Scunny Bunny Posted November 18, 2016 Share Posted November 18, 2016 Rolls Royce Capital markets dayvearlier this week. Go to their website for the forward outlook plus accounting ramifications of IFRS15 - fully explained with examples Link to comment Share on other sites More sharing options...
sleepydragon Posted December 6, 2016 Share Posted December 6, 2016 a few things: 1. I think you are only counting 1500 of Trent XWB engines, but there are other engines (Trent 1000, 700) etc. that are being sold. 2. it's 14 airplanes, so it's 28 engines, so per engine profit will actually be even less than your number, I guess? 3. The $580m revenue seems is for service contract only, which has very high profit margin. i think something like 50%. but they loss money on the engine, so the final margin is like 35%.. Interesting writeup on seeking alpha http://seekingalpha.com/article/3311125-rolls-royce-recent-dip-is-an-opportunity-long-term-outlook-remains-intact It is really hard to understand the profitability here. http://www.rolls-royce.com/news/press-releases/yr-2015/pr-29-07-2015-rr-signs-580m-totalcare-engine-support-agreement-with-vietname-airlines.aspx 340M Pounds for 14 engines. That's 24 M per engine. Assuming a 20% profit margin, it will be 4.8 M per engine profit. How long is this total care contract? 10 years? 20 years? That can change the valuation drastically. Does anyone know? Assuming it is 10 years contract. Each year it will make 0.48 Million pounds per engine. There are 1500 engines sold. So that's 740 Million pounds per year profit. Giving it a 10 PE, and we get 7.4 Bn valuation. Today's market cap is 13 bn. Is my assumption reasonable? Of course they have other lines of businesses, but not that profitable. It puzzle me as to why the author claims it is way undervalued. Link to comment Share on other sites More sharing options...
VersaillesinNY Posted January 16, 2017 Share Posted January 16, 2017 Rolls to Pay $807 Million to End U.K., U.S. Bribery Probes https://www.bloomberg.com/news/articles/2017-01-16/rolls-royce-will-pay-807-million-in-settlement-of-bribery-cases The British penalty is the biggest-ever sanction issued against a company by the U.K. "It’s a very large fine which we didn’t see coming: it’s something of a bolt from the blue," said Nick Cunningham, an aerospace and defense equity analyst at Agency Partners in London. "Usually these settlements are relatively moderate compared to the size of the company." Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 14, 2017 Share Posted February 14, 2017 Rolls-Royce Mulls Disposal of Weaker Units as Profit Falls https://www.bloomberg.com/news/articles/2017-02-14/rolls-royce-profit-beats-estimates-on-cost-cuts-airbus-boost Rolls Royce is Lost in the Fog https://www.bloomberg.com/gadfly/articles/2017-02-14/rolls-royce-is-obscured-by-fog Link to comment Share on other sites More sharing options...
sleepydragon Posted February 19, 2017 Share Posted February 19, 2017 Goldman upgraded Rolls-Royce to Buy and Add to conviction list. But be warned, I have noticed that Goldman's "Buy Conviction list" tend to have negative returns after announcements :) Price target is 1030p ------------ Source of opportunity We upgrade Rolls-Royce to Buy and add it to the Conviction List. Cash performance at Rolls-Royce has been disappointing as underlying earnings performance has fallen and the investment burden has risen. We believe the diversified nature of the group and the impending accounting changes warrant a cash flow based valuation approach. We expect company-defined FCF to improve from £120 mn this year to £495 mn in 2018, £1,018 mn in 2019 and £1,547 mn in 2020. Our 12m price target of 1030p implies 55% upside and an 8% FCFe yield in 2020; adding in the substantial (£985 mn) FX benefit implied beyond 2020 would increase this to 12%. Catalyst Aside from 1H results (date TBC) the key catalyst will be program performance, i.e., continued deliveries of Trent XWB on time and continued in-service performance of the engine. Valuation Our 12m price target is now 1030p (from 743p). We value Rolls-Royce on 11.4x 2018E EV/DACF; our target multiple is based on our 2018E CROCI forecast of 15.6% (+100 bp vs. our previous estimates) and assumes a 1:1 relationship between EV/GCI and CROCI/WACC. This compares to the average target multiple of 11x for our coverage. In our view, a cash flow and returns based valuation captures the underlying drivers of economic value. Our previous multiple was 12.1x, which was based on a 2x premium to Rolls-Royce’s historical average EV/DACF. We expect DACF (debt-adj. cash flow) growth to outpace earnings; over 2016-20, we forecast an underlying EBIT CAGR of 21% but improving cash conversion should result in a DACF CAGR of 27%. Our EPS estimates for 2017/18 increase by 8%/6% Key risks 1) FX, a weaker USD. 2) Negative momentum in defence markets, where visibility is lower. 3) Further declines in sanctioned offshore capex. 4) Program risk (Trent XWB, Trent 1000). 5) US Tax reform. Link to comment Share on other sites More sharing options...
xtreeq Posted February 19, 2017 Share Posted February 19, 2017 When did they publish the upgrade? Link to comment Share on other sites More sharing options...
KCLarkin Posted February 19, 2017 Share Posted February 19, 2017 Anyone know what caused the drop on Friday? The Fitch downgrade? Link to comment Share on other sites More sharing options...
sleepydragon Posted February 19, 2017 Share Posted February 19, 2017 When did they publish the upgrade? today or yesterday. Link to comment Share on other sites More sharing options...
sleepydragon Posted February 19, 2017 Share Posted February 19, 2017 Anyone know what caused the drop on Friday? The Fitch downgrade? I think since they reported ER, it has been selling off everydat. The headline earning is awful, but it's mostly from accounting loss on the hedging and one time bribery settlement. I actually feeling better about RR now after listening to Mungers comments about deferring etc.. Link to comment Share on other sites More sharing options...
zizou Posted October 1, 2017 Share Posted October 1, 2017 https://www.reuters.com/article/us-air-france-canada/air-france-flight-with-engine-damage-makes-emergency-landing-in-canada-idUSKCN1C50PV Scary pictures from this Air France engine failure. "The aircraft involved in the incident was an Airbus 380 that was about seven years old, according to airfleets.net, an aircraft database. The engine was made by Engine Alliance, a joint venture between General Electric Co and United Technologies Corp’s Pratt & Whitney unit." Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 12, 2018 Share Posted January 12, 2018 Rolls-Royce Seeks $700 Million From L'Orange Arm Sale https://www.bloomberg.com/news/articles/2018-01-12/rolls-royce-is-said-to-seek-700-million-from-l-orange-arm-sale Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 6, 2018 Share Posted February 6, 2018 GE Engine Venture May Oust Rolls From Emirates A380 Contract https://www.bloomberg.com/news/articles/2018-01-22/ge-engine-venture-may-oust-rolls-from-emirates-a380-contract Link to comment Share on other sites More sharing options...
no_free_lunch Posted March 11, 2018 Share Posted March 11, 2018 Earnings came out a few days ago. Still weak but improving. Looking ahead they are talking 450m pounds fcf this year and 1b fcf in 2020. However the target fcf seems fully priced in relative to 17b market cap. Anyone see value here? https://www.bloomberg.com/news/articles/2018-03-07/rolls-royce-to-deepen-restructuring-following-earnings-surge Link to comment Share on other sites More sharing options...
rb Posted March 11, 2018 Share Posted March 11, 2018 Yes. FCF is depressed as new programs are ramping up. Right now that depression is pretty bad and likely to last for a while as they have a lot of orders coming to be filled. But it won't last forever and when it normalizes it will do so in a powerful way. Link to comment Share on other sites More sharing options...
KCLarkin Posted March 11, 2018 Share Posted March 11, 2018 Earnings came out a few days ago. Still weak but improving. Looking ahead they are talking 450m pounds fcf this year and 1b fcf in 2020. However the target fcf seems fully priced in relative to 17b market cap. Anyone see value here? https://www.bloomberg.com/news/articles/2018-03-07/rolls-royce-to-deepen-restructuring-following-earnings-surge I struggle with this one. I have a small position. RR trades at a little over 1x sales. That seems super-cheap for a duopoly player in a growing, R&D intensive, highly regulated industry. Obviously, margins and FCF and very poor for many reasons. You'd hope that the new CEO would be able to significantly increase margins and cash flow, which would make the current price attractive. But you are already paying for significant improvement. Link to comment Share on other sites More sharing options...
Spekulatius Posted April 11, 2019 Share Posted April 11, 2019 Looking at this one too and have been for a while. It‘s trading around 1.1x sales (~15GBP revenue) and their largest business (civil aerospace engines) responsible for almost half the revenues is still losing money. balance sheet looks Ok, but there are LT customer commitments and pension issues. The turnaround is taking years and the Trent 1000 issues and cost to fix seem to be getting worse. It’s an interesting business, but the two top players in it GE and Rolls Royce are both struggling for different reasons. No position. https://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/annual-report/2018/2018-full-annual-report.pdf Link to comment Share on other sites More sharing options...
karthikpm Posted November 29, 2019 Share Posted November 29, 2019 Steven Wood seems to like this a lot https://www.gwinvestors.com/wp-content/uploads/RR-LN-Update-November-2019-Friend-Version-v2.pdf Link to comment Share on other sites More sharing options...
Spekulatius Posted November 29, 2019 Share Posted November 29, 2019 Steven Wood seems to like this a lot https://www.gwinvestors.com/wp-content/uploads/RR-LN-Update-November-2019-Friend-Version-v2.pdf I bought some shares recently around 700p. My biggest concern is accounting. I am watching the cash flows closely and hope they make their 2019 forecast. Link to comment Share on other sites More sharing options...
rogermunibond Posted November 29, 2019 Share Posted November 29, 2019 This has been a tough turnaround for Warren East. Three years plus and counting. The bulls have been arguing for the installed engine base service cash tsunami that's coming but so far.... Link to comment Share on other sites More sharing options...
karthikpm Posted November 29, 2019 Share Posted November 29, 2019 Does it trade in decent volumes in the US ADR ? or better to buy on LSE ? Link to comment Share on other sites More sharing options...
Spekulatius Posted November 29, 2019 Share Posted November 29, 2019 Does it trade in decent volumes in the US ADR ? or better to buy on LSE ? Volume seems plenty (200k/ day per yahoo finance) and bid ask I soften down to a penny or two. The cash tsunami from service seems like it’s pushed out further and further in the future. They lose money on the problematic Trent engines X1000 Nd a recent credit downgrade is a problem too. They can’t really afford to go non- investment grade and probably would have to raise equity via a rights offering in this case. That’s my biggest concern. Link to comment Share on other sites More sharing options...
sleepydragon Posted November 29, 2019 Share Posted November 29, 2019 Belong to the too difficult box Link to comment Share on other sites More sharing options...
sleepydragon Posted November 29, 2019 Share Posted November 29, 2019 Does it trade in decent volumes in the US ADR ? or better to buy on LSE ? Volume seems plenty (200k/ day per yahoo finance) and bid ask I soften down to a penny or two. The cash tsunami from service seems like it’s pushed out further and further in the future. They lose money on the problematic Trent engines X1000 Nd a recent credit downgrade is a problem too. They can’t really afford to go non- investment grade and probably would have to raise equity via a rights offering in this case. That’s my biggest concern. And they make money from servicing these engines, which used to be very reliable and long life. Now the new engines are under incredible stress and who knows how long they can last. Link to comment Share on other sites More sharing options...
ValuePadawan Posted November 30, 2019 Share Posted November 30, 2019 Anyone have any thoughts on how even a soft brexit might impact RR supply chains? Link to comment Share on other sites More sharing options...
banellie Posted December 1, 2019 Share Posted December 1, 2019 Anyone have any thoughts on how even a soft brexit might impact RR supply chains? At the bottom of page 11 and page 15, this report gets into the implications of Brexit, however, it is worth reading it in its entirety in my opinion. https://www.gwinvestors.com/wp-content/uploads/RR-LN-Update-November-2019-Friend-Version-v2.pdf Link to comment Share on other sites More sharing options...
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