Sunday, September 4, 2011

TCG notes

Been bearish on TCG since before year start. At the beginning of the year I opined on TMF that TCG was one to watch as a potential disaster. Later on in the year, TMF revealed it as the number one faller in the Footsie. Alas, I can't find the links to the relevant articles: but they're on TMF somewhere. Always satisfying to make a good call.

YTD, TCG has falled a massive 78% to 42.39p, against a decline in the Footsie of 10%.

Saw this interesting post:
Studying the TCG presentation of May this year, TCG during H1-10 carried debt of ?1065m serviced at a 3.9% interest rate. Post the refinance, the status in 1st half 2011 is a total debt of about ?1.3bn, however to an average interst rate of 6.1%. This in my book means interest payments for 2011 are likely to be twice that of 2010.

Just to support Gator, I have somewhere else read that the total TCG liabillities mounts 3bn against what is mostly intangible assets, however I cant at the moment recall from where I got this data.

What's interesting is that last year, TCG make an operating profit of £391m, with interest of £116m, giving it an interest cover of 3.37. Debt has gone up, and if you assume that the interest rate of 6.1% is accurate, then TCG looks extremely vulnerable. Operating profits in half-year stage has worsened against its comparatives, and it looks like we're in for a bumpy economic ride. TCG is of course economically sensitive, heavily indebted, and the debts are mounting. It is vulnerable beyond belief.

4 comments:

Lewis said...

Are you still bearish at this price? Turned out to be a very good call at the start of the year, but at 20% of the price it may have value.

I say this, but I don't think I'd touch it. I can't help but feel that, due to the issues you've pointed out, it's basically one giant, leveraged punt on UK consumer spending. While I'm more bullish than most in the mid term, I'm not sure I have the stomach for this!

Mark Carter said...

Hi Lewis. Yes, I'm still bearish on TCG. Thankfully, I bailed out on TCG a little over a year ago at 187p. Maybe that's why I'm still bearish on it. It was a mistake to invest, but fortunately I got out in time for the big fall.

It is on a PER of 2.4, yield of 16.7% and PBV of 0.22, a classic warning sign that there's something terribly wrong. TCG has net debt of 1bn, which is increasing, and profitability seems to be going down.

There could be a big bounce from TCG, but I think that the company is flirting with bankruptcy, putting it in the highest risk category. Its credit rating is slipping, too.

Mark Carter said...

Oh, I forgot to mention, I also think the bulletin boards are too active, and there's a lot of bullish sentiment. Perhaps perversely, I take this as a bad sign; too many "trapped longs".

Mark Carter said...

From a poster on Interactive Investor: "I suspect TCG has entered the event horizon on the black hole of debt from where it is unlikely to escape."