Cheap FTSE shares abound in this market crash! Many will ultimately recover and go from strength to strength. However, some may never regain their former highs. And some may even go to zero.
The five companies I’m looking at today have several things in common. They’re excellent businesses, in my opinion, with good long-term growth prospects. But I also reckon they have the financial strength for near-term survival. All five have raised new equity in recent weeks, well supported by institutional investors. Furthermore, you can buy their shares today at discounts to the prices those institutional investors paid.
5 cheap FTSE shares
The five cheap FTSE shares I’d buy today are National Express, SSP, WH Smith, JD Wetherspoon, and Gym Group. The table below shows some details of their equity fundraisings, and their current share prices and market capitalisations.
|
|
Amount raised |
Placing price |
Current price |
Market cap |
|
National Express |
£235m |
230p |
210p |
£1,290m |
|
SSP |
£216m |
250p |
230p |
£1,228m |
|
WH Smith |
£166m |
1,050p |
899p |
£1,176m |
|
JD Wetherspoon |
£141m |
900p |
870p |
£1,047m |
|
Gym Group |
£41m |
150p |
133p |
£221m |
National Express said last week: “Even in this unprecedented lockdown, the group continues to generate positive EBITDA and cash flow.”
The equity placing adds to the company’s existing cash and undrawn borrowing facilities, providing additional security for near-term resilience. But also flexibility to invest for the future when the Covid-19 crisis recedes. Indeed, management told us: “We are already seeing a number of growth opportunities as existing and potential new customers seek a financially secure and reliable operating partner.”
National Express’s share placing diluted existing shareholders by just under 20%, but the shares are currently trading 56% below their pre-crisis high. As such, I think they offer great value today.
2 travel-related bargains
SSP is a leading operator of food and beverage concessions in travel locations worldwide, including airports, train stations and motorway service stations. WH Smith also has substantial exposure to such locations. Both companies reckon their recent equity placings and increased debt facilities provide them with, in the words of SSP, “a really strong position to manage through this crisis”.
Both firms are assuming an almost total shutdown of the travel market for the whole of the second half of their financial years (ending 31 August, for WH Smith, and 30 September, for SSP). They also assume only a gradual improvement in trading thereafter.
WH Smith’s share placing diluted existing shareholders by 13.7%, and SSP’s by 19.3%. Yet their shares are trading at discounts of 66% and 68% to their pre-crisis highs. These are great opportunities for investors, in my view.
2 more cheap FTSE shares
Value-for-money pubs group JD Wetherspoon and low-cost, no-contract gyms operator Gym Group are currently completely shut for business. How long could they last in the event of a continuing total closure of their estates?
After recent equity placings and securing increased debt facilities, Wetherspoon and Gym told us they have sufficient liquidity “until the end of November” and “for the remainder of 2020” respectively. A total lockdown of their businesses for that long strikes me as highly unlikely, with potential reopenings of some sites as early as July.
Wetherspoon’s share placing diluted existing shareholders by 15%, and Gym’s by 19.9%. Their shares are trading at discounts of 50% and 58%, respectively, to their pre-crisis highs. As such, these are two more cheap FTSE shares I think are great buys at current levels.
