Results beat analysts but as sometimes happens, a weird mkt reaction. SP was approaching Year high so time for a lull and to breathe and profit slice. Back to 800 and beyond very soon. Markets maybe they hoped the divvi would be increased by more? Reckon the dip will be gone in a week.
An excellent BUY opportunity ... no brainer, I will be stocking up.
Cal me ol' son,
My advice to you is drink heavily and never get too excited on water company shares but as Arfer Daley would say they're a nice lil earner. Still a bargain at 8 quid. Tenner coming back no problem m8. Made a lot on these over the years buying on dips and selling on highs.
Boring plodding water company eh? Up 25% on lows of 3 months ago. Turnaround well on the way now.
Great results from SVT helped today. Gap to 800p closed as I predicted. Next gap 824p not far off. Still, a strong buy. Looking forward to more steady rises and nice big divvy worth about 3% on 14th June and then if the SP falls too much I will add some more.
Had a quick look at brokers - targets range between 850p to £10.
Wow closed at 737.6 - my portfolio winner of the day - never expected that from a boring old water company! Seems the mkt has finally realised these are significantly oversold. Water is a vital resource.
"Apparently, water companies can reduce the water pressure to houses that don't pay. There should be much more of that going on."
How would that be implemented? Are there water pressure valves installed outside every house and flat? Many houses have water meters which are fitted with a one-way valve, but not with a pressure reduction valve. And It is buried deep. Not easy to even take a reading let alone try to fit a pressure valve. And the owner will most likely see you messing with his water meter.
causing this surge in the sp up 7% this last couple of days. A bland "in-line" forecast expecting a modest improvement in the bottom line surely not the impetus.
All water utilities up today so presumably there has been an update or a re-appraisal of the likelihood and impact of future Ofwat / govt intentions ... all utilities are stronger today, broker positives on energy companies led by Morgan Stanley, and Corbyn's own stock has fallen. Bond proxies back in favour because a global trade war will take steam out of growth and therefore interest rates?
There will be an article somewhere but I haven't found it.
Or is it just end of year using up ISA allowances and UU looks cheap?
Before the advent of universal credit, water bills could be taken directly from benefits. I suppose that someone in government thinks that people should take responsibility for their lives, unfortunately some won't pay unless they have to. That is on top of builders that make illegal connections to the mains, which happens more regularly than you may imagine. A change in legislation is unlikely for something that is considered to be an essential essential in life.
"If January is anything to go by, 2018 will be quite a year. We've already seen the demise of LSE:CLLN:Carillion, the share price collapse of LSE:CPI:Capita, and the start of a hostile takeover battle over FTSE 100-listed LSE:GKN:GKN.Amongst these ..."
UUW has fallen more than the other quoted companies, perhaps the market doesn't see that management is able to meet the challenge of a reduced WACC. This company needs to take a serious look at its cost base, the use of contractors for most network activities incurs a heavy management cost with no real way of reducing contractor cost. A back to basics review is needed.
With Corbin threatening to renationalise the utilities who would went to buy UU?
However to renationalise the utility companies:-
1. Corbin will need to get elected
2. He would need to get the financial institution backing as this is where are a lot of our pensions are invested?
3. Where would the money come from? he can't just take them back into Gov hands as most are fully or partly owned by overseas companies.
Can't see renationalisation happening nor a UU take over at the moment but who knows?
With every drop in price of this share, the chance of an outsider coming in and making a predatory move increases, it has now dropped 20% in a very short time period, to me it just seems like a matter of time before this happens, could be wrong just a feeling taking into account past attempts within the industry.
Debt costs are only one aspect, there are also the normal business costs of using electricity. A reduced debt servicing cost is meaningless if the operational costs increase by more than the debt servicing reduction.
UU are trying to isolate themselves from the external uncontrollable costs of their energy by making their own. The following articles appear to suggest that there is a considerable benefit from their approach, a benefit that probably far outweighs using the funds to reduce the debt pile.
As far as I can judge, the use of green energy projects are still peripheral, and they do not indicate any lack of focus on the main activities. Once the facilities are in place they will save management from the task of having to micro-manage their external energy supplies. The projects I have seen are related to facilities that UU have to manage anyway.
The primary reason for the recent downgrade of UUW is the perceived ability to repay it's debts, to add to the debts in addition to employing in house staff to procure and maintain the systems seems to be something outwith the role of a water company. UUW spent several years reducing the company scope to focus on core business and to make these investments seems to be a retro grade step. Water and wastewater are a difficult enough business to manage without having management focus diverted to non core activities. After all it is only 1 year since many thousands of customers were drinking from bottles due to a mismanaged network.
I am sure that they looked at the various alternatives, covering self investment vs contracting out, and apparently concluded that the financial case (among other aspects) indicated that self investment was the best approach.
It is an effort to reduce costs rather than a corporate realignment from water/sewage services to becoming a major electricity generator. Using external Companies does not provide the capability to control internal costs, especially as the external Company pockets any benefits and can easily ratchet up costs.
UU. is a large electricity user, and is susceptible to increases in charges for this electricity. Generating the electricity themselves reduces this impact.
However, I do agree that debt servicing costs can negate many of the benefits, especially if interest rates were to rise dramatically, so it is extremely important for UU. to manage their debt carefully.
UUW should not be borrowing more money to fund solar arrays on reservoirs and its offices. The payback is measured in decades and UUW would do better to rent those sites to a company who could then sell back the power, or even better just concentrate on minimising borrowings and increasing productivity.
Little wonder that Severn Trent is surging ahead of UUW, ST dividend up by 6% v UUW 2.2%. UUW needs to make a substantive change if they are to keep up with ST and also Pennon who have a 4% dividend increase policy.
United Utilities nudged up its first-half dividend after revenue and underlying profits rose.
The company declared an interim payout of 13.24p, up 2.2% from 12.95p in the previous year.
Underlying pre-tax profit rose 5.7% to £160.1m, as revenue rose 2.7% to £876.0m.
"As we turn our attention to the next price review for the period 2020 to 2025, we are engaging with customers across our region to understand their needs and preferences and to formulate plans that best satisfy those needs," chief executive Steve Mogford said.
"Affordability will be key, balanced against resilience to climate change and population growth in our region."
Divvy up 2.2% and inflation at 3% so not too good, but at these prices yield is a chunky 5% and downside risk is minimal IMHO.
UUW would do well to return to its core business, it is investing big money on solar arrays for in an effort to reduce running costs. Why not just let someone else invest the money and UUW then just buys the energy. Water and sewage companies should be just what it says on the tin, not a speculative business borrowing money with decades before a payback.
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