The Lemon Fool

What are people thinking of BT share price at 99p?

Buy, hold or avoid?

I'm holding. The old argument was that it had a big pension fund deficit. I think that that no longer applies.

I first bought at privatisation at 130p, and I see that I took some profit in 1999 at 1357p, and again in 2013 at 340p, and yet again in 2015 at 479p. But again I have bought back in at lower prices along the way.

They are too cheap at this price. The value of copper in their wires must be way above this level. Something will happen eventually.

TJH

£10Bn market cap and noise of £15Bn (loose change for many) takeover offers, could see a 50% upside. Almost worth rivals just buying it to asset strip and destroy it. Bung the government another billion or two to also destroy its pension fund liabilities.

P/E Ratio is currently 4.2, which is 4th lowest in the FTSE100 as I understand it. I'm looking to hold for 7-10 years anyway.

Half the cost of a bag of chips....so "cheaper than chips". Who will buy...who will be allowed to buy?

The same is true of Centrica..? ? ? (just urging caution!).

I am a holder. The pension fund is still I think an issue, but I dont think it is that exposed to equity.

johnhemming wrote:I am a holder. The pension fund is still I think an issue, but I dont think it is that exposed to equity.

Apart from the prospect of a bid, why on earth would anyone hold BT? No dividend and no prospect of one for this year or next. No growth plan that I can see. The pension fund is the least of the problems.

Dod

A forecast PE of 5.4 has to be a good reason.

It does not strike me as a business that is going to disappear. Then again I tend to buy stocks that are out of favour as they appear to be priced at less than the value.

ReallyVeryFoolish wrote:

Dod101 wrote:

johnhemming wrote:I am a holder. The pension fund is still I think an issue, but I dont think it is that exposed to equity.

Apart from the prospect of a bid, why on earth would anyone hold BT? No dividend and no prospect of one for this year or next. No growth plan that I can see. The pension fund is the least of the problems.

Dod

I think it's more the other way round. The pension fund has a very poor performing sponsor. The business is now a pension fund with a pretty small telecoms (in the world scale it's very small) business attached.

RVF

You may be right. Anyway I cannot see any attraction in it and I have as a customer I cannot say that their service is much good.

Dod

Whilst the deficit in the pension fund is down to £1.1 billion, it could easily shoot up

BT said: “Our defined benefit pension schemes, in particular the BTPS, could become more of a financial burden as a result of future low investment returns, changes in inflation expectations, longer life expectancies, a more prudent approach being taken (e.g. if BT’s financial strength is viewed as having worsened) and/or regulatory changes.”

It has £53 billion of liabilities and £52 billion of assets. Big numbers compared to BT's £9.9 bn market cap.

It does seem to have a track record of always being behind the curve

As many have said it is a pension fund with a hobby.

scrumpyjack wrote:Whilst the deficit in the pension fund is down to £1.1 billion, it could easily shoot up

BT said: “Our defined benefit pension schemes, in particular the BTPS, could become more of a financial burden as a result of future low investment returns, changes in inflation expectations, longer life expectancies, a more prudent approach being taken (e.g. if BT’s financial strength is viewed as having worsened) and/or regulatory changes.”

It has £53 billion of liabilities and £52 billion of assets. Big numbers compared to BT's £9.9 bn market cap.

It does seem to have a track record of always being behind the curve

As many have said it is a pension fund with a hobby.

All of these are reasons why BT would be unpopular with the market. Whether the discount in the price hence makes it worth buying is, of course, a separate issue.

I don't personally like buying stocks which are popular with the market as their prices tend to be a bit high.

johnhemming wrote:

scrumpyjack wrote:Whilst the deficit in the pension fund is down to £1.1 billion, it could easily shoot up

BT said: “Our defined benefit pension schemes, in particular the BTPS, could become more of a financial burden as a result of future low investment returns, changes in inflation expectations, longer life expectancies, a more prudent approach being taken (e.g. if BT’s financial strength is viewed as having worsened) and/or regulatory changes.”

It has £53 billion of liabilities and £52 billion of assets. Big numbers compared to BT's £9.9 bn market cap.

It does seem to have a track record of always being behind the curve

As many have said it is a pension fund with a hobby.

All of these are reasons why BT would be unpopular with the market. Whether the discount in the price hence makes it worth buying is, of course, a separate issue.

I don't personally like buying stocks which are popular with the market as their prices tend to be a bit high.

The corollary of course is that when prices tend to be 'a bit low' it is often for a good reason and I think that is the case with BT.

Dod

The outlook could be a slowly declining, periodically failing, business. This would justify the current price.

ReallyVeryFoolish wrote:

bluedonkey wrote:The outlook could be a slowly declining, periodically failing, business. This would justify the current price.

The issue with BT unlike the vast majority of other companies out there, it cannot be allowed to fail due to it's (almost) monopoly stake in the UK's telecommunications infrastructure.

RVF

But that means shareholders interests are a long way down the priorities and it can be allowed to stagger on as a quasi-nationalised entity paying no dividends.

Which posts (and I am not quoting any because I think they are all relevant) demonstrates why narrative affects the share values. Whether the narrative's effect on the value under values the stock or over values it is a matter of varying judgment. I personally go for "not over".

ReallyVeryFoolish wrote:

bluedonkey wrote:The outlook could be a slowly declining, periodically failing, business. This would justify the current price.

The issue with BT unlike the vast majority of other companies out there, it cannot be allowed to fail due to it's (almost) monopoly stake in the UK's telecommunications infrastructure.

RVF

I hold (and bought more at the end of March) and am looking at this as a longer term recovery opportunity.

In the near term, I expect BT's market to hold up, unlike many other businesses. A world of confinement, and videoconferencing from home, is not one where I expect lots of people to be economising on the their broadband.
Longer term, investment in 5G by cellular operators (of which BT is one) will be driven by smaller cells in the radio network, knitted together with a fibre backbone. They are well positioned for this.

One of the COVID imponderables is how much it will thin the ranks of pension liabilities by the time it is all over.
Also, the corresponding inflationary surge and increase in rates that feels almost inevitable over the 3-5 year horizon would do much to reduce the deficit.

Very uncertain future, but one with sufficient upside to be worth hanging onto.

The issue with BT not being allowed to fail is not to do with their near monopoly market position (assets could be resold) but the political storm that would result from letting an army of semi-civil service pensions that have been parked there go tits up.