Property Recycling Share Discussion Threads

[9461dick] 07/4/2008 11:44

From Hardman & Co January newsletter
Property Recycling Group has placed its Stanton, Suffolk distribution site on the market through Savills. The agents appear to be suggesting a possible sale value of in the region of £9m, compared to the £1m book value. This suggests a possible profit, if a sale is achieved, worth 22p a share. We would caution that valuing a site of this nature (93 acres with B8 permission for a major distribution depot) is far from straightforward. Also, putting a property on the market is by no means the same thing as selling it. However, the current share price is only 32p.Investors should be hugely encouraged by this. Also, Property Recycling Group has appointed J M Finn Capital Markets as its NOMAD. The announcement has unfortunately done nothing to stem the weakness in the shares, which we think is probably due to clients of the previous NOMAD selling. The shares have now halved from their mid-2006 peak and are trading significantly so far below their probable real asset value that they really stand out as a value proposition even in the hard hit property sector. Book asset value is 32.4p, but this figure is very historic and almost certainly a considerable understatement. There are several interesting points on individual properties that could benefit from further information. First is the Stanton site, where Ikea had an option to purchase that it allowed to lapse at end-December. There are very few new sites in Britain with the appropriate planning permission that are capable of hosting a major distribution base, but this is one of them. It is an old WW2 airbase, is situated close to the A143 and was purchased in 1997 for just over £0.7m. It is zoned for commercial and industrial use, and covers 93 acres. Ikea had taken out its option many years ago when property prices were considerably lower than they are now, and the fact that the option has expired unexercised should lead to a significant increase in value for this site. This property now has B8 planning approval for a 1.2m sq. ft. distribution centre. The eventual buyer will have to find approximately £2m to fund section 106 off-site highway improvements. Another site of great interest is the 44 acre property at Hensby near Huntingdon. This is zoned commercial and industrial and has a waste management licence for composting, a business that is hugely popular at the moment. The site is let and producing £260,000 p.a., but is only two years off a rent review. It was purchased for £1.8m - or £41,000 an acre. It is worth a great deal more now, even in the current difficult market for property, and the value will leap once more on a favourable rent review

[9461dick] 01/4/2008 08:30

Reco,
Did you see that they have just bought another site for 2 million?
Just need to sell one now and the share price will go up!

[recommended] 13/3/2008 12:29

Thanks 9461 you have of course confirmed my thoughts about this company that it should probably be private as it is treating shareholders in a rather shoddy manner! If there is a good financial reason not to revalue each year why not say why? I take the point that you think the shares are at a low point and you may be right. However, I can't be sure as i don't know what the asset value is now as we are not being told! Call me cynical but I would not mind betting that if they were revalued there would be a reduction in the asset value. Why should this property company be the only one not to give an annual figure like every other property company? Further why should it trade at asset value when every other propco trades at a discount (to rebased asset valuations). I love the space that the company operates in but at this price I could be paying 50% more than is reasonable. If the assets are 30p now, reduce valuation by 15% and you get 25.5p, take a 20% discount to that figure and hey presto you are at 20.4p. So not for me yet!

[9461dick] 11/3/2008 10:50

I'm not an accountant but I guess there is a good financial reason not to revalue each year. The Rackham family own over 50% of the shares, Unicorn and Asset Value Investors own a large chunk between them so they must know what the assets are potentially worth and are happy. They don't need to communicate to small investors like myself. The family have a track record of making money and I am confident that the current share price is a very low entry point. I am in this for the medium term and I'm not worried that I am currently in a loss position. When the share price moves it will happen very quickly - so buy a few now!

[recommended] 11/3/2008 07:10

9461 I also saw the hardman report last year but the world has changed rather a lot! Whilst I completely agree that gains (hopefully!) will be booked at point of sale,we are somewhat in the dark as to what the uplift might be, fair enough as we don't know what planning applications are anticipated but I don't think that it is asking too much to have the sites revalued once a year. I don't own any shares but would like to at a sensible price as I am a big believer in the planning process adding huge value BUT the company is doing zip to help. We don't even know what its assets are worth today. The future is the future and one can go to work finding out what things may be worth in the future but I don't know the starting point!

On reflection the directors would only need to say that in their opinion the assets are worth the same as they paid for them and they don't see any point in a revaluation. Having said & done nothing i think is treating shareholders in a rather shoddy manner. Perhaps the company should be private & not quoted.

[spaceparallax] 10/3/2008 15:00

I stand corrected. Interesting to see a Hardman update.

[spaceparallax] 10/3/2008 15:00

I stand corrected. Interesting to see a Hardman update.

[9461dick] 10/3/2008 10:54

Space,
I am basing my comments on what I have read - particularly Hardman & Co report 19.06.07. which says "Most of its sites are carried on the balance sheet at cost, suggesting significant scope for uplift upon revaluation". You will see from the Prop website that they have carried out improvements to all of the sites since purchase (some of them several years ago). I'm not sure how it works exactly but I guess that there is no benefit to revalue sites regularly. However, the gains will appear at the point of sale. For instance the Stanton site was purchased in 1997 for £0.7m and now has planning permission for a large distribution warehouse that IKEA had an option on but did not take up. They are looking for another buyer and the sale price would be several millions.
Does that make sense?

[9461dick] 10/3/2008 08:43

If you do some research I think you will find that the assets are on the books at cost and are worth considerable more. A revaluation would push up the NAV.

[recommended] 10/3/2008 07:54

Interesting finals, no revaluation of property assets and shares trading at NAV. What if revaluation showed drop of 15% like the rest of the market and shares traded at 30% discount to that figure? Ooops!

[spaceparallax] 31/1/2008 12:42

What's this? A rise.

[9461dick] 28/1/2008 16:28

Pug,
I cannot disagree with you. I realise that the wider market is the cause of the decline in the share price for this company, I think it has been overdone. They have enough rental income to cover their costs and no borrowings. Their landbank was already undervalued and they won't overpay for more. They don't do many deals but the next one, buy or sell, will be a significant pointer to the future. 2007 results will be interesting to see and I hope they pay a dividend again.
I remain optimistic and wish I could afford more shares!

[geologic] 25/1/2008 09:28

Is it REAL yet?

[9461dick] 17/1/2008 13:30

These have to be a bargain! The property sector has been badly hit but this company should not be included to the same degree. There has been no news and very few trades and the share price is being dragged down. I still have faith that the price will return to 60p plus in the next few months - now is not the time to chicken out.

[spaceparallax] 17/1/2008 12:15

Well Phil,

I just keeps getting cheaper - without some sort of positive TS, it's quite possible that the share price will decline further. I'm in two minds whether to hang in or not, having reassured myself for a while that it would recover.

[energyi] 28/12/2007 05:06

(From a thread on GEI- anyone interested in US property here?):

QUOTE (Rudi @ Dec 28 2007, 01:21 AM)
Although I agree that the builders may be a leading indicator for direction,
I don't agree that they will move together in the way you are suggesting with that chart.
UNQUOTE
- -

(DrBubb):

???
The chart shows the history of how they HAVE moved together in the past.



Look, I do agree that House prices will be more "sticky" to the downside. We are seeing that already, I think. But so long as the builder stocks remain under severe downwards pressure it should make sense to stay away from buying property. And even if there is a bounce which turns into a move breaking the downtrend, I still think you will have another 6-12 months before UK property hits bottom.

I watched how well this bellwether worked in the UK, and then used HK property developer share price movements to help me time my aggressive move into Hong Kong property, just under one year ago. I will remain learn, andwatch for signs of a breakdown in that indicator.

Here's the cycle from another thread:



I think the US builders may bottom in 2008 or 2009, after a sharp fall*
...and the UK builders maybe a year later. I would then be alert for a buying opportunity within 12 months of that bottom.

- - -

*Sharp Fall?
Here's an update of the CTX/Centex chart for the last ten years



It is not impossible that we have seen the lows already.
But the 18 1/3 year cycle would suggest a low next year (2008) or maybe 2009.

[philjeans] 21/12/2007 14:17

Looks very cheap to me at this rock bottom price.

Picked up 10k yesterday. This will be a lumpy journey but profitable in the medium term.

[9461dick] 21/12/2007 14:14

You can find them at propertyrecycling.co.uk. I supposed the reports have been prepared for the company so may paint a slightly rosy picture. However the facts are there for you to come to your own conclusions.

[9461dick] 21/12/2007 09:13

Space,
Have you read the Hardman reseach reports? It says that the properties were on at cost and don't take account of improvements. The NAV should be safe.