The Lemon Fool

Hi OLTB,
Are you ok with the "health report" in simply wall Street?
It reckons cna is undervalued at 191p. However, I'm nervous about the debt levels.

Interestingly, the SSE Snowflake looks healthier but it is reported as overvalued.

I hold both cna (1%) and I had a small top up to 2.5% of SSE today.
Monabri


Obviously before sp drop today.

monabri wrote:Hi OLTB,
Are you ok with the "health report" in simply wall Street?
It reckons cna is undervalued at 191p. However, I'm nervous about the debt levels.

Interestingly, the SSE Snowflake looks healthier but it is reported as overvalued.

I hold both cna (1%) and I had a small top up to 2.5% of SSE today.
Monabri


Obviously before sp drop today.

Hi Monabri

The company analysis model here from Simplywall.sthttps://github.com/SimplyWallSt/Compa ... h-flow-dcf seems very comprehensive and has a very detailed explanation of it's methodology. I'm not too sure how up to date the information is though and how often it is updated so this is where some anomalies may be?

The CNA screen does say that Centrica's level of debt is high though!

Cheers, OLTB.

I don't know how reliable SWS is. I was checking out GFRD and RB and I noticed some unusual data. SWS presents a graph of debt and for both RB and GFRD there is a significant increase of debt around Dec last year ( graph titled "historical debt",). Then we look at the same graph for CNA. It also shows significant debt.

The timing and shape of the ramp up of debt with RB and GFRD concerned me and I then read across this concern to CNA.

GFRD debt went from £159m to £760m in 3 months after being reasonably flat
RB debt went from £2389m to £17227m in the same 3 months as GFRD...the increases starting and finishing on the same daysl

I've emailed SWS to check out the RB and GFRD data. One other thing, national grid causes SWS a problem ( confirmed by SWS). It recognises the stock but the value is zero independent of the number of shares you have!

vrdriver reminded me that RB bought Mead Johnson Nutrition (MJN) for ~£17b so that is the probable explanation for Reckitt. ("+1" vrdriver)

monabri wrote: One other thing, national grid causes SWS a problem ( confirmed by SWS). It recognises the stock but the value is zero independent of the number of shares you have!

I wasn't aware of that (I don't hold National Grid) and it's a worry that there is an issue as that leads to concern that other companies may also have 'issues' in the data. I suppose like all information sources, it is the start of perhaps considering a stock, but that other information sources should be considered to ensure you have as rounded a view as possible.

Also, I have picked up from other posters here that it is typical for a utility company to have large debt figures so perhaps a percentage check against the other utility companies debt figures may soften your concern?

The utility companies I hold are SSE (Energy) and United Utilities (Water).

Cheers, OLTB.

Centrica PLC on Monday said Group Chief Executive Iain Conn bought 100,000 shares in the company for 173.10 pence each for a total of GBP173,100.

http://www.londonstockexchange.com/exch ... 54000.html

Well British Gas have today called to cancel our annnual boiler service due tomorrow and booked 2 months ago. Apparently they are cancelling all appointments because they are overloaded with emergency callouts from people switching their central heating on. Next available service appointment now first week of December.

FFS these volumes aren't difficult to predict are they? The pilots and rostas shambles springs to mind.

I'm very glad I "pickered" earlier this week and topped up VOD instead of CNA.

Difficult to know, and to separate out the business performance from political pressures upon it. The yield certainly looks tempting. Most of my CNA was bought above £3 prior to the dividend cut and equity issue, I will probably top up a slice in the new year to average down. I'm sure the British Gas brand will still be around in 15-20 years time, but in who's corporate clothes I wonder...

moorfield wrote:I'm sure the British Gas brand will still be around in 15-20 years time, but in who's corporate clothes I wonder...

'Corporate clothes' might not be the challenge. If Corbyn gets in there could be renationalisation of utilities, probably why the sector's div yields are looking pretty tasty for now.

FredBloggs wrote:A real bad day at Centrica, it seems. Looks likely to head sub 100p to me. Down > 17% and counting at 135p. The reason? Here -
https://www.theguardian.com/business/2017/nov/23/centrica-shares-dive-after-british-gas-loses-823000-customers

Thanks for highlighting FB.

I've been "pickering" about CNA for a while, but it seems we're into falling knife territory now ...

FredBloggs wrote:My response is that if a company is losing customers at the rate British Gas seems to be doing, then the company is doomed until it turns that round.

Other than being unexciting, what is wrong with supplying gas and electricity using the filling station model? You charge a competitive market price and that's it. No contracts or complex price locks. If you can trust your supplier to always offer a decent deal you retain customers. It's the Aldi and Lidl model.

FredBloggs wrote:

Alaric wrote:

FredBloggs wrote:My response is that if a company is losing customers at the rate British Gas seems to be doing, then the company is doomed until it turns that round.

Other than being unexciting, what is wrong with supplying gas and electricity using the filling station model? You charge a competitive market price and that's it. No contracts or complex price locks. If you can trust your supplier to always offer a decent deal you retain customers. It's the Aldi and Lidl model.

Nothing wrong at all. But if CNA are going to continue to lose hundreds or even tens of thousands of customers, it's hard to see where the business is headed?

Correct me if I am wrong but my understanding is that Centrica had a very large customer base, presumably most of whom were on standard rates which were presumably profitable until the Govt came along with their energy cap, which makes those rates untenable. Meanwhile other suppliers have pushed 1 year contracts on more competitive rates, using the car insurance model where if you don't switch provider after 1 year (or 18 months in some cases) you will lose out by being put on an uncompetitive deal. I don't understand why Centrica with its colossal buying power cannot seem to compete in this market.

Meanwhile I been resuming my yearly search for a new energy supplier, and my most competitive deal comes from Bulb, who I have never heard of but as well as offering me the most competitive rates, also brags about supplying me 100% renewable electricity. From what I read in chat rooms, my impression is that Bulb is picking up customers all around. I don't understand how they can do the business, yet Centrica can't.

I am appalled that my holding in Centrica has dropped like it has. The company seems to have lost all ability of running a profitable business for its shareholders. I should have sold out when I learnt that Haythornthwaite was in charge.

FredBloggs wrote:

Nimrod103 wrote:Correct me if I am wrong but my understanding is that Centrica had a very large customer base, presumably most of whom were on standard rates which were presumably profitable until the Govt came along with their energy cap, which makes those rates untenable. Meanwhile other suppliers have pushed 1 year contracts on more competitive rates, using the car insurance model where if you don't switch provider after 1 year (or 18 months in some cases) you will lose out by being put on an uncompetitive deal. I don't understand why Centrica with its colossal buying power cannot seem to compete in this market.

Meanwhile I been resuming my yearly search for a new energy supplier, and my most competitive deal comes from Bulb, who I have never heard of but as well as offering me the most competitive rates, also brags about supplying me 100% renewable electricity. From what I read in chat rooms, my impression is that Bulb is picking up customers all around. I don't understand how they can do the business, yet Centrica can't.

I am appalled that my holding in Centrica has dropped like it has. The company seems to have lost all ability of running a profitable business for its shareholders. I should have sold out when I learnt that Haythornthwaite was in charge.

Not only that. It's actually much worse. Centrica is a vertically integrated business. It has it's own gas production assets so it is in control from the sea bed to the end user's boiler. It also has it's own CCGT power stations so it's generating it's own electricity too. If that business can't compete against a "Johnny come lately" in the energy business, it really is a dodo.

I assume Centrica (being biased towards gas energy) is being trashed by Govt dictat to push more subsidized renewable energy into the market?
How do you rate Centrica as a merger/takeover target?

FredBloggs wrote:

Nimrod103 wrote:

FredBloggs wrote:Not only that. It's actually much worse. Centrica is a vertically integrated business. It has it's own gas production assets so it is in control from the sea bed to the end user's boiler. It also has it's own CCGT power stations so it's generating it's own electricity too. If that business can't compete against a "Johnny come lately" in the energy business, it really is a dodo.

I assume Centrica (being biased towards gas energy) is being trashed by Govt dictat to push more subsidized renewable energy into the market?
How do you rate Centrica as a merger/takeover target?

A more attractive break up prospect perhaps? There's a whole bunch of assets and business streams in there that I'm guessing are close to bargain basement territory now? Perhaps the domestic business (per SSE recently) is the least attractive part of the company. It's retail customers seem to think so going by recent evidence.

A friend of mine is keen on a Centrica merger with EDF's UK business. I have no idea whether it might make sense.

FredBloggs wrote:

Nimrod103 wrote:

FredBloggs wrote:A more attractive break up prospect perhaps? There's a whole bunch of assets and business streams in there that I'm guessing are close to bargain basement territory now? Perhaps the domestic business (per SSE recently) is the least attractive part of the company. It's retail customers seem to think so going by recent evidence.

A friend of mine is keen on a Centrica merger with EDF's UK business. I have no idea whether it might make sense.

Doubtful. EDF has way too much to chew on in it's own backyard, it's only being kept afloat by the French government. Any private company would have gone bust years ago. Even worse, EDF was forced to take ownership of the bust Areva nuclear business. In any case, Centrica bailed out of it's stake in the Moorside nuclear project, which actually was a very wise decision in hindsight.

I'm sure you are right. The whole energy supply business in the UK seems to be completely, unbelievably, perhaps irretrievably FU, and mainly by Govt dictat. I originally invested a small sum in Centrica because I thought after Millibands demise, price caps would be a thing of the past, and the Govt would understand how crucial a healthy low cost energy supply business was to UK industry and domestic consumers. I was clearly wrong. I don't think they care, as long as their renewable targets are met.

Many years ago we had gas from British Gas and electricity from SEEboard, which was taken over by EDF. I did my research on dual fuel prices and found that EDF offered the best rates. EDF keep updating their fixed rates, which you can leave at any time if you can find a better deal and until recently they told you about any such deals.

EDF also tell you that your electricity will come from sustainable sources, meaning nuclear. I don't know how British Gas can offer gas at higher prices when they own the sources. One would expect it to be the other way round, but maybe their costs are higher than the wholesale market.

British Gas also have a lot of their customers on maintenance contracts, which are dubious value for money. Modern gas boilers have little or nothing that needs maintaining, and it seems to be a common experience that trouble arises just after an annual "service". We have only ever had ours attended to by the makers on two occasions, the last over 15 years ago. Our local plumber replaced the 3-way valve when it failed.

I can understand why they are haemorrhaging customers.

TJH

There's a lot of difference between 99p and 102p though...

FredBloggs wrote:3% (Or thereabouts).

In theory, yes. But in practice comes the darkness...

moorfield wrote:

FredBloggs wrote:A real bad day at Centrica, it seems. Looks likely to head sub 100p to me. Down > 17% and counting at 135p. The reason? Here -
https://www.theguardian.com/business/2017/nov/23/centrica-shares-dive-after-british-gas-loses-823000-customers

Thanks for highlighting FB.

I've been "pickering" about CNA for a while, but it seems we're into falling knife territory now ...

I so wish I'd got a copyright on those 'pickering' or 'pickered' terms. I'm famed/mocked for being so fickle, hence the term.

Ian.

By the way, I dumped my Centrica shares on 23 Nov 17, selling at 137p per share. No regrets because they've been a very unreliable share/company, with dividend cuts etc. Glad to be out. I hold SSE, NG. and PNN only in the utility universe now.

Ian.