r21442
24 Mar 2017
Re: Share price is a shambles RPC hit a six-month low on Wednesday after Northern Trust analysts accused the packaging maker of disguising structural problems with a lot of acquisitions. The group last week completed the $640m purchase of Letica, a Michigan-based peer, which was its tenth deal in 12 months. According to Northern Trust analyst Paul Moran, RPC management has been encouraged to pursue value-destructive acquisitions by “innovative” bonus schemes and “some of the most aggressive accounting we have seen”. He argued that RPC’s definitions of adjusted profit and free cash flow had been inconsistent over the past five years, and had flattered the figures in ways that sometimes “defy accounting logic”. And by stepping up the pace of acquisitions over the 12 months, RPC had masked its structurally weak pricing power and labour cost inflation, Northern Trust told clients. “We accept that a rights-issue funded, value destroying roll-up story can continue to report adjusted EPS growth for as long as shareholders are willing to fund it,” the broker said. “But should the hitherto supportive appetite for rights issues fade, we think shareholders will find a structurally challenged, low margin, highly levered, sub cost-of-capital business trading on circa 23 times [current year] earnings on our estimates, an undeserved 50 per cent premium to the market.”RPC closed 4.8 per cent lower at 866.5p in a weak wider market. The FTSE 100 was 0.7 per cent lower, down 53.62 points at 7,324.72.---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---He may be right on the accounting.He is quite correct that much research has concluded that on average acquisitions are not value accretive.However, one look at the share price chart since inception gets you wondering how Paul has it correct and everyone else has it wrong?
Clued-in
24 Mar 2017
Re: Share price is a shambles Who is Paul Moran anyway ? Just one opinion. Look at the opinions of the analysts rating this share with price targets around £11.50 - £12.50.
72_fastback
23 Mar 2017
Re: Share price is a shambles Paul Moran at NT thinks RPC use aggressive accounting and that acquisitions are value-destructive.I don't think I'm allowed to copy & paste FT stuff but try Googling 'Paul Moran RPC'It isn't enough to make me think I should sell yet anyway. Let's see how the Letica acquisition goes now this opinion is out there.
72_fastback
23 Mar 2017
Re: Share price is a shambles Yesterday's pasting was (probably) due a very negative note from Northern Trust.I will try to dig out the details, but suffice to say it is completely at odds with pretty much every other analyst.
Willow67
22 Mar 2017
Share price is a shambles Whats going on!?
oggs
14 Mar 2017
Re: Acquisition it was a great chance to top up which I did below today's price. Not quite where it bottomed out but happy nonetheless
Willow67
14 Mar 2017
Acquisition This feels very good value to me. Basic maths says Letica made $57m ebitda in the y/e 30/6/16 and $67m in the y/e 31/12/16, so it appears to be growing quickly. If the performance hurdles are fully met over the 2 year period (starting today I guess) - $200m of ebitda over 24 months - RPC will own the business for 6.4x avg ebitda which feels like a steal to me. Even without even the lower hurdle being met - $140m over 24 months, which feels unlikely given they are on that run rate right now and clearly growing quickly - they will own the business for 7.3x y/e 31/12/16 ebitda.
Geoffrey Lowndes
06 Mar 2017
Re: lapsed shares The company news said by March 10th I think and by cheque.. No interest paid and any payments due for less than £5 bad luck. Regards, Geoff.
DIE HARD 1
06 Mar 2017
lapsed shares I thought I had taken up rights but as I manage other portfolios I had not taken up mine.When do we get paid for the ones not taken up
Geoffrey Lowndes
04 Mar 2017
Re: Help please on Rights issue Thanks for all the replies.I have written to my broker to explain to me what I have missed out on, and will also see if I am due a cheque from RPC.Thanks again,
Willow67
01 Mar 2017
Re: Help please on Rights issue If the acquisition doesn't go through the shares will get punished - that said I took a view and added 1/3 to my holding on the open today. My guess is the shares continue this drift upwards and then properly recover once the acquisition is comfirmed
Moonsurfer
01 Mar 2017
Re: Help please on Rights issue The Dutchman,I think your right in much of what you say but I think a bit of patience is called for. The rights issue probably has caused , or will cause, some holders to sell a portion of their shares/ rights. The market anticipates this.Already the sp is moving upwards. I think we will see satisfactory gains now that the issue is completed.Moon
The Dutchman
01 Mar 2017
Re: Help please on Rights issue see my other post, but also.....In overall terms the impact of the recent acquisition and rights issue has not been well received by the market. This is my biggest single co holding and my mantra is always to subscribe to rights issues, so I duly did for RPC. I also do a month end reckon up on all my holdings and can report that the net effect of ;End of Jan valuation ( pre rights) plus cash subscribed to Rights Issue compared to end of Feb valuation on the increased number of shares shows an overall loss of circa 10%. My biggest percentage and absolute loss in the month by some margin. So the market didn't like the acquisition and the funding at all.Now admittedly rights issues often cause disruption as shareholders need to decide whether the increased holdings are in accord with their investment mandate etc, and often recover afterwards. The shares do appear to be moving up a bit now, but not quickly.I must admit we have had a series of rights issues here ( 3 in the last 40 months I recall, but haven't checked) to fund a lot of acquisitions, and theere are a number of points here;1) will shareholders continue to want to pump more into this rapidly growing company - I'm not sure I will next time, it just represents too high a proportion of my portfolio2) they need to demonstrate they can generate an increased rate of return on these acquisitions in the medium term - Are they biting off more than they can chew!3) I'm always concerned about companies growing rapidly through continuous acquisitions, the accounting framework is open to.... well maybe not open abuse, but at least smoke and mirrors. For example management adjusted earnings ignoring goodwill right offs, re-organisation costs, amortisation of aqcuired intangibles etc often on the basis that many of them are non-cash -------- well you are wrong they are cash, I've just given you a load of dosh in this rights issue!Do your own research !
The Dutchman
01 Mar 2017
Re: Help please on Rights issue The option of "Letting them Lapse" isn't neccessarily madness. What happens is that the rights not taken up then revert to the underwriters who sell them in the market and return the cash to the holders who didnt take up their rights. So virtually the same as selling your rights but without the commission! So Geoffrey you will receive some cash in a week or so. There is an RNS earlier this week stating that 4% didn't take up the rights and these were sold in the market for the benefit of the shareholders.
oggs
28 Feb 2017
Re: Help please on Rights issue It's an odd way of doing things because you should have been given three options. To take them up, sell them or let them lapse. The latter would have been madness and it appears that they have simply taken them up for you. Whether that was appropriate is down to whatever agreement you have with the, but claiming for the 9% drop is not really a goer as that is just the market reaction. Personally I'd see that as a buying opportunity given the track record but I'm not in the business of recommending anything to anybody.
