RM dividend to be sustained says Deutsche Bank

[RobertT]

http://www.thecsuite.co.uk/CFO/index.ph ... ned-454354

The Royal Mail share price (LON:RMG) will find support going forward owing to the continued delivery of the 20p dividend.

However, analysts at Deutsche Bank warn that challenging times lie ahead for Royal Mail plc and as such they retain their Hold rating on the stock.

Royal Mail shares are quoted at 415p at the time of writing, Deutsche Bank have a target share price quoted at 400p suggestion the stock may now be richly priced.

Challenges Ahead

Commenting on the investment case facing RMG, Deutsche Bank analyst Andy Chu tells us:

“We continue to believe that RMG faces significant challenges, with rising competition in UK Mail, UK Parcels and GLS (European parcels).

“In addition, mail volumes are in structural decline and actions from Ofcom, the regulator, in our view, do not seem overly supportive for RMG.

“But RMG does generate strong cashflow and has a strong balance sheet in part due to on-going property disposals.

“Despite the operational headwinds, we retain our HOLD recommendation as we expect RMG to be able to sustain a 20p dividend medium term, which equates to healthy c.4.4% yield.”

Forecasts Cut

Regarding financial performance in coming months, Chu says:

“We are reducing our forecasts materially mainly driven by a weaker outlook for parcels, higher pension costs of c£40m in FY 2015/16 over FY 2014/15, higher costs for GLS Germany, driven by an increase in the minimum wage from 1 January 2015 and translation FX headwinds in GLS.”

[britwrit]

“We continue to believe that RMG faces significant challenges, with rising competition in UK Mail, UK Parcels and GLS (European parcels).

Well, Royal Mail actually owns GLS. What's German for "You should have gone on Google for 30 seconds?"

[wacko74]

“We continue to believe that RMG faces significant challenges, with rising competition in UK Mail, UK Parcels and GLS (European parcels).

Well, Royal Mail actually owns GLS. What's German for "You should have gone on Google for 30 seconds?"

Just shows what so called 'experts' these institutions are. And they have the power to wipe millions off share prices with their forecasts and opinions.

[wandle]

I think you both have egg on your face.

What they were in fact saying is true. Royal Mail faces increasing competition in it's uk and european operations. They were in fact stating that GLS would be affected by competition as well. They were not saying GLS is one our competitors, as you wrongly interpreted it

[clashcityrocker]

What are translation FX headwinds?

[TrueBlueTerrier]

What are translation FX headwinds?

At a guess something to do with the cost of currency exchange.

[k979aaa]

What are translation FX headwinds?

At a guess something to do with the cost of currency exchange.

Yes currency flatulence stinks if your on the wrong end of the stick.