Watch Cable & Wireless (CW.)...

Riz

Experienced member
1,266 5
CW. used to be popular with its growth potential and earnings outloook...this changed after they announced a profits warning last month which caused the share price dip to 430 from around 750...it went up to 515 afterwards and currently at 475...

Normally one would consider possible further dips at the share price having issued profits warning at this unusual market sentiments...

However cw. has got a huge cash pile which is estimated around 9 bln...cw.'s current market value is around 13.3 bln...this raises two possibilities: bids or to avoid them share buy back

Either of them will no doubt see the share price up...bid news/rumours have already started to appear in the press...as Commerzbank AG said last week: "At these levels (a bidder) could afford to make a share offer without seeing any dilution to their own valuation multiples..."

Worth watching with a view of making use of any bounces caused buy bids or share buy back news...

Riz
(No financial advice intended)
 
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Riz

Experienced member
1,266 5
Up today +15 (3.2%) to 490 with a big volume of 21,268,730... also up +0.24% in US on a day when Nasdaq got tumbled down...

I didn't get in today becuase I didn't like the sentiment in the US markets...but getting more interested in this one...chart looks bullish with price and 5 and 10 days MAs all heading up in the correct order...widened up BBs suggesting possible sharp price movements...RSI, MFI and OBV all sharply heading up...stochastics flat at the oversold line however...

I'll be watching this one closely...

Riz
 

Riz

Experienced member
1,266 5
Up +2 at 472...still holding the cash...in the mean time watch cash-hungry circles...

LONDON (FTMW) - Cable & Wireless [UK:CW] has a problem most telecoms companies would love to have - a mountain of cash it has to get rid of.

If Cable & Wireless can't get rid of enough of its £7 billion to £9 billion cash pile quickly enough, then cash-hungry telecoms groups like British Telecom [UK:BTA] or Deutsche Telekom [DE:555750] or Telefonica [US:TEF] might decide to help out by launching takeover bids.

Analysts and fund managers say it's quite possible that these debt-ridden 'dinosaurs' could effectively raise cash cheaply by simply issuing their own shares in an all-share takeover bid for Cable & Wireless. Investors. Banks aren't keen on conventional rights issues or more debt issues at the moment.

The other class of predators could be financial buyers like private buy-out specialists Kohlberg Kravis Roberts or Hicks, Tate Muse and Furst, that could buy Cable & Wireless, strip out its cash and sell off the bits for a profit.

Premium

Given the 64 percent crash in Cable & Wireless' share price in the last six months, many investors would look kindly at a takeover bid at a 30 to 40 percent premium.

But that depends on Cable & Wireless continuing to dither over how to get rid of the cash pile and its share price remaining in the dumps.

"The question is: do you really believe a company with this amount of cash will still be independent in a 12 months time with a share price below 500 pence," said Commerzbank analyst Taco Sieburgh Sjoerdsma.

Unlike its big former monopoly rivals, C&W chose not to invest heavily in buying expensive third generation mobile phone licences or to buy other consumer telecoms businesses in Europe. It focused instead on global business customers.

Surely they'll give it back or buy something?

Many analysts and fund managers have until now been sceptical about the likelihood of a predator taking out Cable & Wireless.

They doubted there would be enough cash and and a low enough share price to encourage buyers. Or, they thought, Cable & Wireless wouldn't leave itself cashed up and vulnerable long enough for such a bid.

But that was before Cable & Wireless' badly handled profit warning last month and the subsequent collapse in its share price.

The management's equivocal attitude to a cash buy-back has increased the fear Cable & Wireless would try to hold on to the cash.

Cable & Wireless' sale of its Australian operation, Cable & Wireless Optus, for £2.7 billion late last month and the sale on Monday of $1.5 billion worth of bonds exchangeable into Pacific Century Cyberworks [US:pCW] shares has intensified the focus on the cash pile. See stories on Optus sale and PCCW bond sale.

Analysts estimate the cash pile at up to £7 billion to £9 billion, which would mean it's more than 50 percent of Cable & Wireless' market capitalisation of £13.1 billion.

Big share buy back no sure thing

The immediate assumption was that Cable & Wireless would return the cash, either through a share buy-back or a special dividend, particularly given the appetite for cash in such a bearish market.

"In the current climate, a return of cash would seem the sensible thing to do," says Barclays Stockbroker fund manager David Harbage.

"The best cause of action would be to return the cash to shareholders," said M&G's head of research John Hatherly.

But Cable & Wireless chief executive Graham Wallace was insistent after the Optus sale that he wouldn't be forced into a cash return. He says the company needs the flexibility for potential acquisitions. Cable & Wireless is expected to give more guidance on its capital management plans when it releases its year results on May 16.

Analysts are sceptical about whether Cable & Wireless could find the right targets and big enough targets to spend all the cash.

Confidence in Wallace's ability to pick the right one has also been shattered by the recent profit warning, which essentially said Cable & Wireless' big move into carrying business data globally hadn't generated the margins it hoped.

Nothing's big enough

Analysts say the only gap in Cable & Wireless' strategy is in web hosting in the United States, where it would struggle to spend more than $1 billion to $2 billion on acquisitions.

So Cable & Wireless would need a complete strategy change - another one - to be able to go on a serious acquisition spree. Cable & Wireless has just finished turning itself into global telecoms group serving business customers. Investors are reluctant to see another change with the current management.

Without a share buy-back of about 30 percent of the stock, Cable & Wireless may be forced to return its cash at the point of a hostile takeover gun.

"Perhaps that's the best thing to happen - for someone to take pre-emptive action to get them off their backsides," said M&G's Hatherly.



Riz
 

Riz

Experienced member
1,266 5
more bid-merges talks...

Interesting article in thisismoney about cw. having £10bn problem and the vultures eyeing this money...

http://www.thisismoney.com/20010408/nm30592.html

Sunday times also tips cw. for its huge cash pile and saleable assets...

"it cannot be long before the telecoms group sees some deals. City experts believe that even in a tough market for the telecom stock, the recent profit warning has put investors off the stock too much. But the group does have a fundamentally sound strategy and deserves to recover from the current lows. Buy for the long term at 495p."

cw. held up well recently...at 495 still worth watching closely...

Riz
 

shelman

1
439 1
Good stuff Riz.
Have a look at, if you've not already done so :-

Cable & Wireless - Exchangeable bond for PCCW stake Buy

Today's exchangeable bond offering for the group's PCCW stake is likely to be well received by the market, helping to underpin C&W's share price. The company has launched a zero coupon bond offering for the 14.7% stake, convertible at a share price for Pacific Century Cyberworks of HK$3.60 in two years' time (compared with a share price last Friday of HK$3.00). Our initial view is that the bond is likely to be well received, because it has an implied volatility below the average for the telecoms sector, and so is likely to appeal to hedge funds. The bond could act as a drag on the PCCW share price, while leaving open the possibility that the UK operator could be left with Cyberworks stock in two years' time if the shares fail to move upwards.

At the same time, however, it will remove the uncertainty over the Hong Kong stake which has clouded the outlook for C&W in recent months. The UK operator will also be able to generate interest income on the US$1.5bn cash raised from the bond, equivalent to around US$150m over the next two years. Because PCCW is currently treated as an investment in C&W's accounts, this should provide a small boost to earnings. We calculate that Cable & Wireless will now have up to GBP7bn of cash by the middle of this summer, compared with a market capitalisation of GBP13bn. Against this background, further speculation seems inevitable regarding possible takeovers and leveraged buyouts.

ABN AMRO Analyst Research on Cable & Wireless News

Yr to Mar EPS P/E EV to EBITDA Yield
2000A 19.38 25.31 6.02 2.45
2001E 16.99 28.87 7.32 2.67
2002E 22.04 22.26 6.68 2.91


Definitions key Country: UK Next Results: 16/05/01

02 Apr 2001 14:00:36:753


Steve

The link didn't work so posted the text
 
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Riz

Experienced member
1,266 5
CW. went up to 531 from 475 since we started this thread...only retraced from 525 to 505 last 2 trading days amid rumours about deteriorating conditions at its US operations...

Figures this week from its trans-Atlantic rivals didn't help as they were suggesting prices in long-distance phone calls were going down...

On Friday Dresdner Kleinwort Wasserstein asked thier clients "to brace themselves for even worse news when C&W reports full-year results on 16 May"...

This caused concerns that cw.s next month results might include a second damaging profit warning...

Expect volatility due to these concerns and bid/acquisitions/share buy back rumours resulting from the huge extra cash...Best to be cautious till results are out of the way

Riz
 

Riz

Experienced member
1,266 5
From Sunday Times April 22 2001:

Although its share price has fallen by almost 70% during the past year, C&W is still valued at £14 billion, about half of which is held in cash. Much of this capital was raised when it sold its 52% stake in Optus, the Australian telecoms firm, to Singapore Telecommunications. The deal gave it a huge war chest to fund acquisitions, pay special dividends to shareholders or set up a share buy-back programme.

"Sentiment about this sector is very bearish, but the company is in a great position and is top of the heap," says Craze. "When sentiment changes the price of this company will come flying back."

The shares are trading on a p/e ratio of 11 and they pay a dividend of 3%.

Riz
 

Riz

Experienced member
1,266 5
Up +9.5 (2.0%) at 481.5 ..

Now that the results are out of the way and they are still holding the cash keeping all their options open, it should be time to watch them again for sharp price movements...I got in at 468 soon out for -7 and back in at 450 still holding...

Riz
 

Riz

Experienced member
1,266 5
Slow but steadily up..+1 to 488 today..

Phillips & Drew Looks for Rebound in Telecom, Computer Stocks
London: Phillips & Drew, the U.K. fund manager that avoided computer and telecommunications stocks in the late 1990s deeming them overpriced, is buying them now betting they're undervalued after last year's market slump.
The London-based money manager is loading up on shares of companies such as British Telecommunications Plc, Cable & Wireless Plc and Marconi Plc, said Robin Hindle Fisher, Phillips & Drew's chief executive, in an interview.
``The massive fall in prices that we've seen has exposed value in some areas,'' Hindle Fisher said.


Re: Interests in the Ordinary Shares of Cable and Wireless plc

The Company was notified on 22 May 2001 that the Trustees of Cable and Wireless plc Employee Share Ownership Trust purchased 191,090 Ordinary Shares.
The price for the purchase of these shares was £4.93581 per share.

Riz
 

Riz

Experienced member
1,266 5
Up +1.5 (0.3%) at 480.5
Still hasn't made the expected move over 500 however..in spite of "Commerzbank has slapped a "buy" rating on telecoms company Cable & Wireless (CW. - news) at 479p."

I am in at good profit but still running to catch the move above 500, maybe being too greedy, well at least it's better than insisting on those consistently going down :)

So running profit not losses..

Riz
 

Riz

Experienced member
1,266 5
Cutting dividends by half while sitting on that cash pile...are they inviting a bid or what?

Riz
 

Riz

Experienced member
1,266 5
CW. bucked the trend on friday going up 14 (3.2%) to 448.5 on arrangements to sell any Singapore Telecom shares it receives following the sale of Cable & Wireless Optus in Australia...

Thus avoiding a retest of year low 430...most indicators ticking up at the oversold area, I think it's worth to rewatch this one

Riz
(no financial advice intended)
 
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