Saga share offer

Tombola591

I'm not really sure either. Was thinking I'll skip this one.

I suppose in terms of insurance costs, I know my elderly parents didn't use Saga for travel insurance as they found it cheaper elsewhere.

le_loup

melbury wrote: »

- didn't know they were in debt to the tune of £1.5bn, that is certainly not very encouraging.

Oh that's pretty typical for a venture capital owned company. They buy it up, load it with debt, take dividends equal to or greater than the debt and thus the company drowns in debt and pays no tax! Then they sell the company with it's debt and make money all over again.
Simple, it's part of what makes unrestrained capitalism so great.

bowlhead99

There is certainly some truth in that generalisation about private equity firms - dividend recaps and other bits of financial engineering are common when the debt markets are good enough to support it. A Telegraph article last month mentioned they did a 1.3bn refinancing recently but didn't give any details about what rates, which banks, how much (if any) the parent company took off the table; they are, after all, a private company.

The same article did say

Credit rating firm Standard & Poor’s today gave a “B” rating to Saga and a stable outlook. The rating agency said that it anticipates Saga’s key credit metrics will remain in the “highly leveraged” financial risk profile category because of the group’s shareholder loans."

Of course, the borrowing is unlikely to remain that high post-listing. In fact, a BBC article a few days ago said they expected the debt to reduce to about 700m. And their credit rating will change when listed because of the different access to capital that they will have going forwards.

They wouldn't be running a very efficient insurance business if they were trying to do it with zero debt. How many listed banks or insurers or credit businesses have no debt? It's cheaper and more tax efficient than equity. And ultimately the high level of private and external debt in the business while it is privately owned is not going to still be there after it's floated.

So, while 1.5bn is a lot of debt for a company which will allegedly have a market cap of 2.2bn, a few hundred million is not unreasonable. We shall have to see what the financials look like when the prospectus is available.

IMHO, people saying things like

"Still undecided about the shares though - didn't know they were in debt to the tune of..."

- the language used is a worrying hint of the countless examples of why retail shareholders should not get involved in IPOs. (no offence intended Melbury!)

If you don't know the details of what a company's P&L and balance sheet and cashflow looks like, what the final price range is going to be and how much debt is planned to support it at what cost, there is absolutely no way you should possibly be decided at this stage. I mean, you could be decided that you would not participate, but you couldn't possibly be expected to have decided that you will participate. It would be like writing a blank cheque out of blind faith or massive customer loyalty, without caring whether you get anything meaningful in return.

As a customer gets some "free" shares, this may make it more attractive to some.

True, if you're an existing customer qualifying for the 5% free shares offer, it may be tempting as a sweetener if you believe the base investment case has enough merit. But you pay a price for the bonus shares in terms of being locked in for a year, which could cost you a lot more than the 5% you stand to gain if you try to hang on for it. So that in itself is not enough if you were sitting on the fence.

If you've already decided that the business fundamentals are good and the expected offer price fair, then it's a nice-to-have on the side - but if you are wavering and you don't think it's a fair price beyond reasonable doubt, then someone throwing you a 5% back hander to buy a lock-up should not tip you into saying 'yes'.

le_loup

Another piece of profundity from bowlhead.
Agree entirely.

sabretoothtigger

Very simple answer to this is look at the market and how long its been going up. I think its been a long since a fall, the flotation is not likely to be a bargain.

Prices are more a reflection of loose money then economic success though we could be worse off; in short buy on gloom and doom and this is not it nor is saga a forced sale, cheap or high growth so far as I know?

Standard Life was a good one, it was pretty much a forced sale. Valuations werent high for it, even so if you had waited it was cheaper after ipo and a few years later much cheaper. Now its doubled.

If someone wants to post up Saga's amazing dynamics then great but its probably going to trackers and other funds who manage large boring companies almost by obligation

dealer_wins

Im not going to be applying for SAGA shares. PE too low, offer price will be too high.

Also the company has a lot of debt and as us youngsters get old we still think we are teenagers and wouldn't dream of using Saga!, hence I see their business declining over the coming years.

Just my 2c

dealsearcher

I am tempted because of the extra share in 20 after one year. However I haven't seen any news of a dividend payment. One share in twenty equates to a notional 'dividend' of 5% payment after one year. You can get 5% dividend with HSBC or Vodafone so I am not sure how good this offer is. And HSBC look particularly cheap at present.

fifeken

dealsearcher wrote: »

However I haven't seen any news of a dividend payment.

This article mentions

Saga has said that it intends to pay an initial dividend payout of approximately 40pc to 50pc of the group’s net income. The company reported £1.2bn of underlying revenues for the year to 31 January 2014 and underlying EBITDA of £222.4m.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/10816990/Saga-IPO-to-value-company-up-to-2.5bn.html

DJBenson

IPO live on HL.

Prospectus is >300 pages long if anybody fancies some bedtime reading

jimjames

For anyone thinking of applying, how does Saga sit with your existing share portfolio? Is it the only share and everything else in managed funds and just a punt or part of a mix of shares in different sectors?