Why Mitie could see another 25% drop in its share price

Key talking points on why Mitie see another 25% drop

  1. According to Jim Artimitage of the Evening Standard, the new CEO Phil Bentley is a sort of fella goes looking for skeletons in Mitie’s cupboard to implement a massive write-down on its assets.
  2. Goodwill is likely to get written down by 45% because Goodwill turnover has deteriorated from 8.1X to 4.8X, helping to drag overall asset quality lower.

Therefore, a write-down of £200m from goodwill will mean shareholders’ value will fall to £206m from £450m

  1. Mitie is likely to see zero sales growth in the future, along with contracting earnings.

In the last five years, average sales grew 2% p.a., whereas cash profits increased by £10m.

  1. The company runs a net debt position close to £170m.


  1. Some people will say Mitie go the way of Connaught PLC, but, in my opinion, this is an unlikely scenario because it has £200m+ in undrawn debt facilities expiring in 2019.


Therefore, the target price for Mitie in the next 12 months is £1.35 to £1.50/share.


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Aquatic Foods, an Naibu waiting to happen


In the past decade, there were 80 listings which originated from China and over this period 45 companies have left the market leaving shareholders empty.

Back then, China was the engine of economic growth for the world economic and was growing four times faster than the UK.

Therefore, it made sense to invest in China because it equates to higher stock returns.


The UK investors had learned their lessons and stayed away from Chinese AIM businesses, even if it has a significant cash balance and orbital growth prospects, these financial results can’t be trusted any longer!

They have stayed away!


You don’t need to talk to the fishes to know Aquatic Foods smell fishy


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Tell the truth or not tell the truth: a dilemma for management in publicly-listed companies

If you are a shareholder, you would be proper pissed-off when a company you put your life-savings on collapses in value.

You start reading the RNS statements they released and start “mind-cursing” the management for its brutal honesty about its short-term outlook.

Other investors might call management up and go mental on their unrealised trading “losses.”


But, do you think management need to hide the truth from shareholders to preserve its share price value and make you sleep well at night?

I guess it will work for a while, but it’s unlikely you will sell your shares before the bad news comes home to roost the share price.

In fact, the company could go bust!


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