First Group Speculation

[First Class]

RE: First Group Speculation
Major banks are advising clients to get rid of their shares in First!

Quote:FirstGroup continued to fall back following last week's shock withdrawal of the West Coast franchise amid bid irregularities at the Department of Transport. It lost another 5.2p to 190.9p, with Deutsche Bank the latest to issued downbeat note on the business. Recommending clients to sell...

The markets appear to think that if they fail to secure Thameslink/Great Western franchise they are pretty much done for.

Quote:Profitable extensions to First Great Western and First Capital Connect [franchises] offer a last chance saloon. Otherwise 2014 will be another "transition year", the dividend will definitely be cut and FirstGroup will have a tricky decision to take regarding debt reduction, further asset sales and/or a rights issue. The shares look cheap both pre and post a rights issue...

My view is that if they don't win the two franchises, any assets, (e.g. depots etc), under performing will be sold off desperately to try and get some income.

If they don't return a decent dividend, you aren't going to get many investors!

First Group are rated BBB- with negative outlook by both Standard & Poor's and Fitch.
Anything lower than a BBB- rating is considered a speculative or junk bond.

In comparison, Arriva has an AA rating, which is very good, only 2 ranks below the top. However, Stagecoach Group is barely doing much better than First, with the same BBB- rating, albeit with a stable outlook.