Speedy PLC – Shares, What can be expected & Should I Buy?
Speedy PLC – Shares, What can be expected & Should I Buy?
I have just brought some more shares in this company after thinking over it for the last two weeks.
There were two sides to the argument of whether or not to buy more shares in this company and this is what I came up with. If you can think of anything else that I have forgot to mention then feel free to comment.
The Argument Against
- Hire Industry – Due to the credit crunch, businesses and consumers aren’t spending through lack of credit and uncertainty over the economic future. Consumers don’t spend then businesses won’t spend and invest. Even if they wanted to they may struggle to raise capital. Businesses don’t build, then construction companies don’t build and the services provided by Speedy such as the hiring of toll equipment won’t be needed.
- Rights Issue – The Company has just raised £100m by issuing more shares at a ratio of 9:1 to existing share holders. Basically if you had 900 shares a few months ago and didn’t take up the new shares offered then your investment in today was value has diluted by 9. (Divided by 9). So you may want to buy shares but realise you’re buying into the company less of an amount than you would have a few months ago? – understand?
- Company Debt – The business owes lots and lots of money in forms of loans worth a couple of millions of pounds. Do you want to invest in a company like this? – Although virtually every company is in this type of debt anyways?
- Speedy profits – Didn’t they announce at the end of the March 2009 Financial year they made losses? Around 70m right? – well if they pay off £100m debt on their balance sheet, then even if they occurred another loss of this much then wouldn’t the company see themselves in £30m profit?
The Argument For
- We’re in a credit crunch Yes, but don’t forget at the start of the year Speedy shares climbed to over 248p! – now I know more shares have been issued, blah blah blah, but I think the shares will improve when more data is released on the how the construction industry is doing and how the company is benefiting from raising £100m.
Rights Issue
Although more shares are now in circulation, don’t forget that new capital has been raised from doing this and so will be put to good use and pay off a large proportion of the company’s debts. Meaning that it’s less likely to be affected by interest changes over the next few years. Surely this is a good enough reason ‘to’ invest? The company is improving itself! - Company Debt – I think we have already discussed this as above; A large amount of it will be paid off through new shares.
Conclusion
I think overall with the share price being this low I think it’s a good short to long term investment. The company is improving itself and through paying off large debt it will put itself a good position for the future. The uncertainty over the construction industry is true and a reflection of this can already been seen in the share price, but doesn’t this make it a good time to buy? When shares are low?
I have made my decision to buy and hold, you feel free to make your own mind up.
