RM investors should lock in their profits

[TrueBlueTerrier]

Royal Mail PLC (LON:RMG) investors should lock in their profits ahead of an uncertain future, says Roland Head.

http://www.fool.co.uk/news/investing/20 ... lrf0010002" onclick="window.open(this.href);return false;

Royal Mail (LSE: RMG) has dominated the investing headlines in recent days, and so far it's been a pretty sweet story for the estimated 93,000 private investors who received shares in the flotation. After floating at just 330p per share, Royal Mail shares are currently worth 489p -- a healthy 48% profit in just over a week.

As a Fool, I wouldn't normally advocate short-term trading, but in this case, I reckon it might be time to cash in your gains and walk away with a smile. Here are three financial reasons to consider selling today.

1. Future property gains are already priced in

Royal Mail watchers reckon that three central London properties earmarked for sale by the company are drastically undervalued on Royal Mail's balance sheet, creating hidden value.
The properties -- in Paddington, Farringdon Road and Nine Elms -- could be worth around £1.2bn, based on the £120m Royal Mail received when it sold a site on Oxford Street two years ago. That equates to 120p per share. But 330p + 120p is still only 450p, which is below the current Royal Mail share price.

2. Not really that profitable

Royal Mail's restructuring over the last couple of years has seen it cut more than 30,000 employees from its payroll, and profits have risen. However, the firm's operating margin was just 3.9% last year, and over the last three years, it has managed to deliver operating profits of just £498m on turnover of £26.5bn. That equates to an average operating margin of just 1.8%.
Given that Royal Mail appears to be about to enter strike season in the run up to Christmas, I wouldn't bet against some extra costs that will make a dent in the Mail's slim margins over the next three months.

3. The honeymoon will soon be over

At the moment, investors are giving Royal Mail the benefit of the doubt. The firm's undervalued property portfolio is fully-priced into the stock and investors are shrugging off the risk of industrial action -- something that postal unions have repeatedly shown themselves to be in favour of in recent years.

I reckon that even a small disappointment could deliver a shock to Royal Mail's share price, so if you want to continue holding Royal Mail's shares for their potential high yield, you need to be committed for the long term.

What's next after Royal Mail?

If you've sold your Royal Mail shares, then it may be worth considering the shareholdings of top UK fund manager Neil Woodford. Mr Woodford's High Income Fund has risen by 1,830% over the last 25 years, transforming an investment of £10,000 in 1988 into £193,000 at the end of 2012!

[redneck]

'And I forgot to mention, I occasionally share a drink with Mr Woodford'.

[DGP1]

I don't mean to make this 'financial genius' look silly but

Royal Mail's restructuring over the last couple of years has seen it cut more than 30,000 employees from its payroll, and profits have risen. However, the firm's operating margin was just 3.9% last year, and over the last three years, it has managed to deliver operating profits of just £498m on turnover of £26.5bn. That equates to an average operating margin of just 1.8%.

how does he get the turnover figure? I looked at the results from last year and it only showed £9.5bn.

It's no wonder the whole financial world is so f**ked up when they can't even look at a sheet and copy it accurately.

[nataddick]

This financial genius has looked at page 8 of the Full Prospectus and has added 2 sets of numbers together for the last 3 years and got one set wrong.

'The Group’s revenue in FYE 2013, FYE 2012 and FYE 2011, was £9,279 million, £8,764 million and £8,415 million, respectively.' = £26,458 million - I agree !

'Operating profit after transformation costs in FYE 2013, FYE 2012 and FYE 2011 was £440 million, £152 million and £18 million, respectively' = £610 million - he is £112 million short ?

Oh well perhaps he has used some other measure of profit to suit.

I have quickly checked the numbers above from the Prospectus and they are consistent with the Royal Mail Group Limited Annual Report and Financial Statements 2012-13 - page 1

http://www.royalmailgroup.com/sites/def ... 2-2013.pdf" onclick="window.open(this.href);return false;