Author Topic: RR - Rolls-Royce  (Read 107297 times)

ValuePadawan

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Re: RR - Rolls-Royce
« Reply #250 on: December 01, 2019, 12:21:21 PM »
Wow I thoroughly enjoyed the writeup thanks!


Spekulatius

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Re: RR - Rolls-Royce
« Reply #251 on: December 01, 2019, 04:59:28 PM »
Wow I thoroughly enjoyed the writeup thanks!

I second this. I do find it strange that  nobody mentions the doomsday scenario:

1) continued weak cash flows cause a credit downgrade to near junk
2) due to customers getting uneasy about RR.L meeting their LT obligation after above, RR decides to do a deeply discounted rights offering
That would cause dilution at the bottom (foreign ADR holders for sure couldnít participate and would get screwed) and permanent loss of capital.
« Last Edit: January 11, 2020, 08:30:45 PM by Spekulatius »
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Spekulatius

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Re: RR - Rolls-Royce
« Reply #252 on: December 10, 2019, 03:34:38 AM »
Valueact leaving the board - shares down 3%+.
https://finance.yahoo.com/news/1-rolls-royce-says-valueact-084809104.html

Probably got tired waiting for the turnaround after 4 years and do some housecleaning for next year. They own a substantial position, so if they sell, it could put further pressure on the stock.
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ValuePadawan

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Re: RR - Rolls-Royce
« Reply #253 on: December 10, 2019, 06:19:30 AM »
I wonder what they are seeing at the board level that is making them wave the white flag. With XWB starting to hit the maintenance schedule I'm expecting cash flows to increase and if they can cut costs and reduce headcount by the end of 202o like they are saying they will it seems like odd timing to say the least.

buffetteer1984

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Re: RR - Rolls-Royce
« Reply #254 on: December 10, 2019, 07:08:36 AM »
Could be tax loss selling for valueact.  It's interesting that they would be doing this as the stock is near a low very similar to their investment in ADS.

ValuePadawan

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Re: RR - Rolls-Royce
« Reply #255 on: December 10, 2019, 07:35:29 AM »
Ya it could be. There are many reasons to sell but only one to buy.

Spekulatius

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Re: RR - Rolls-Royce
« Reply #256 on: January 12, 2020, 06:19:24 AM »
The stock has trended down (after the Valueact representative left the board and they presumable started to sell down their position) and I have added a bit to my position,  it donít have the cojones to make this a major bet. they will announce their 2019 results on February 28 and so far every earnings announcement has been an disappointment. I am particularly concerned about the FCF numbers , as those were very weak for the half year results and I think rating agencies have them under the microscope.

Then there is concern about further deterioration of the Trent 1000 and of course any news with problem with the Trent XWB engine (their largest program) would be a killer.

That said, this trades at 0.8x revenues and if they can turn this around, it should beantworte  at least 2x the still growing revenues at some point. So I think we are looking st least at a 2 bagger plus organic growth if they turn this around. Also the Boeing woes are a tailwind for RR, since they are sole supplier for the A350 and their largest product. The A350 is the main competitor to Boeingís 737 max and I expect it will do very well.
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KCLarkin

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Re: RR - Rolls-Royce
« Reply #257 on: January 12, 2020, 08:11:08 AM »
A350 is competitor to 787 not 737. RR only sells wide body engines.

ValuePadawan

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Re: RR - Rolls-Royce
« Reply #258 on: January 12, 2020, 12:46:41 PM »
Spekulatius I too will be watching the cash flow numbers closely in addition to keeping an eye on whether they are making their numbers in terms of headcount and restructuring as well as reducing R&D spend and if their inventory starts to come down back to regular levels now that the Brexit path is more certain.


As a bit of a tangent I was reading they are looking into the hybridization of widebody engines by the 2030's or so.

This seems crazy to me based on current battery technologies.

The batteries in a Tesla have an energy density of around 240 Wh/kg. The batteries that are being researched right now might have an energy density of 280-300 Wh/kg.

Kerosene has an energy density of around 14,000 Wh/Kg.

Even if jet engines are only 35-40% efficient in terms of kinetic energy Fig. 3.2(https://www.nap.edu/read/23490/chapter/6#37) and somehow electric jet engines somehow get to double that efficiency as they have with automobiles.

They would still need more than 20kg of batteries to replace 1 kg of kerosene. This doesn't even get into the cost of the batteries or their lifespan it just doesn't seem technically feasible to electrify or even hybridize aviation at all in the next decade.

Does anyone know why Rolls are pursuing hybridization? Is it for the PR to keep environmentalists satisfied or am I making a mistake and missing a crucial piece of the electronic aviation puzzle?

Spekulatius

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Re: RR - Rolls-Royce
« Reply #259 on: January 12, 2020, 01:00:35 PM »
Spekulatius I too will be watching the cash flow numbers closely in addition to keeping an eye on whether they are making their numbers in terms of headcount and restructuring as well as reducing R&D spend and if their inventory starts to come down back to regular levels now that the Brexit path is more certain.


As a bit of a tangent I was reading they are looking into the hybridization of widebody engines by the 2030's or so.

This seems crazy to me based on current battery technologies.

The batteries in a Tesla have an energy density of around 240 Wh/kg. The batteries that are being researched right now might have an energy density of 280-300 Wh/kg.

Kerosene has an energy density of around 14,000 Wh/Kg.

Even if jet engines are only 35-40% efficient in terms of kinetic energy Fig. 3.2(https://www.nap.edu/read/23490/chapter/6#37) and somehow electric jet engines somehow get to double that efficiency as they have with automobiles.

They would still need more than 20kg of batteries to replace 1 kg of kerosene. This doesn't even get into the cost of the batteries or their lifespan it just doesn't seem technically feasible to electrify or even hybridize aviation at all in the next decade.

Does anyone know why Rolls are pursuing hybridization? Is it for the PR to keep environmentalists satisfied or am I making a mistake and missing a crucial piece of the electronic aviation puzzle?

I think part of the answer for the battery may be that that peak power is only needed during takeoff or in emergencies, so maybe not much stored energy is needed if a hybrid tech is used. Otherwise itís correct that the power density of batteries is way too low to completely replace kerosene powered jet engines.

Kclarkin is correct that the A350 is a competitor to the larger 787 and not the 737 max. In any case, they are not affected by the 737 max disaster, unlike GE potentially.
Life is too short for cheap beer and wine.