (ahem, DYOR.)

I bought a load more at 122p, but the screw-ups in North American buses and then Virgin trains seemed to confirm the suspicions that the dynamic duo were out of their league. And so to the coronavirus, which has trashed them. Actually, though, I suspect that the company may be worth a fair bit more than the current valuation. It's a company that everybody loves to hate. But the divis have always been nice.

BJ

UncleEbenezer wrote:Sector thoroughly devastated. Looking at one-month figures in my own portfolio:
SSPG (travel catering): down 76%
WTB (hotels): down 54%
SGC (public transport) : down 61%

Not surprising when their businesses have been largely closed down. But are there any counterexamples that have bucked the trend? And is anyone tempted yet by their inner vulture to go bargain-hunting in the sector?

Have you not got any airlines in your portfolio?

Dod

bungeejumper wrote:

SGC (public transport) : down 61%

Ouch! I hadn't looked at that one again since I sold it @ 159p last spring. And now it's bobbing around 56p?

Well, just checking the closest peers, GOG, NEX and FGP are all in the 80% ballpark. My SGC is outperforming its sector.

But SGC is an odd company, and I'm not sure that it's properly understood,
BJ

That I can well believe. I've been impressed by some of what they've done in our area.

Dod101 wrote:Have you not got any airlines in your portfolio?

Not b***** likely!

Update from WTB: https://www.investegate.co.uk/article.a ... 440424150H

It is possible that closure of our hotels and restaurants (other than those which will stay open to support key workers), as a result of the Government's instructions, may amount to a technical event of default under our banking arrangements and certain other financial obligations of the Group.

Hmmm, does that mean they could be declared bankrupt and equity wiped out?

UncleEbenezer wrote:Update from WTB: https://www.investegate.co.uk/article.a ... 440424150H

It is possible that closure of our hotels and restaurants (other than those which will stay open to support key workers), as a result of the Government's instructions, may amount to a technical event of default under our banking arrangements and certain other financial obligations of the Group.

Hmmm, does that mean they could be declared bankrupt and equity wiped out?

A default doesn't automatically lead to bankruptcy, let alone a technical one, so unlikely as it stands.

As part of their banking relationship they will have agreed to provide management information, and certain KPIs. This allows the bank to monitor its exposure and get an early "headwind" of any potential troubles, and is normal. One of these may have been occupancy rates, for instance, with the bank requiring satisfaction these exceed a certain level. It isn't possible, as an outsider, to know what these are.

It would be in the bank's interest to keep such companies "alive" and generating cash flows if possible, so unlikely to be pushing at this stage for any meaningful change. The bank's position ultimately in getting its loans repaid rely on it either running the business, or selling it, neither look particularly attractive to a bank right now I would suggest.

WTB to raise money in a rights issue. Discounted to 1500p. I think I'll bite: mine is only a small holding, and as a sector-leader they should still offer longer-term prospects.

That compares to the near-5000p in the recent share buyback following the Costa disposal - when I (happily in retrospect) unloaded the bulk of my holding and banked a healthy profit.

There are many opportunities in this sector if you have some knowledge of how price action works, have the time to watch prices and are able to move quickly. Airlines e.g. are struggling, but the potential of flights restarting has been enough to give some nice rallies from lows.

Eazyjet was 446, now 574 in 5 days.

IAG was at 159.30 now 206 in 5 days.

These and similar opportunities are mostly news driven and although the current macro picture is ugly for airlines, save for much lower fuel bills, equity markets look ahead and any change in government policy/regulations both domestic and international can produce significant changes in prices.

Regards,

odysseus2000 wrote:There are many opportunities in this sector if you have some knowledge of how price action works, have the time to watch prices and are able to move quickly. Airlines e.g. are struggling, but the potential of flights restarting has been enough to give some nice rallies from lows.

Eazyjet was 446, now 574 in 5 days.

IAG was at 159.30 now 206 in 5 days.

These and similar opportunities are mostly news driven and although the current macro picture is ugly for airlines, save for much lower fuel bills, equity markets look ahead and any change in government policy/regulations both domestic and international can produce significant changes in prices.

BA currently plans to operate about 45% of its normal schedule in July, and 70% in the 4th quarter.

That said they do not expect to have 2019 passenger numbers again until 2023. More flights but with lower occupancy seems to be the trend. Then again, if people start taking flights and find them and airports pleasantly uncrowded, that might juice demand.

Airlines make most of their profits from the folks in the front of the plane who pay premium fares. The problem there is that the quality of that product must decline. For instance Emirates won't be operating their onboard shower on their 100-plus A380s. They are not serving Dom Perignon any more. No onboard bar. Limited turndown service. Why will I pay full-price for First on Emirates if it is a shadow of its former self?

Right now in BA First there is no alcohol at all. Meal is served on a tray like you were in Economy. What you are now paying for in First is that precious distance from other passengers, and maybe that is worth a lot to flyers?

If this happens it will delay the recovery in the Travel and Leisure sector:

https://www.thesun.co.uk/news/11688142/ ... rce=pushly

It was interesting that in the last PMQ one of the questions concerned a Scottish minister who had travelled from Scotland to be at PMQ. Boris refused to say anything bad about him. If this legislation is enacted, as I understand it, a visitor from Scotland, Wales or Northern Ireland would have to quarantine for 14 days. However, we can probably expect exceptions will be granted.

Regards,

odysseus2000 wrote: If this legislation is enacted, as I understand it, a visitor from Scotland, Wales or Northern Ireland would have to quarantine for 14 days.

It's arrivals from outside the Common Travel Area which comprises the whole of the UK plus the Republic of Ireland, the Channel Isles and the Isle of Man.

Alaric wrote:

odysseus2000 wrote: If this legislation is enacted, as I understand it, a visitor from Scotland, Wales or Northern Ireland would have to quarantine for 14 days.

It's arrivals from outside the Common Travel Area which comprises the whole of the UK plus the Republic of Ireland, the Channel Isles and the Isle of Man.

The obvious work-around is to fly from, say, New York to Dublin, and then either fly from Dublin to London or take the ferry to Holyhead and then the train.

Annoying, but not as annoying as 14 days in quarantine. Good business opportunity for Aer Lingus?

As of now one is actively discouraged from visiting either Wales or Scotland:

https://www.visitwales.com/coronavirus

https://www.visitscotland.com

Friends were just refused a booking in Wales as the hotel had been told by the Welsh assembly to forbid any bookings from anywhere beyond Wales.

The common travel area is a concept from pre-C19 and for the moment is not operational.

How the proposed 14 day quarantine will work is far from clear as to whether the Home Secretary can overrule the Welsh and Scottish assemblies.

Regards,

https://www.investegate.co.uk/article.a ... 700093834M

Today's RNS, NEX and SGC confirm merger talks on terms that sound like NEX eating SGC. Is sector consolidation happening as fallout from covid-chaos, or was the sector already in so much trouble this was on the cards anyway? And might this raise "monopoly" concerns?

Definitely not one of my better investments (the other stocks I mentioned in the OP here are back in comfortable profit, albeit knocked a long way back from pre-covid times).