Again huge buys after hours.Why?

RESEARCH ALERT-HSBC raises Stagecoach to overweight
Mon, 30th Jul 2012 07:33

July 30 (Reuters) - Stagecoach Group PLC:

* HSBC raises Stagecoach to overweight from neutral; price target to

310p from 250p

http://www.moneyam.com/action/news/showArticle?id=4427309

West Coast rail franchise

Stagecoach Group plc ("Stagecoach") is disappointed that its joint venture, Virgin Rail Group, has been unsuccessful in its bid for the new West Coast rail franchise, due to commence in December 2012.

Could see a red day today

Ironically, it looks like a bullish engulfing candle here and a bearish engulfing on FGP.

12 month high today @295.30p - charts above (bullish/bearish) still looking ok.

Interim Management Statement

Government scraps $9 billion West Coast rail deal

LONDON | Wed Oct 3, 2012 5:10am BST

(Reuters) - Britain scrapped on Wednesday a $9 billion (5.5 billion pounds) deal that had awarded the West Coast rail line to FirstGroup Plc, citing flaws in the government's figures, just a day after the company had said it was prepared to take over the key mainline train service this year.

FirstGroup in August won the 13-year deal for the London-to-Scotland line with a bid of around 6 billion pounds, but the decision was challenged by Virgin Trains, a joint venture between high-profile billionaire Richard Branson's Virgin Group and Stagecoach.

Completion of Acquisition

Completion of acquisition of bus operations in Merseyside, Cheshire and North Wales

Stagecoach Group plc ("Stagecoach") is pleased to announce that, further to its announcement on 12 November 2012, Glenvale Transport Ltd, a wholly owned indirect subsidiary of Stagecoach, has completed the acquisition of certain businesses and assets of subsidiaries of FirstGroup plc in Merseyside, Cheshire and North Wales.

ENDS

Deutsche Bank note:
EBITA of £77m came in marginally ahead of our £76m forecast and has grown despite one-off Olympic contracts last year. Business KPIs are all positive: volume growth (for medium term health) is +1%, commercial revenue growth (away from subsidized income streams) is +4.2% and concessionary revenue growth is better than stable at +2.2%. On Quality Contracts, the local authority is due to comment in March 2014 and Stagecoach management remains confident of a relatively benign eventual outcome. Management also sees no change to BSOG or concessionary rates until 2015 UK elections at the earliest.
A clear beat with EBITA of £20m which seems to have been fully driven by US megabus. In the absence of start-up costs underlying margins are likely to have been very good, reinforcing the medium-term potential of the business. Coach America assets are now fully integrated and the management team is now in place to resume mileage growth of 20% next year. Whilst Greyhound competition remains aggressive in some areas, it is in line with expectations and no worse than previously reported. Given the substantial underlying margin improvement alongside LFL top-line growth of 23% we feel incrementally more confident that megabus is a strong multi-year story.
Operationally, rail EBITA of £18m was in line. We had expected the key newsflow to be around extension agreements for West Coast and SWT, but both of these have disappointingly been delayed until H2 2014. We believe the delay is time-resource driven rather than a fundamental disagreement between SGC and the DfT. Nevertheless SGC remains incumbent on its three franchises, is short-listed for Thameslink and DLR and has submitted its PQQ for East Coast in a 90:10 JV with its West Coast partner Virgin. Despite the delay to extension agreements we believe SGC is still well placed to be a medium-term beneficiary in Rail. As an aside, it also seems clear that new franchise structure will transfer almost all macro risk to the state in a GDP risk share mechanism.
We have raised our FY14 EPS forecast by 2% but keep FY15 & 16 broadly unchanged. Our TP increases to 400p by rolling our valuation forward a year to a 12x FY15E EV/EBITA multiple."

Ex-divi wed 5th Feb (2.9p)

Preliminary Results

Financial results in line with expectations
· Adjusted earnings per share* up 5.7% to 26.0 pence (2013 restated: 24.6 pence)
· Full year dividend per share up 10.5% to 9.5 pence (2013: 8.6 pence)
· Net debt+ down £76.4m to £461.6m (2013: £538.0m)
· Current trading in line with management expectations

UK Bus
· Market-leading financial performance and customer satisfaction
· Orders for over £110m of new greener buses for 2014/15
· New contract wins in London driven by good cost control and operational performance

UK Rail
· New West Coast Trains franchise agreed
· Extension of South West Trains-Network Rail Alliance
· £9m invested in pursuing new rail franchise opportunities

North America
· Over 80% increase in operating profit
· megabus.com inter-city services driving growth in revenue and operating profit
· Progress in resolving legal cases at Twin America sightseeing joint venture

Growth opportunities ahead
· Focus on customer service improvements to support modal shift
· Development of megabus.com product and footprint
· Planned extensions or direct awards of South West and East Midlands rail franchises
· Shortlisted for InterCity East Coast rail franchise in partnership with Virgin, with pipeline of other new rail opportunities in UK


more...

StockMarketWire.com
Stagecoach Group welcomed today's announcement by the Department for Transport (DfT) of its intention to award the new InterCity East Coast (ICEC) rail franchise to Stagecoach's venture with Virgin, Inter City Railways Limited (ICR).

Passengers can look forward to new services, quicker and more frequent journeys whilst taxpayers will get a bigger return than they receive under the current temporary East Coast arrangements.

ICR will transform the customer experience for around 20 million journeys a year on one of the UK's major inter-city rail routes, blending the experience, culture and service-focus of both Stagecoach and Virgin. Stagecoach holds 90% of the share capital of ICR and Virgin holds the remaining 10%.

The new franchise will start in March 2015 and is planned to run until 31 March 2023, with the option for a one-year extension at the DfT's discretion. It includes a commitment to deliver £2.3bn* in real terms in premium payments to the Government between 2015 and 2023, providing a higher return to the taxpayer than under the current arrangements.

The franchise is set to see more than £140m invested in delivering an improved service and a more personalised travel experience for passengers. Trains will operate under the 'Virgin Trains East Coast' brand.

StockMarketWire.com
Stagecoach has booked an H1 pretax profit of £98.3m, slightly lower than the prior same period's £98.5m. Revenue totalled £1.55bn, from £1.47bn. It proposed an interim dividend of 3.2p a share, up 10.3% from 2.9p.

CEO Martin Griffiths commented:
"These are a good set of results, reflecting the strength of our businesses in the UK, mainland Europe and North America. We have improved further the travel experience for our customers, provided value for money for taxpayers, invested in public transport and added value for our shareholders.

"Strong partnerships between transport operators and central and local government are the best way to maximise the value in public transport for our communities and for our regional economies. We are proud that our record of significant investment, innovation, and low fares has delivered strong transport networks and high levels of passenger satisfaction.

"Despite facing a number of challenges, our sector-leading commercial bus operations in the UK have continued to grow, helping support the economies of some of the country's biggest city regions. Working with other bus companies and building on our existing multi-million-pound digital strategy, we are planning to introduce smart multi-operator ticketing in key city regions during 2015.

"This transformational initiative demonstrates what can be achieved at local community level without the need for costly and unnecessary regulatory change. "Our megabus.com branded coach services in the UK, mainland Europe and North America have helped create hundreds of new jobs. We have significantly expanded our footprint in mainland Europe and are encouraged by the opportunities in several countries, including moves to open up the inter-city coach market in France.

"There is encouraging momentum in the UK rail sector, with the award this year of several new franchises. We have opportunities to add value from both our existing franchises and new contracts, and to improve services for passengers. In particular, we are working closely with Government and Network Rail to provide new trains, extra capacity and a more reliable service for customers.

"We are delighted to have been selected to operate the new InterCity East Coast rail franchise along with our partner, Virgin. Our plans will deliver a transformation in travel for passengers, as well as value for money for the taxpayer. We are shortlisted for the TransPennine Express franchise and look forward to agreeing new franchises with the Department for Transport to extend our time at East Midlands Trains and South West Trains.

"Overall the Group is in excellent financial shape and we are well placed to drive value through new opportunities in our core bus and rail markets.

"While we have changed our view of the likely divisional mix of profit for the year ending 30 April 2015, with lower expected operating profit from our regional UK Bus and North America businesses broadly offset by other areas, we remain on course to achieve our expected adjusted earnings per share for the year."

Highlights:
· Continued passenger volume growth in commercialised UK bus market: Successful partnership working with government, investment and low fares; Significant further investment in technology improvements for customers; Working with other bus companies to deliver smart multi-operator ticketing in key city regions during 2015

· Expansion of megabus.com coach operations in Europe

· Commercial initiatives to further grow megabus.com in North America

· Encouraging momentum in UK rail sector: New InterCity East Coast franchise due to commence in March 2015; West Coast Trains franchise through to 2017 and performing strongly; Planning for direct awards of new South West Trains and East Midlands Trains franchises in second-half of 2015; One of three shortlisted bidders for TransPennine Express franchise.

StockMarketWire.com
Stagecoach Group said recent trading has been consistent with its expectations and there is no change to the adjusted earnings per share that it is anticipating for the year to April 30.

Like-for-like revenue growth for the financial year to date in each of the Group's main businesses is provided below:

- UK Bus (regional operations), 48 weeks ended 29 March 2015, 2.4%

- UK Bus (London), 48 ended 29 March 2015, 8.1%

- UK Rail, 48 weeks ended 29 March 2015, 9.0%

- North America, 11 months ended 31 March 2015, 1.0%

- Virgin Rail Group, 48 weeks ended 29 March 2015, 7.6%

Trading update

StockMarketWire.com
Stagecoach Group has reported an H1 pretax profit of GBP90.8m, from GBP98.3m. This on revenue of GBp1.97bn, from GBP1.55bn. Interim dividend was 3.5p a share, from 3.2p.

CEO Martin Griffiths said:
"These are a good set of results with overall earnings per share in line with expectations.

"We have continued to invest in making travel better and easier for our customers. Public transport is a shared responsibility between the public and private sectors.

"It is crucial that the investment of transport operators is matched by steps by the public sector to tackle the growing challenge of road congestion, which is holding back the potential of the bus.

"At the same time, shrinking public investment in local transport can impact on the cost of travel and the network of services. We look for efficiencies within our own businesses to protect our customers as far as we can from any impact of Government cuts.

"Our bus passengers in the UK are now benefitting from our new UK Bus website, which enables them to check live running times for their bus services and purchase travel on their smart phones. In 2016, we will also introduce a new mobile bus app.

"In addition, we are on track to complete delivery of smart multi-operator bus ticketing in England's main city regions within the next few weeks.

"Our rail businesses have demonstrated the benefits of a commercially-led approach, with passenger revenue growth and ongoing investment in improved facilities and better information for customers. We are working closely with Government and Network Rail to deliver new trains, greater capacity and more train services.

"We are pleased that the Department for Transport has agreed to extend our operation of East Midlands Trains and plans to extend Virgin Rail Group's operation of West Coast Trains. This will allow us and Virgin to continue to deliver improvements to our customers, attract more people to rail travel and increase the future value of these franchises to Government.

"In North America, we have taken steps to mitigate the impact of lower motoring costs on demand for our megabus.com inter-city coach services by better matching the level of vehicle mileage to current demand. The rest of the North America Division is performing in line with our expectations.

"Overall, the Group is in good financial shape and we were pleased to have put new bond financing arrangements in place earlier this year. Challenges remain in our sector in the short-term but the underlying strength of our businesses across the UK, continental Europe and North America, means we are well placed to drive value for our customers and investors."

Deutsche Bank comment:
"There can be no hiding our disappointment at several aspects of the first half results. Trading has been impacted by a multitude of factors - some new, some one-off and some recurring. A special dividend looks remote until possibly FY17 at the earliest. We have cut our earnings estimates for FY16 by 6%, for FY17 by 9%, and our target price by 15% to 390p. Despite this, and after reflecting on the recommendation and make-up of our earnings cuts, we still believe Stagecoach is a mid-term high return business that is under-levered and not priced aggressively. Today may be grim, but we maintain buy.
The rub is that our operating profit estimates for UK Bus are cut materially (FY16 from £135m to £122m; FY17 from £139m to £134m), similarly for UK Rail in FY17 (FY16 from £66m to £63m; FY17 from £60m to £45m) but London Bus, North America and Joint Ventures are broadly unchanged. Overall we are cutting our Group EBITA forecast by 6%, and also our EPS by 6% with the financial gearing offset by marginal tax rate improvement to 19%. Clearly investors are likely to focus on the £13m cut to FY16 UK bus operating profit. The conclusion however is that nine million is arguably one-off in nature, a combination of weak intercity bookings following the Paris attacks and extremely bad roadworks. The last three to four million however is an out and out slowing of underlying revenue growth. Unfortunately this move has no obvious explanation and is a continuation of regional macro and general passenger weakness. It is this part of the downgrade that carries most weight, and is potentially recurring. As such, we think it prudent to carry forward a £5m cut to our FY17 UK bus forecasts as well. The earnings cut in UK rail, as well as the effective termination of the joint bid with Abellio for East Anglia, are also detailed on page three.
It’s clear that today’s results are disappointing. Our forecast of a special dividend in FY16 has proven too early - we have now moved it back to FY17. Earnings cuts for this year and next are material (c6%-10%) and more importantly impacting the crown jewel that is regional bus. The inability to reach a joint bid with Abellio is obviously disappointing given that the joint venture would have been well placed to win.
But after picking apart the downgrade we find that although some parts are clearly concerning, and potentially recurring, at least half ought to be one-off in nature. Similarly whereas the delay of a capital return is clearly a blow to our thesis, it doesn’t change the fact that Stagecoach is still underlevered – the cash has not disappeared. Taking a step back, even post our earnings revisions and pre-market open Stagecoach trades at 12.2x April-17 which isn’t a price for perfection. Therefore whilst we are reducing our target price by 15% to 390p we maintain buy and see medium term value. Our investment case, valuation, forecast changes and risks are shown on pages three to five.
We value SGC using a FY17 EV/EBITA multiple of 12.0x, a small premium to the five year average. The key risk to our view is a continued deterioration in regional bus volumes."