I'm just copying this from the Barclays board. Please read below for update on Eadwig which obviously explains why he hasn't been able to post for some time. I wish him all the best and hope in time that he can return to this board. This board is poorer with the absence of people like Eadwig.
Thanks for the concern. I'm physically well but my best friend died in January. I was in the UK looking after my elderly father at the time and on the day of his funeral in Feb my dad had a fall that night resulting in 5 weeks hospitalisation and eventually his death also. For some reason my two siblings very much set against my supposed lack of concern during his illness and after his death. I've no idea where this came from. I was after all spending new year and January in the UK looking after him 24 hours a day as I have done for at least 10 weeks per year for the last 4. Anyway, I've been quite upset by that on top of everything else as I'm sure you can imagine.
I'm now back in Poland after missing out on 4 months of my 4 year old's growing up (my sister used to give up one Saturday afternoon per week in her own concern for my dad) and will be slowly easing back into shares which I have dangerously neglected. Despite that I hit my 15% growth target for the tax year 17/18 although I only measured my position on 5th May, so a 13 month year.
I'm very much out of touch so don't have a lot to contribute to the board right now but hope to participate more as time goes on. I'd be grateful if you could copy and paste this message somewhere public and appropriate so that anyone else who might be concerned can be brought up to date.
Trading statement didn't really give us much. Nothing in 2018's results to make me think this lot are going anywhere. I see Merlin still blaming terrorist attacks and poor weather. The excuse is wearing a bit thin IMO. Does anyone really fancy a Shrek experience?
Quite pleased with the drop.
Added to my holdings at 359p.
Market squalls like this are to be taken advantage of - steel tariffs wont hit trips to Alton Towers.
Was very impressed with the results. As the terror attacks fade from view, the company is building a geographically diverse business and am liking the significant expansion in bedrooms. The balance sheet is robust and the dividend well underpinned.
The markets certainly like the results. I purchased a few weeks back at £3.26 and am quite happy with investing in this company. I also want to thank people like Eadwig and others who have been providing their thoughts on the company. I think Eadwig's average price of around £4 will be met before too long and hopefully that'll be just the start.
Good set of results today which look like the start of the turnaround. Gardaland badly hit by a drop in numbers but overall a strong uptick in visitors. With the addition of ValueAct to be the 3rd largest shareholder to promote change, this should be the start of the fightback.
"Merlin Entertainments shares received a boost, gaining 4%, after a US activist investor became the third largest shareholder in the themepark operator.
ValueAct, which pushed for management changes at Rolls-Royce and Microsoft , has revealed a 5.4% stake in the owner of Legoland and Alton Towers. Merlin downgraded its full year profit forecasts in October after terror attacks in the UK had an impact on the number of visitors to its attractions, which also include Madame Tussauds and the London Eye.
However, ValueAct is understood to be supportive of Merlins strategy after the two companies met."
(From a newsletter)
"Opportunity in Merlin share price fall, says Numis
Shares in Merlin Entertainments (MERL) are trading back at their 2013 flotation price, which Numis said is an opportunity to invest.
Analyst Tim Barrett retained his buy recommendation and target price of 454p on the shares after a 40-week update showed only marginal improvement in the London day trip market. The shares rose 2p to 320p yesterday.
The derating of the stock more than reflected estimate risk creating a medium-term opportunity, said Barrett Merlins share price has underperformed by 10% since its 40-week update, he said. It is now trading back at its IPO price from 2013, notwithstanding 20% earnings per share growth over that period and an expected compound annual growth rate of 9% over the next three years.
He added that the 2018 price/earnings multiple of 15.2 was attractive versus peers and relative to earnings per share growth.
Sales momentum may remain negative for several more quarters, which could weigh on short-term performance, he said. However, we expect investors to start to take more interest which could underpin material upside on a 12 months view. "
"It's been a tough twelve months for this company, but can some market sorcery help it recover? Chartist Alistair Strang and his magic software have some fresh forecasts.Merlin Entertainments (LSE:MERL)Our last report on LSE:MERL:MerlinÂ gave a ..."
" MERLIN ENTERTAINMENTS (LSE:MERL) Our last report on Merlin (link here) gave a pretty cynical, almost nasty, opinion on how the market has seen fit to manage this share price. Unfortunately, it appears we were correct with our overdose of ..."
According to Peel Hunt, in a through review of the same - Merlin is highlighted - see below for the relevant summary:
FWIW I remain unconvinced of any move, at least at this stage, given the extant PE stake, ongoing capital intensity and the fact that the valuation - while now less elevated - hardly screams cheap. But not something ever to rule out...
"We have been surprised by the de-rating of Merlin. The impact of terrorism on demand in the key UK markets has been material but we expect a steady recovery consistent with improvements in other markets after demand shocks. The Group has an established pipeline of development opportunities, which will increase the geographical diversification of the business and is a clear beneficiary of the trend for increased tourism. Demand for Lego toys softened notably in 2017 after several years of remarkable growth, and this had an effect on retail sales. We expect the new Lego movie to revive interest in the product and for demand for the child-friendly theme parks to remain robust. This is a highly cash-generative global business and we expect it to attract bid interest at the current level."
Deutsche Bank have lowered its forecasts for Merlin today based on consumer spending concerns, bad weather and currency exposure. Projections for both 2018 and 2019 have been cut by 1.7 per cent and 2.3 per cent respectively. The share price has dipped in response.
2 things I`m not over keen on,fairly large debt figure, although understandable with a company determined to expand.
Divi yield mean, again though can be the case with growth orientated companies.
I`ve been unable to find what interest rates they are paying on their loans anyone know pls. ?
I do like that 3 of the directors have a fair bit of skin in the game.
I hope they expand further in to Asia, that remains a growth area. IMO
To price now.
At a 1 year low and the sp below the 10/20/100 day moving averages.
Many TA players would regard that as very negative, I`m somewhat contrarian though and do sometimes like to go long on a 1 year low.
Support level appears to be 352 ( very close to that as at Friday`s close ) then 337.
Resistance levels at 368/383/426/440.
The latter 2 will seem high of course.
Support and Resistance levels are not predictions though.
I`m inexperienced trading this, thought I had done more but just 6 trades so far, 5 wins, 1 loss.
Happy enough with that on something new.
Nothing in now but have re entering to the long side in mind.
I do not think it has viability as a short but some probably think otherwise.
I can see the merit/reasoning behind long term buy.
I'm in agreement with most people tracking this share in that it has great potential. Having recently been over £5 it has not become a bad company overnight. However, I think the senior management has become slightly stale and would benefit from some new blood. Big Little City and Shreks Adventure are recent concepts that appear to be mistakes as is the stake taken in Big Bus Tours. Returning to focus on core strengths by building more accommodation, promoting short breaks and securing an excellent new link-up with the Peppa Pig brand proves Merlin has far from lost its mojo. I'm hopeful that in the not too distant future I'll be posting with a BUY rating but they need to fix some core problems which the current slump has exposed.
MERL has been demoted from the FTSE 100. No real surprise, although it did affect the share price quite a bit, surprisingly. I guess some trackers can only act once it is official - and may still be divesting themselves of stock for a week or two yet.
I hope you managed to SELL, City Ranger. Excellent move if you did, with a re-buy once it is clear where the move will leave the price. At £3.6Bn market cap and automatic re-entry around £5.3Bn its quite a long way back for MERL.
On the other hand, those tracking funds that actually physically hold stock may well also have FTSE 250 trackers (or medium cap UK growth or whatever) so its hard to predict the fallout.
Those of us who haven't sold may as well hold for now. At some point between now and mid December, MERL will become a weak buy...
I must admit, I once again failed to take an index move into account. I should have waited until now for my most recent buy I may go again if the price draws near @342p (5% down on my last buy detailed below).
The lower price is an opportunity from my point of view as I have always had a 5-10 year view of this stock and only bought my first tranche 12 months ago. On the other hand, I consider a full position as 4 tranches and I already hold 5, so it would be something of a risk to take on a sixth with a small dividend and the market headwinds (terrorist activities in the main) that caused the problems are unlikely to disappear anytime soon.
The other side of the coin is that those media companies taking a long term view of the sector must be aware that MERL priced in GB pounds is currently at a bargain price in terms of adding to their entertainment empires, with only Disney likely to encounter any regulatory issues.
Even then it would almost certainly go through as Disney are mostly in the USA in terms of physical attractions and that is the one place where there are other extensive entertainment brands within that home market.
I shall be watching carefully and making a decision on going a 6th tranche between now and Santa rally time which starts around mid December, but I also believe there will be a market correction at some point which will drag MERL down (along with everything else). I wouldn't want to be caught with 6 tranches on hand during that buying opportunity.
Ultimately my aim remains to have a full holding of MERL (4 tranches) at a price with an average as far below @400p as I can make it with trading around the position.
"Are you still in Empiric? (I'm so glad I sold when I did.) "
I am, although I reduced my holding when the price was around @113p and only added a minimal amount at the last IPO. The failure of that IPO to be fully taken up was a big warning, but unfortunately I wasn't aware. One of the penalties for being an amateur and not always having time to keep up to date on all my holdings and prospects.
Obviously I wish I had sold the lot. Hopefully plenty of people dodged the drop after reading my plentiful warnings on the ESP board (and elsewhere) after Mrs May started her infamous rant in India in October 2016. I must admit, the size of the drop has been a big surprise to me, even though I thought a reduction in dividend was probable, at least temporarily. In fact, it was part of the new 2025 plan to reduce from the target of 6% to about 5.5% (I seem to remember), so I'm not sure why it was such a shock.
Anyway, at the current price you can get the original 6% return ... assuming you have confidence in the company going forward .... I wont be rushing in myself when they are talking about 2 years to get back on track.
As I stated, I never did like the '2025' plan, especially flying in the face of government's manifesto pledges to cut back on foreign students and leaving their top-end niche strategy to battle for market share that was worth less per student. It made no sense to me, and seemed to be all about keeping the company growing rather than keeping the returns high.
I believe the Finance Director was the main mover behind that plan, so I'm hanging on to what I still own (about 15% under water with an average of @105p) in the hope that they will go back to their original plan now she is on her way. I'm hoping that the very high board salaries have been cut back also.
Meanwhile, someone may finally knock some sense into the government that if they really want the UK to be a haven for R&D they have to go back on their manifesto pledges against foreign students.
That will probably require Mrs May to step down, but we will see. Or maybe she really believes that the world's 'best and brightest' (by which she means richest) will all just happen to have been born in the UK (less than 1% of world population) in the last 15-20 years... in which case the men in white coats may drag her off instead.
A travesty that a UK government should actively seek to destroy one last sector in which the UK was arguably a world leader, has a global reputation for quality and the natural advantage of speaking the global language of business and science that all top students must become fluent in.
Unfortunately, the media has been persuaded (and I use the word advisedly) to concentrate on the salaries of University Chancellors whenever one is on TV or the radio trying to point out the damage that is being done. A classic 'flanker' if ever I saw one. Why the BBC are swallowing it, I don't know.
Merlin are being tipped to fall out of the FTSE 100 index as part of the quarterly index review. Confirmation one way or the other is expected after market close today (changes would be effective from December 18th). If they do exit, this would put further short term pressure on the share price as tracker funds amongst others sell down their holdings.
The Times Article won't add to your knowledge, Eadwig, but it seems to have had a negative effect on the market's view of Merlin & consequently the share price.
Any price movement in between relevant news is an opportunity for folk like you who make an assessment on the true value of the shares.
I haven't topped up yet - been too busy taking advantage of other oversold shares (Ultra, Dignity) & trying to work out any opportunities thrown up by the budget (who will be getting the work from the Electric Vehicle Charging network fund?) - but if it continues to drop I may just have to.
Are you still in Empiric? (I'm so glad I sold when I did.)
@361p, which is a function of my last BUY @378p (approx 5% down on that price) and my ambition to get my holding average down to @400p on 4 tranches for the long term. Average is now @399p, but on 5 tranches, unfortunately.
Haven't read the Times article. Will try to if I can find the time, but I doubt they'll be adding to my knowledge specifically. Always good to know what such media is saying though, it all feeds into the general sentiment.
Chart is looking pretty dismal, innit? Buying now at what I was guessing might be the new low support is a risky one, I'm the first to admit it.
I've still got more to come here yet, as those who know my posts might have guessed!
I particularly want to tie-in the plans for technological expansion plans and developments, and I need to go back over your post to see if there is anything I can't answer.
There's also the latest developments and latest forward guidance to analyse. I think I'll leave the numbers to you, but I have always thought the P/E multiple generally too high (it is what my first post was about on this board).
The actual growth has never lived up to the multiple the market has assigned, for one reason or another, and since I have been involved the growth achieved has really been very average.
However, the plans are ambitious, they are focused abroad for maximum diversification as soon as possible (although I'm sure the UK as a major tourist economy will remain a large part of the company offering, and rightly so). I don't see any immediate future where companies listed in London but earning foreign currency aren't going to have a premium attached.
I'm sure MERL will continue to extend the number of brands offered and also destination hotels from which multiple MERL attractions can be accessed, but the strength of the existing brands will get more and more coverage and so far they have shown great caution and wisdom when adding brands, I think.
I haven't seen it stated, but the age that attractions appeal to is being widened also and the Peppa Pig brand shores up the pre-school level nicely while Shrek appeals to a slightly older audience. (I wonder why unique licenses never seem to extend to China).
I'm unsure about the whole concept of Little Big City and want to look into that further before expounding on it. I might even sneak a visit if I can get over to Berlin (drivable from here). I love models myself (ever since seeing the railway layout at Alton Towers when about 11, funnily enough) but I'm not sure they have a lot of pull.
The SeaLife attractions look set to expand to just about everywhere there is thought to be a market, and there are new brands in Australia (Tree Top Tours, WildLife, skiiing resorts and others, all of which which can very easily be expanded across the world if thought suitable. Management will be key in the decisions here, of course, but so far they seem to have done well, if over-cautious in their presentations.
There are some competitors such as 'Six Flags', I think it is, in the USA, but they only run theme parks - in fact pleasure parks really (rides only pretty much) and one or two others. Brands are all important, and Six Flags is unknown outside USA.
I'd love to see MERL get their hands on Warner Bros and the Harry Potter franchise and theme park(s) at some future point, but that is just fantasy right now.
Held up at the moment by yet another illness, and the constant antibiotics are slowly ploughing me under. I shall be back ASAP.
PS. I have upped my next BUY order (5th tranche) up from @358p to @364p as part of my efforts to trade my average down to below @400p
"If I didn't think I had answers to your questions then I would be re-examining my position immediately... If you haven't done so, I do urge you to go back over my posts from the last year on this board... Like you I've never really understood or agreed with the high P/E but ultimately that was the price I had to pay to be in, I decided."
Hi Eadwig - a belated thanks indeed for your considered thoughts in defence of the MERL thesis (and hope you are back on the mend now?)
And again - I have been through pretty much all your previous pertinent posts on the longer term case, and I really don't find too much to challenge in any of its multi-faceted aspects... well thought out and argued, and imbued with your considerable investment experience and expertise, as I would expect. If, for me, MERL is not quite a perfect fit for some of them, it still doesn't negate their relevance to the debate - and nothing is ever a perfect fit for any thesis!
And you are right to say "my questions" - as I said before, it is questions I have, rather than answers. Ultimately, for me, any such long term case is about squaring the story with the price you have to pay for it, and it is the latter I am wrestling with most, not the former! FWIW I had a very good seat to observe the IPO and, for a while, its subsequent experience as a quoted company, and was always both interested and intrigued... I wasn't allowed to buy in back then, which I might well have done otherwise, hence my renewed attention now that I can and the SP pull-back has thrown up at least a potentially "unique-ish" opportunity.
For any situation, if I can't make the valuation work for me, as well as the story, I won't buy in... I have missed out on a few good 'uns as a result, but equally, dodged a few bullets. Swings and roundabouts, overall...
When I said "unique" stock, I was thinking partly as a UK stock, but also that while there are a few international comparators (Disney of course, also SeaWorld? and one or two more in both US and Japan, as I recall, though would have to dig around to refresh my memory), none were that close a fit to MERL's profile. It just makes pricing the story that bit more difficult...
And I do have a caveat over hotels expansion... yes, they earn higher margins (they have to), but typically lower ROCE due to capital intensity, and higher cyclicality, with high operational gearing. And (rightly or wrongly!) I was always more intrigued by the opportunity in the Midway segment, with shorter "dwell" times and where it's more about exploiting existing footfall rather than packaging longer term duration with accommodation supply. But yes, I see the sense in some level of hotel capacity... as long as they don't over-build in the wrong places, at the wrong time...
"... don't accept this argument and see no evidence to back it up... major internet/media players are driven by idealism as much as ROCE and future growth is all about Intellectual Property, Access and CONTENT over which they control access to or have unique ownership of."
On this point, a fair cop, I was largely thinking out loud... and ultimately, whatever the rationale, I don't doubt there's a few who could certainly buy MERL for almost any price without blinking, today, tomorrow or whenever. As for who will be the big "internet/media" players 10-20 years from now, I am less sure - could be a whole new crop, I suspect at least some of the current ones will not last the pace... though there will be doubtless others to take their place (as I can hear you say yourself!)
So... I commend your case, I'm just not sure what it's worth. More than a "market average" rating, I agree... but maybe (probably) less than the 25x P/E or so we have seen not so long ago. Somewhere in between... which is where we are now! It sometimes helps to apply the binary consideration in such cases, everything's either a Buy or a Sell... easy enough answer for me in that case, down here, I would Buy it
Bill, "the capital intensity may put off your internet/media players who are much more at home with asset-light, capital-light, high ROCE operations."
I simply don't accept this argument and see no evidence to back it up. Many of the major internet/media players are driven by idealism as much as ROCE and future growth is all about Intellectual Property, Access and CONTENT over which they control access to or have unique ownership of.
MERL are all about the development of I.P. (that very much includes media franchises, brands and merchandising) and pushing forward into virtual reality experiences and ever-increasing integration of technologies. Lego was rated 'the most powerful global brand' in Feb 2017, making it a critical linkage. (I've never been quite sure just how solid that linkage with MERL is - could Lego withdraw from the deal, for example?)
MERL's other brands are not in the same league, although they are growing in strength and value.
'Asset light, capital light?'
The Google maps project.
Cross-pacific fibre cables have been or are being being laid by Google, FB, MSFT.
Autonomous transport, drone delivery, low-level 'satellite' internet provision across the whole of the third world.
The complete depository of Chinese literature in one library (written pictorially, remember), online education up to and including degree level (Tencent Holdings)
$19Bn for Whatsapp by FB
Ongoing R & D and applications of artificial intelligence and machine learning.
Global credit cards and mobile payment systems.
The development of new production studios and TV shows, bids to show/stream live professional sports in the hundreds of millions which will soon be into billions as contracts come up for renewal.
Feature film projects and studio ownership.
Amazon not even attempting to make a profit for the first couple of decades.
The list of heavy capital projects with no guaranteed return whatsoever is just about literally endless.
Apple alone have as much cash on hand as most nation states. Over a quarter of a trillion USD in cash at the last count, I think it was.
Money is NOT going to be any kind of impediment to these companies when acquiring rights and assets that will help them secure content and customer interest.
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