MET - Metlifecare - one for the fundies?

[percy]

Buybacks to boost the share price often seems to be a predictor for even more falls in the share price —- Turners, Fletchers etc

Seems Market not fooled by financial engineering and companies touting their share prices should be higher

Many conveniently overlook there’s often a reason for a dismal share price.

A share buyback occurs when a company purchases some of its shares in the open market and retires these outstanding shares. This can be a great thing for shareholders because after the share buyback, they each will own a bigger portion of the company, and therefore a bigger portion of its cash flow and earnings.
Also stops management wanting to do foolish acquisitions,therefore they concentrate on their own business.
Had Fletchers concentrated on share buy backs in the past, instead of acquisitions, they would have a great business today,instead of losing millions of shareholders funds.

ps.A few months ago I was looking forward to Turners announcing a further share buy back.Corona Virus stopped those sort of thoughts.

[King1212]

Well...TLT will do $250m buy back soon!

[winner69]

Well...TLT will do $250m buy back soon!

At least TLT have a genuine reason for a buy back - they have far too much cash sitting idle.

And every shareholder is going partake on a pro-rata basis

[Beagle]

A share buyback occurs when a company purchases some of its shares in the open market and retires these outstanding shares. This can be a great thing for shareholders because after the share buyback, they each will own a bigger portion of the company, and therefore a bigger portion of its cash flow and earnings.
Also stops management wanting to do foolish acquisitions,therefore they concentrate on their own business.
Had Fletchers concentrated on share buy backs in the past, instead of acquisitions, they would have a great business today,instead of losing millions of shareholders funds.

Well said as some people don't appear to understand and / or appreciate the basics.

[winner69]

I agree MET pretty cheap at the moment and the hope of some takeover keeps me in

But not really that cheap

Underlying profit -

FY17 $82.0m
FY18 $87.3m +6.3%
FY19 $90.5m +3.8%
FY20 $83.0m -8.3% and that’s if they are lucky

Hard to see FY21 being better


Not a good trend there

[traineeinvestor]

A share buyback occurs when a company purchases some of its shares in the open market and retires these outstanding shares. This can be a great thing for shareholders because after the share buyback, they each will own a bigger portion of the company, and therefore a bigger portion of its cash flow and earnings.
Also stops management wanting to do foolish acquisitions,therefore they concentrate on their own business.
Had Fletchers concentrated on share buy backs in the past, instead of acquisitions, they would have a great business today,instead of losing millions of shareholders funds.

I agree with all of this and have a strong preference for investing companies that are more likely to buy back shares than ones that make a habit of raising new capital through dilutive share placings. That said, buybacks may be a signal that the company lacks growth opportunities. I also like to look at where the funds for the buy back are coming from – if the company is racking up high levels of debt to fund the repurchase of its own shares then I start to worry about the board's motives.

As per the last interim accounts, MET has $311 million of interest bearing debt ($100 million in retail bonds with most of the rest in bank facilities) against shareholders funds of $1,493 million. IMHO this is a very comfortable level of gearing (even allowing for obligations to repurchase occupation rights) and I'd be happy to see at least some of their cash flow being used to repurchase shares. In this context, I note that cash outflows for investing exceeded cash inflows from operations in the last half year.

Regardless, I'd rather see a company whose shares are trading at well below NAV using cash for buying back its own shares than paying unimputed dividends which is what MET has been doing historically. With the former shareholders loose part of their dividend proportionate to their marginal tax rate and with the latter, not only is there no tax leakage but the company is effectively buying assets at a discount (in METs case, a substantial discount).

It's a bit old but there's an easy to read summary on buybacks here: https://www.mckinsey.com/business-fu...share-buybacks

[Beagle]

I agree MET pretty cheap at the moment and the hope of some takeover keeps me in

But not really that cheap

Underlying profit -

FY17 $82.0m
FY18 $87.3m +6.3%
FY19 $90.5m +3.8%
FY20 $83.0m -8.3% and that’s if they are lucky

Hard to see FY21 being better


Not a good trend there

You must like playing Devil's advocate seeing as you hold plenty...okay mate I am seriously bored AND sick and tired of Mrs Beagle's constant grumpiness, so I will play silly beggars with you.

For a start the mid point of their FY20 forecast is $86.5m, (as you well know) which is down just $4m on FY19.
We don't know what extra costs they have incurred because of Covid 19 but we do know from SUM that they reckon it is millions. Lets assume millions means several million seeing as SUM took a wage subsidy of nearly $9m but still has withdrawn guidance.

I'm going to call it as $4m extra costs as a guess. So we're up to an adjusted underlying profit of about the same as FY19 just with the extra specific costs of Covid 19.

Then we consider that they have had to shut down their sales operations for over a month. We know they have embedded value of $1,155m and average resident tenure is 9.1 years.
Each year they make a gross underlying profit of about $1,155m / 9.1 years = $127m. Shut that $127m per annum profit engine down for a month and obviously you lose approx 1/12th of that or about $10.6m.

Let me do the maths for you. $86.5m after $4m extra costs and adjusting for $10.6m forgone gross underlying profit margin = normalised underlying profit of $101.1m.

Take some happy pills mate, it seems you need them and I know Mrs Beagle really does.
https://thebfd.co.nz/2020/03/26/the-...and-kids-or-b/

[King1212]

Master Beagle...u need to tell Mrs Beagle...it is a wine o'clock....get her to sip couple bottles...ops glasses

[Beagle]

Yeah, I could sure do with a few drinks myself. We are dry as I haven't been able to stomach the long local liquor shop queue's. Facing up to that might be the lesser of two evil's though !!

[percy]

Yeah, I could sure do with a few drinks myself. We are dry as I haven't been able to stomach the long local liquor shop queue's. Facing up to that might be the lesser of two evil's though !!

I don't need any drink.
Lovely home entertainment.
Wife has been on the phone for about and hour and a half, explaining world, and NZ economics, to her friend.
Peace .!..lol.