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发表于 2012-11-26 04:16 PM
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本帖最后由 jamesmith 于 2012-11-26 04:46 PM 编辑
S&P and Fitcher downgraded Western Union with similar reasons...
1) outlook is bad, branches were closed due to compliance issues
2) raised dividend and continue buyback even though outlook is bad...so they were worried about does WU have enough cash flow to keep up if things got worse
I expressed similar view in the early post...WU's buyback was not a good decision in the previous years. I don't think WU has short term liquidity problems though. if things do get worse, they just have to slow down buyback...however this might effect stock price, and create a even better entry position :)
I still have the position I entered at $12.26...I will set a stop order in case things got worse.
heheboy 发表于 2012-11-5 12:52 PM 
I think they have about 0.5 mil agents worldwide, their customers are mostly the ones without bank a ...
Fitcher cuts Western Union rating
Nov 15 - Fitch Ratings has lowered the Issuer Default Rating (IDR) for The
Western Union Company (Western Union) and all senior unsecured ratings to 'BBB+'
from 'A-'. The Rating Outlook is Negative.
The ratings downgrade reflects the following considerations:
--Western Union provided initial guidance for 2013 that is significantly below
expected 2012 results. Specifically, the company believes revenue may be flat to
down modestly but GAAP operating income may be down 10% to 15% as margins
decline.
--The company is planning to lower pricing for international remittance services
in certain corridors beginning in the fourth quarter of 2012 in effort to regain
lost market share in certain regions. The company is also planning to increase
its investment in compliance and technology in the coming year which will
increase operating expenses.
--Western Union raised its dividend per share by 25% beginning December 2012.
Fitch estimates that the company's new dividend rate represents approximately
20% of expected 2013 EBITDA. This level is well in excess of similarly rated
entities at the 'A-' level.
--The board of directors authorized an additional $550 million share repurchase
plan which expires Dec. 31, 2013. The company has $194 million remaining on its
2012 authorization which expires at the end of this year.
--Fitch believes that the company's decision to increase its dividend and
maintain its share repurchase activity in the wake of unusually poor guidance
for 2013 is indicative of a change in philosophy at the company in terms of how
it expects to manage the balance sheet and capital allocation going forward.
Fitch believes there are several drivers behind Western Union's need to reduce
prices. The primary issue is the company's loss of the majority of its agents
for its Vigo and Orlandi Valuta (OV) brands in Mexico related to new compliance
regulations. These brands have historically been positioned as lower priced
service providers for the U.S. to Mexico and Latin America corridors. Fitch
believes Western Union will reduce prices at its Western Union branded agents to
make up for the loss of Vigo and OV agents. In addition, Western Union has held
prices relatively firm the past two years on average across its business which
has resulted in EBITDA margin growth for its consumer to consumer segment but
has evidently led to the company pricing itself out of certain markets. Price
initiatives over the next year are intended in part to offset the lost
competitiveness of the past 24 months. Fitch notes that the company undertook a
similar initiative related to its domestic U.S. remittance business in late 2009
that subsequently resulted in significant revenue and market share growth.
The Negative Outlook reflects Fitch's belief that there is a significant
increase in event risk following the third quarter earnings announcement as the
stock price has declined nearly 30%. Fitch estimates that Western Union now
trades at a forward enterprise value to EBITDA multiple of approximately 6x.
Fitch believes that this could lead to a potential third party leveraging event,
either in the form of an LBO or an activist investor forcing a leveraged
recapitalization of the company. Of note, Fitch believes that the floating rate
notes due March 2013, the 6.5% senior unsecured notes due February 2014, the
3.65% senior unsecured notes due 2018 and the 6.2% senior unsecured notes due
June 2040 contain some form of a change of control provision.
The ratings could be lowered if Western Union significantly increases leverage
to fund shareholder friendly actions or if EBITDA profit margins do not rebound
from the historically low levels expected in 2013. The ratings could be
stabilized if Western Union's pricing initiatives lead to material gains in
share and revenue growth as well as a rebound in the equity valuation of the
stock.
Fitch believes that Western Union's core business model remains intact as does
its superior competitive position. Fitch believes that cash-based remittance,
particularly on the receive side, will continue to represent the vast majority
of the overall market which limits the potential competition from cash-less
based remittance alternatives. As a result, Western Union's strength in breadth
and scale of agent locations will likely remain fundamental to the business.
Fitch believes that these recent developments may lead to lower EBITDA margin
expectations longer term for the company, although it is equally possible that
margins will rebound with strong revenue growth. Either way, Fitch expects the
company to remain the dominant remittance provider with strong margins and free
cash flow as well as a high return on invested capital. This supports the high
investment grade nature of the credit but also leads to significant event risk
from investors that see an opportunity to leverage the balance sheet.
Credit strengths include:
--Extensive domestic and growing international agent network with a strong
worldwide brand.
--Revenue stability from strong global diversification and consumer exposure.
--An asset-light business model with a largely variable cost structure due to
the company's network of agents which generally own and operate the retail
locations.
Credit concerns include:
--The compliance risks associated with regulations governing Western Union's
business in numerous jurisdictions worldwide. The company recently received a
subpoena by the U.S. Attorney's Office in California related to an investigation
against a former Western Union agent. The company was also notified that it is
the subject of an investigation into structuring and money laundering. It is not
possible to estimate the potential liability, if any, to the company from this
action.
--New payment technologies could challenge traditional remittance services,
particularly if certain economies broadly adopt cashless payments, however, this
trend will likely take years to materially impact Western Union, if at all.
--Event risk dominated by shareholder friendly actions as the ratings
incorporate Fitch's expectation that Western Union will use the majority of its
excess free cash flow for stock buybacks and acquisitions.
--The risk of adverse political environments or legislation impacting migration
flows although this risk is mitigated by Western Union's broad geographic
diversification.
--Significant foreign currency exposure given broad international
diversification although natural hedges in the cost structure of the business
essentially protect profitability as a percentage of revenue.
--Longer term, Western Union is likely to face increased competition from
regional and multi-national banks entering the remittance market. However,
Western Union's relatively unique customer base represents a potential asset to
financial institutions looking to offer traditional services to migrant workers
which the company may be able to monetize in the future.
Liquidity as of Sept. 30, 2012 was solid with cash of $1.4 billion and $1.5
billion available under a $1.65 billion senior unsecured revolving credit
facility, expiring January 2017, which fully supports Western Union's $1.5
billion 4(2) commercial paper program. In addition, free cash flow was
approximately $700 million over the latest 12 month period.
Total debt as of Sept. 30, 2012 was $3.4 billion consisting principally of $150
million outstanding in commercial paper with an average term of one day, $300
million in floating rate (L plus 58 basis points) notes due March 2013; $500
million in 6.5% senior unsecured notes due February 2014; $1 billion in 5.93%
senior unsecured notes due October 2016; $400 million in 3.65% senior unsecured
notes due August 2018, $325 million in 5.253% senior unsecured notes due April
2020; $500 million in 6.2% senior unsecured notes due November 2036; and $250
million in 6.2% senior unsecured notes due June 2040.
Fitch has lowered the following ratings of Western Union:
--IDR to 'BBB+' from 'A-';
--Senior unsecured to 'BBB+' from 'A-'; and
--Senior unsecured credit facility to 'BBB+' from 'A-'.
Fitch has affirmed the following ratings of Western Union:
--Short-term IDR at 'F2';
--Commercial paper (CP) program at 'F2'.
The Rating Outlook is Negative.
WHAT COULD TRIGGER A RATING ACTION
Future developments that may, individually or collectively, lead to negative
rating action include:
--A significant increase in leverage to fund shareholder friendly actions; or
--If EBITDA profit margins do not rebound from the historically low levels
expected in 2013.
Future developments that may, individually or collectively, lead to positive
rating action include:
--The current Rating Outlook is Negative. As a result, Fitch does not currently
anticipate developments with a material likelihood, individually or
collectively, leading to a rating upgrade. |
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狗仔卡
发表于 2012-11-6 04:54 PM
