Public Services Properties Share Discussion Threads

[kimboy2] 28/9/2012 11:40

I don't think the valuation that Colliers are using is necessarily higher than those being advertised. They say the retained properties have 1.77X rent cover.

That would mean if there is a valuation yield of 7% that the return to someone who purchased it would be about 12.5%.

The loans are also almost completely non recourse which IMV make it unlikely that anyone would lose their capital at these levels.

[kenny] 28/9/2012 11:30

The gap will not close if it is a real gap. If you wish to take a punt, try the lottery or premium bonds. The spread on PSPI is too big to take any chances and time is not on your side because within a year they have to refinance what they have so far been unable to refinance - so the banks take everything or the company stages a massively discounted rights issue.

I am a value investor and tend to use Ben Graham's investing principles, including his saying:

"The first rule of investing is not to lose your capital. The second rule is not to forget the first".

However, I wish you luck and hope you do not lose too much of your capital.

[loverat] 28/9/2012 11:13

Kenny

Agreed. I do not believe what directors say and clearly the market does not either. However, I think we just have different perspectives on investing. I tend to invest at a particular cycle of a company's fortunes and developement. Perhaps you see investing in a company like this over the much longer term. Longer term is risky.

The point I have always made here is that even allowing for the possible overvaluation etc etc someone investing in this company in the short to medium term might conclude that with a market cap of 13 million versus a declared company value of 60m that this gap(either real or imaginery)will close a little.

[kenny] 28/9/2012 10:52

I find it is always better not to believe what a company's board tells you until you have checked it independantly.

There are lots of sources of research out there - for example for PSPI you can look at European Care's accounts and also go on various estate agents web sites where care homes are advertised for sale. The latter will give you the "real" yield at which care homes are being sold for - which I think you will find is a lot higher than PSPI are using.

[loverat] 28/9/2012 09:57

Well, I suppose we can all analyse and debate these points all day. I still go back to the strategic review where they said they wished to maximise shareholder value and close the gap between NAV and share price This was around 65p at the time when the NAV was £1.30.

Now, the NAV is 50% of what is was but we have a share price at 18% of its previous. Some uncertainty removed and the proceeds of any sales going to shareholders.

Although I acknowledge there is some uncertainty and doubt at the ability of these directors, I struggle to accept that there is no value here at 12.5p. When the strategic review was announced I regarded this as a 'special situation' share. Now I feel it is simply one of those anomolies on the market you see from time to time. I guess the share price will go down a little more before this finally dawns on investors.

[scburbs] 28/9/2012 09:11

German valuation is key. They continue to step down the value of those properties. Average yield has gone 6.7% (June 2011) to 7.22% (December 2011) to 7.81%. There is no real sign that the German market is moving in this manner, so what is driving these valuation falls (commentary from Colliers below is not very informative)?

The increased spread 7.15% to 9.50% from 6.86% to 7.82% indicates that certain properties have taken a significant hit.

"The valuation of the investment properties in Germany was conducted by Colliers CRE, UK. Based on both the duration of the leases and the future cash flows and after due consideration of transaction activity in the market, Colliers CRE concluded that capitalisation rates of 7.15% to 9.50% were appropriate under the market conditions prevailing at 30 June 2012 (30 June 2011 - 6.35% to 7.59% and 31 December 2011 - 6.86% to 7.82%), resulting in an average capitalisation rate of 7.81% (30 June 2011 - 6.70% and 31 December 2011 - 7.22%). PSPI has applied individual capitalisation rates as advised by Colliers CRE to each investment property in preparation of the interim condensed consolidated financial statements."

[kenny] 28/9/2012 08:55

You need to look at the accounts of European Care. From memory, properties that cost them £10m were valued on the balance sheet at about £60m on an operational valuation basis.

So there is plenty of scope for PSPI shareholders to be wiped out. The properties have been on sale for a year and not one sale has been acheived. I imagine the banks have blocked offers for the properties because they would then need to recognise the losses on their loans. Better to keep receiving the interest and hope the values improve over time.

[loverat] 28/9/2012 08:36

Well, I guess the market have always thought these were optimistic valuations - hence the 50% discount which has also been applied. Now there is a 77% discount.

Some uncertainty yes but alot of that was removed with the recent deal. When these results are read and absorbed I would expect to see the gap here closed a little.

[kenny] 28/9/2012 08:28

I think the NAV is still wildly optimistic. Management seems to be hiding its head in the sand about the real value of the remaining properties or, more likely, unwilling to recognise the true value of the properties until they have got buyers.

A number of the remaining care homes are likely not viable as care homes. So they will need to be sold as residential. Because PSPI valued its care homes on a multiple of income, when the current market value "emerges" it will result in a massive further write down.

[swiftnick] 28/9/2012 08:11

Annual rental income on the retained properties is £9.6 million. Not bad given the market cap of just £14.22 million. Obviously uncertainties remain, particularly in terms of rolling over the debt, but I find these figures encouraging.

[loverat] 28/9/2012 08:01

Difficult reading these but do not seem too bad considering and particularly in the context of the current share price. Unless there are any nasties I have missed the share price trading at around 24% of the value of the company.

Assets look like they might be sold and proceeds to investors.

[swiftnick] 27/9/2012 08:41

Interims tomorrow.

[monis] 17/9/2012 09:01

results due soon imo dyor..

[loverat] 11/9/2012 11:44

Small volume still but seems like a few people coming back for another look.

[monis] 03/9/2012 10:54

After the reported rises in property prices in Germany it would be nice to see further rises here.

[greedfear] 31/8/2012 14:05

The spread (18.5%) is effectively killing all trading.

[f stebbing] 30/8/2012 15:39

My family holding company has 550,000 shares which is almost treble the Boards Holding but is .5% of the shares in issue. What kind of Board do we have who stated in December that they were seeking to match the share price to published net assets i.e circa £1.50 result the shares are hovering around 13p and not a word of explanation. Are the large shareholders connected either individually or collectively to the current Board? Why did we need 2 new Directors appointed.

[monis] 29/8/2012 10:45

scburbs - that article you posted sounds even more relevant, thanks.

[monis] 29/8/2012 10:44

That's good news then as the company appears to have invested heavily into the german market. imo.

[monis] 29/8/2012 10:26

scbur- do we still own 100% of the german properties? And have we kept them all?

[monis] 29/8/2012 09:59

Another article 5 months ago.


-----


All sounds pretty good news for PSPI imo dyor.

[monis] 29/8/2012 09:30

These two paragraphs comes from the rns on 4/7/12 which talk about the German properties. dyor

Am I right in thinking that we still own the German properties?

---

3. Background to and reasons for the Transaction
The Company's shares were admitted to trading on AIM in March 2007. At that time the Company had a market capitalisation of GBP100 million and comprised a portfolio of property assets located in the UK, Switzerland and the United States of America. As part of the flotation, the Company raised cash of GBP31 million which was used for investment into the German care home market. The UK portfolio, comprised predominantly care home assets, represented approximately 79 per cent. of the Company's asset base, all of which were leased to the European Care Group and were valued at a capitalisation rate of 6.25 per cent. with an unexpired lease term of 30 years. Occupancy in the UK portfolio at that time averaged 88 per cent. of registered beds and was supported by debt markets which typically offered 70 to 75 per cent. loan to value funding on 5 to 7 year terms at spreads of 1.25 per cent. to 1.5 per cent. per annum. The investment opportunity in Germany, which had similar demographic trends to the UK, focused on securing multiple operators of care homes with lease terms averaging 20 years at a net initial yield of 7.3 per cent. to 7.5 per cent. The Company also announced its intention to commence a progressive dividend policy, initially targeting a 6 per cent. dividend yield supported by index-linked leases against predominantly fixed financing which resulted in the Company's net income increasing over time.

In the three years after admission of its shares to AIM, the Group acquired several assets in Germany at a gross purchase cost of approximately EUR58 million, additional properties in the UK at a gross purchase cost of approximately GBP24 million and refinanced and raised debt of approximately GBP100 million. In April 2010, the Company raised a further GBP21 million through an issue of new shares by way of a 8 for 15 open offer at 70 pence per new share. The primary purpose of the open offer was to raise funds for a capital expenditure programme to expand and refurbish a number of the Company's UK care homes in exchange for rent increases on completion of the refurbishments.