Matrix European Real Estate Share Discussion Threads

[nigelwestm] 23/1/2011 12:11

johnv. Depends a bit on the currency hedging. If we are overexposed to the euro there could be a problem.

But in terms of the property portfolio itself, it doesn't really matter if it is valued in francs or deutschmarks.

Anyway, I think there is enough political will in Europe to mean that the euro will not be allowed to fail. I heard a German economic commentator talk recently about supposed German reluctance to back the euro and the rest of the eurozone. He just said that this view was mainly coming out of the tabloid press and papers like the Telegraph in the UK, and in fact the opposite is true.

In fact, I am far more worried about the health of the pound. The history of the UK for most of the last Century, as the after effects of two world wars impacted our economy and the Empire, has been marked by fairly frequent devaluation of our currency.

The only way out of the financial mess that the Labour Government left us with is to erode debt through inflation. All this talk about the Bank of England wanting to put up interest rates is nonsense in my view: they are trying to achieve the effect on inflation of an interest rate rise by talking about it rather than doing it.

The BoE and the current Government both know that the pound has to be devalued if our debt is to be reduced. They don't care about savers because it only affects the little people who tend to invest their savings in the UK; most of the decision makers have their assets abroad. For instance, did you know that the Monetary Policy Committee has members who aren't even British and don't live here?

The people in debt in the eurozone will just have to take on board the austerity measures in order to deal with their debt. Spain, Greece, etc don't have the power to devalue the euro. But the UK will devalue the pound over time.

[johnv] 23/1/2011 11:46

How risky do you think mere is compared to other property companies taking into consideration they are european and the possible collapse of the euro.

[nigelwestm] 23/1/2011 11:37

This is a great share to hold. The reason that the share price is so low is that the original investors targeted by the trust have seen their investment fall significantly.

Relatively new investors who have got in over the past two years, like myself, have enjoyed great returns so far. But since this is a share that noone in the financial press seems to write about there only appears to be a handful of people involved here (probably a few private investors with a good nose and lots of dosh).

I can't imagine the people behind MERE can go to the usual property investors who invest in their funds and say "I know that we have lost 80-odd per cent of the capital you invested over the past four years, but we're coming back." Even institutions will be twice shy after they have been bitten once, despite the value here that is obvious to the rest of us.

I think it is going to take time, but value will out here. Meanwhile, I am happy to take 9%-plus in dividends (actually more like 15% given my average price) for my trouble.

[johnv] 23/1/2011 10:05

There isnt many companies which have the ability to increase their dividend as well as pay back debt at the same time.

[zangdook] 23/1/2011 06:38

Yes. I'd also be happy if they'd revive their 122p offer; that would get a better take-up than buying on market and still help with nav.

[kimboy2] 22/1/2011 08:54

Having the LTV in the 60-65% bracket costs an extra £1m pa. To reduce the LTV to 60% would cost £10.6m, which would be about 3 years dividends.

IMV the best return to shareholders comes from buy backs at present prices. If they could spend that £10.6m on buying shares at the present 108p (which they couldn't of course) that would increase NAV to 455p by my calculations.

I suppose by giving dividends they are giving shareholders the option to buy back themselves.

At the moment however, as things stand, they have to sort out the FX otherwise it will just get added to the debt in 2014.

[zangdook] 22/1/2011 03:21

I'd sooner they reduced debt than increased the dividend, even though the increase is only around £350k. Every little helps to bring LTV back down. In fact I'd be ok if they forgot the dividend and just reduced debt until it's below the 60% threshold.

[kimboy2] 21/1/2011 11:45

The figures I gave were;

Net rent ....£29m
Admin........£7m
Interest.....£11.5m

PBT.........£10.5m
Tax.........£2.31m

Post tax....£8.19m

EPS.........22p

The one thing I didn't allow for was the FX quartely exchnage contract which I think loses £2m pa until June 2014.

This would bring EPS down to 17p.

On page 4 of the presntation which came with the interims they said that, based upon various assumptions, they expected the dividend of 8p to be twice covered. This would suggest at least 16p.

The assumtions were fairly conservative so perhaps a bit more. I would presume that the increase in dividend is covered twice as well so perhaps things are better than their assumptions.

It's just a pity that the spare cash they have, and are generating, is having to go on this FX contract rather than buying back shares. Perhaps they could sell something and get tucked into a few at a 60% discount.

[sleepy] 21/1/2011 10:42

Kimboy - have been rereading some of your older posts e.g. 1878. Have you a view on EPS now?

[sleepy] 21/1/2011 10:38

I would contribute to expenses if someone competent would visit the Frankfurt property and do a report

[kramch] 21/1/2011 10:17

Frankfurt is by far their biggest asset now Vienna has gone. A 40% void estate is not good news, we need to know what Matrix are doing about it. The German economy is growing, why is this site, close to the airport etc, such a disaster? K.

[sleepy] 20/1/2011 17:11

I also have over 100k shares and share Kimboy's views in 2013 and 2022

[kimboy2] 20/1/2011 16:51

Good. So what is the problem at Frankfurt then.

[nigelwestm] 20/1/2011 16:48

No. You are wrong again. I am long and strong. I suggest you grow a pair!

[kimboy2] 20/1/2011 16:43

I am not nervous. I am a relaxed observer and stakeholder. If I was nervous I would sell and I have no intention of so doing. I am happy to sit and wait for events to take their course and I am pretty certain that the NAV will eventually grow and the gap will close.

It is quite apparent that you are the one who is getting tetchy about any form of discussion regarding the challenges the company faces on the way.

[nigelwestm] 20/1/2011 16:40

Ah. So you are another "cautious long". We see guys like you over on the GKP thread all the time. "I'm long here, but I'm nervous because..."

[kimboy2] 20/1/2011 16:38

I didn't realise it was me you were moaning about.

I am well aware of the discount, which will in the fullness of time be righted, and the dividned which will hopefully be paid in the meantime. That is why I have over 100,000 of the shares.

That doesn't alter the fact that the vacancy levels at one of their properties is stubbornly high, nor the fact that I don't know why that should be the case.

It seems clear to me that if this property was sorted that the NAV gap would be much smaller than it presently is (as well as the NAV being larger).

[nigelwestm] 20/1/2011 16:29

It's not "shoot the messenger". It's shoot the basher!

I don't mind if people come up with some good, solid reasons to sell this share but to post vague bearish comments like "I am not sure what is wrong with the Frankfurt property either" seems deliberately designed to make holders nervous and put off potential new purchasers from buying.

Funny that these guys don't seem to want to mention that the shares are at a huge discount to NAV, nor that the share currently yields some 9.5% in dividends. They only focus on supposed "negatives".

It's like saying that it's a poor deal if I have a five-bedroom buy-to-let flat that I'll let you have for £150,000, even though it is worth £350,000 in the current market and its three occupants are paying £700 per month each in rent (more than enough to cover any mortgage payments). You guys would just focus on the fact that two rooms are unoccupied.

[mathisvale] 20/1/2011 16:26

This BB is for DISCUSSION. That means considering the good and bad points. How else can you reach a balanced investment decision.

The currency hedging, IMO, is a perfectly fair topic for debate, especially if it takes cash that could go to reducing the LTV to below 60%

[zangdook] 20/1/2011 15:58

NigelWestM - 20 Jan'11 - 15:35 - 2014 of 2014 (Filtered)

I really get sick of this sort of shoot-the-messenger idiot who can't allow a simple discussion to take place without personalising everything and making snide comments about posters' motivations.

[nigelwestm] 20/1/2011 15:35

Funny that you guys only seem to appear when there is good news and then you tell us how it is, in fact, bad news.

If you want to knock the share price, then the best way to do it is when they has been a long period of no news (not uncommon with this share) and talk it down. But to appear with your "cautious long" view and other bearish posts when they have just increased the divi by 25% is a little bizarre to say the least!

[kimboy2] 20/1/2011 11:18

I have no idea why they take out these curency hedges either. I get the impression that they intend to reduce the liability from cash flow on an opportunistic basis. That would suggest a pretty good free cash flow given that they are paying an increased dividend.

I am not sure what is wrong with the Frankfurt property either. Germany is in boom conditions and Frankfurt is the largest freight airport in Europe.

[nigelwestm] 20/1/2011 11:08

Ah, so you're a "cautious long". OK, I've come across those before.

Well, if you feel like that I reckon you should sell up now. 105p must be a good price for you.

Me? I'll be holding on. Still at a 50%-plus discount to NAV? And being paid a dividend that works out at around 9% while we hold.

[kramch] 20/1/2011 09:39

No, if you look back on the thread I have been long for 18 months. I know they have good cash flow for the divi, but wasn't expecting the 20% deterioration at Europort and continuing stand off at Nice.
I was expecting their LTV to be below 60% by now with the corresponding reduction in debt costs. Now they're admitting they need to divert cash to reduce their FX exposure. Sorry but I can't see the good news! K.

[nigelwestm] 20/1/2011 09:26

kramch. You short of a few here?