Japan Residential ORD 10P Share Discussion Threads

[ydderf] 31/8/2009 13:56

does the election change anything here...?

[rat attack] 17/3/2009 16:22

Just found out Co cannot gtee paying dividend this year!! Although large discount to net asset seems to be refi risk coming up over next 12 months. Given uncertainty looks like better off elsewhere...

[rat attack] 09/2/2009 11:56

Just taken a small position myself: attracted by the discount to NAV and yield, which I believe compensates for the debt repayment profile!

[callumross] 03/2/2009 14:31

does this one look like it has finally turned? Thinking of getting an initial 10k

[callumross] 23/1/2009 19:48

This comment on JRIC today is interesting - still toying with buying this one.


"Closed-end funds offer enormous value as a dearth of buyers is creating massive discounts on vehicles where the net asset value (NAV) continues to rise, argues Apollo Multi Asset Management's Tom McGrath – even in unloved sectors such as property.


McGrath said the lack of buyers has helped create the massive discounts to NAV which hedge funds and arbitrageurs normally take advantage of, but due to lack of finance even these have been largely absent from the market. This is creating value across a number of sectors though property vehicles stand out in particular, as these have very wide discounts.

Examples include the Japan Residential Property Fund which is listed on AIM and whose share price has collapsed from 100p to 37.75p, at the same time as its NAV has risen from 100p to 180p. McGrath said it offers a seven per cent to eight per cent yield.

The vehicle is also helped by the strength of the Yen against Sterling – something which has been helpful to Sterling investors for the past 12 months, according to Matthew Brett, Japanese specialist equities fund manager at Baillie Gifford"

[monty9] 20/1/2009 18:40

When JPY was about 155 to GBP1, the NAV was £1.21
If the value of property had remained unchanged and the company traded at break even, at today's JPY126, the GBP value per share would be £1.49 against the 38p quote. Speculation I know but that is about a 75% discount...

[monty9] 07/11/2008 16:05

asmagliocco,

yes me too! still pity I didn't sell at the first sign of trouble and re-invest about now....

one other thought, the company is due to be liquidated at some point and the proceeds returned to holders unless its members vote to change that. This means there is a route to realisation. I forget when, might be about 6 years from now. The date is in the placing doc.

[asmagliocco] 07/11/2008 15:35

Thanks for the posts and link Monty9.
That update is a bit reassuring, though the NAV has to be seen as "ephemeral" in current circumstances. The mix of debt schedules doesn't seem overly onerous since the quota at variable rates should become easier to pay.
I agree the share price is way oversold but I'm lacking both guts and cash at the minute to take advantage of it.

[monty9] 05/11/2008 08:35

Hello, anybody else out there?

JRIC just released a most encouraging trading announcement, pls see the link below. The two key points are:

1. NAV £1.21

Remember this is a closed end fund that, if the share price remains in the doldrums, will eventually be liquidated and the assets distributed to its investors.

2. Dividend of 1.5p

This makes a total of 2p for the year, a 5% yield on the current (silly) share price.

[monty9] 03/11/2008 17:57

Just over 6,000,000 shares purchased by 3 CF Milton funds and finally the price has moved up a tad. Reasons for these two events might be:

1. next results will show a small profit or at least approaching profitability

2. newish residential property in the central areas of the large cities (JRIC's target assets) has not decreased significantly in price.

3. the yen has rocketed in GBP terms, and there is 100 million of capital (well, 100M less some losses) in the company, that should produce a mega currency gain. Net asset value might, believe it or not be a little over GBP1.00.

4. As the ludicrous carry trade now seems to be well bust, the Yen is unlikely to fall far from current levels.

[monty9] 21/10/2008 16:55

A buy has just gone through for 2,700,000 shares at 40p

[monty9] 18/10/2008 20:17

tonyd, Regarding JRIC, although I wish I was buying now, not 15 months ago, I believe the asset base remains strong, even if this is largely due to the Yen appreciation. Its a long haul now, for sure, but, IMV, it should recover in time.

[tonyd3] 18/10/2008 11:53

It looks like my worse case scenario is playing out . the shares are nearing 39p. PEJR is 5p

This dreadful . The guys at moneyweek need to be shot for recommending these two shares.

[monty9] 14/10/2008 09:42

asmagliocco

I think JRIC is a very different proposition. Property in the city centres has not really reduced much in price even in JPY terms. JRIC does not invest in property companies, its all direct ownership of property (in a very complex legal framework admittedly). I suspect in GBP terms property values have actually increased over the last 18 months or so as the JPY has risen from 230 to 172, a 25% change. Probably the problem at JRIC was that the market did not anticipate how much of the capital would be spent getting invested, imv it wasn't really evident in the prospectus. Following that there was a freaky 'one off' exchange loss (GBP strengthening) and some impairment of the underlying assets. Given the early stage of the operation and the large work in progress value, the rent being received was still a long way off the target. All this culminated in a P&L that looked dire. However, the situation is now interesting once more.

The phase of aggressively purchasing property is nearing completion (certainly the initial GBP100M equity capital) and has slowed right down; the company should be cash positive about now. Impairment of carrying values is an issue, but as the cost of finance is low and property yields a much higer return, I expect values to be well supported; particularly on newer buildings that have a much improved life expectancy. Sterling asset value is in the region of GBP1 per share (see post 59).

The purchases yesterday look convincing, I only wish it was me, who got in at about GBP1.

All IMV and please DYOR.

[asmagliocco] 13/10/2008 17:34

In relative terms, notable buying today. In stark contrast to poor PEJR (that I also hold).

[monty9] 07/10/2008 14:01

They recently paid a 0.5p interim during a period when fair value write downs and property acquisition costs had put the P&L into heavy losses (allowed in Jersey). I assume the dual purpose was to keep/attract institutions who can only invest in dividend paying companies and perhaps to signal they intend to pay a more reasonable dividend as soon as this is possible. So, I anticipate grater than a half penny, but don't have much of a feel for how much.

[sleepy] 03/10/2008 10:13

What dividends do you think they will pay?

[monty9] 03/10/2008 09:35

The share price is now quoted at 59p. The GBP asset value may be in the region of £1.06. Heavy impairment losses were recognised at the last interims, which we might hope will not be repeated at the full year, or at least be at a much lower level. The company was profitable at the operating level, and this should have improved over the last 6 months.

Its anybody's guess, but I recon there will be some further impairment charges, but nowhere near the size of the last ones. Overall, profitability will perhaps be flat in the 6 months to 31 Dec 08.

In this case the recent strong appreciation of the Yen against Sterling might restore (in pound terms) the net asset price to just over £1 per share:

Last NAV per share at 1/8/08 - 92.2p

Assume no underlying gain or loss
in the value since 30/6/08, the
effect of the Yen's appreciation
will be roughly 92.2 x 214/186 - £1.06

The company should be moving toward cash generation, surely a 45% discount is too high. Perhaps a reasonable target price is in the region of 76p

[monty9] 21/8/2008 11:42

Its been a bad time for all in the property game. In Japan the building companies have apparently suffered most. Their material costs are up and their, as well as their customers', ability finance purchases reduced by the credit crunch. This will result in a reduction of supply and also an increase in the price of a new unit. In time this should lead to firmer values and recover the recent fair value write downs.

Could further decline in the GDP damage values? In the short term maybe, but in the longer term the fact that it currently costs twice as much to rent as the cost of financing a purchase should support capital values from further falls. And further weakness in the economy should pretty much guarantee interest rates will not be increased.

[monty9] 03/4/2008 10:46

The JRIC enterprise does seem to be more for the benefit of the advisors than shareholders. Ironic that the reason assets are still at the float level is the effect of substantial JPY appreciation against GBP. IMV that appreciation is likely to be over; surely the lunatic global 'carry trade' has unwound now and JPY repatriated.

Presumably that money now sits in the domestic economy looking for ways to earn a revenue without taking massive risk. At the risk of stating the obvious, real estate does seem to be a good example of this, particularly in the urban centres JRIC focusses on. I would expect this to increase the value of assets (despite the experts anticipating the opposite) at the expense of yield and hence investment opportunity. JRIC are reasonably invested already so while it might reduce the ultimate income it should not make the operational revenues negative. If I am right that might explain the activist interest - a break even, or slightly better, operation, with good potential break up value.

If the company does continue as planned, it should do well enough. The current dip in sentiment being offset by the windfall GBP gains. The one thing I still can't get my head around is why, given that the management and advisors must have known roughly what the costs of acquiring the properties were, the early operating losses came as such a shock to the market, and did so much damage to the share price. Was this a failure in the IPO doc?

Tony, I agree with your assessment there might be a buying opportunity in the Summer, but if the new investors really do shake things up you could also be looking at profits on what you have got already (at least from today's levels).

[tonyd3] 03/4/2008 08:41

Well the results are out now so we have some information to go on

I think there are a few positive things to explain the stabilization of the share price recently

-A few activist investors have been tempted in so they must see value in breaking the company up and the assets maybe worth more than the whole and will buy more if it falls further

-It is good that they have slowed down investment speed as this will stem the advisor losses and allow them to be a bit more savvy about the market. Intiallly it looked as if they didn't know what they were doing. The activists have spotted this also

-I think delaying things gives them time to assess whether they should have lower leverage in they can get 5 year guaranteed deals.

-As Monty says the difference in 5% yield versus 2.28% interest means they will make money (Although this should not come as a surprise because this is what their original estimates and was what they were set up to do)

Some caution is still required though

-They promised 6% yield and they didn't deliver and it is not clear why ?????, given their original prospectus . They don't pay out any money till late June

-They are not very transparent as an organisation and they will not make any announcements about performance for a long time so investors could get twitchy again (particularly in the sell in May come back in October period nad if the credit crunch tightens
-They are saying the asset values will come under pressure in the medium term . The NAV will drop further
-The GBP versus yen is up 5% this week at 204
-The share price has increased recently so recent good news will be priced in

I don't think the share will now drop to 39p because they slowed down buying . However I do think this share will become cheaper again in the summer and that maybe a good time to buy

[stuart14] 17/3/2008 19:51

If / when we get through his period there will be a hell of a lot of bargains out there.

[monty9] 17/3/2008 14:34

Well the bears certainly have it to date and tonyd's prediction looks about right so far.
But here's the thing. On 31/5/07 the valuation was 85p after some fairly heavy exchange losses (and start up costs, but these should have been anticipated). About 5 months later it was 87.82p. slightly up on the previous value. At this point the GBP/JPY rate was 239. Today the JPY has strengthened to about 195. Assuming the underlying JPY cost of real estate (together with any JPY deposits) have remained the same the GBP value is now about 107p; a very significant exchange gain in other words. Yet the GBP quote has fallen further.
So can the underlying value have reduced over 20% in the last 5 months? I doubt it. The price of rural property is falling in Japan, but no-one is saying that is also the case in the major cities, where JRIC invests. It may be about to fall a little but that is conjecture, there are arguments on both sides.
Then look at the yield against cost of money, about 5% vs about 2.2%.
In conclusion we have:
- a large JPY asset, reported in GBP and a (strongly) strengthening JPY.
- a financial environment where gearing adds to the EPS
- an acquisition of assets that shouldn't weaken, given its yield is several times the cash deposit equivalent.
- losing money for investors.
Amazing!
I remain a holder because if it doesn't recover in due course, I don't know what will.