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Shangri-LA Asia LSE:SHA London Ordinary Share BMG8063F1068 ORD HK$1
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  +HKD0.00 +0.00% HKD24.85 HKD0.00 HKD0.00 - - - 0 05:00:10
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jimmyloser: iii article: SHARE OF THE WEEK ALLERGY THERAPEUTICS - AGY - Aim In a week when the FTSE 100 finally made an all-time high there were surprisingly few big winners among either the large or mid-caps. A three-day losing streak for the blue-chip index clearly took some froth out of the market, which is why we cast our net a bit wider in search of our Share of the week. In fact, we headed all the way to AIM where an old favourite was causing a stir. We last covered Allergy Therapeutics (AGY) in September following full-year results. Revenue had risen fast, but heavy R&D spend meant big full-year losses and a possible delay to profitability. However, one analyst reckoned an enterprise value (EV)/sales ratio of just 1.6 times made the shares "very cheap", with peers trading on a ratio of three times. It's why Paul Cuddon at Numis slapped a 37p price target on the shares. That article - Allergy Therapeutics tipped to bounce back - was nearly three weeks ago, and things have really taken off since. In the days following our write-up, directors opened their wallets, snapping up 280,000 Allergy shares at 17.75-19.25p. Chief executive Manuel Llobet kicked things off, buying 100,000 at 18p. Finance director Nicolas Wykeman picked up 150,000 at 17.75p, before chairman Peter Jensen bagged 30,000 at 19.25p. This Friday, the share price peaked at 25p, up 45% since the results. It's also a five-month high, and just a penny from the 50% Fibonacci retracement of the decline from the October 2015 best at 35p. Clearly, the market also liked news Monday that Allergy would present data at the World Vaccine Congress, demonstrating how its adjuvants can make "significant improvements" in the effectiveness of malaria vaccines. Data also implies "highly significant" potential for this novel adjuvant system in infectious disease applications using Allergy's Bencard Adjuvant Systems (BAS) technology, we're told. Panmure Gordon has been a fan for ages, and remains a buyer, believing Allergy could be worth 53p a share in time. The broker's sum-of-the-parts valuation is based on enterprise value/sales analysis of specialty pharma and allergy peers for calendar year 2017, estimated balance sheet cash and net present value of its Pollinex Quattro hay fever treatment.
simon gordon: Mad, I remember at peak gold listening to Nigel Farage on King News and his Austrian conspiracy theories. See he's turned up at a Trump rally extolling the virtues of English fascism. What a nasty pair of lunatics. ----- What Investment - 26/8/16: Why I've been buying more Lloyds Banking Group shares, by investor of £1.4 billion Job Curtis, who runs the City of London Investment Trust, a £1.4 billion fund that has increased its dividend for each of the past thirty years under his tenure, has revealed the reasons why he has been investing more capital in Lloyds Banking Group shares. Curtis told What Investment that, ‘the shares have been pretty depressed since the EU referendum, a lot of UK focused shares sold off after the referendum and we think that was overdone. Lloyds is the market leader in the UK, and it is an investment in the UK economy. But the big thing is the dividend, they came through with the dividend last year, and in the results announced recently, the interim dividend went up by 13 per cent. Lloyds looks in pretty good shape, it earns more cash than it pays out in dividends. These days the banks basically have to get the regulators permission for their dividends, but the regulators seem pretty happy with Lloyds.’ In terms of the valuations at which the shares trade he noted that a five per cent yield and that the share price has fallen to the level where it is trading at book value. This means it is trading at the value of its tangible assets which Curtis describes as ‘attractive217;. He is also keen on the investment case for another banking giant, HSBC, and commented that, ‘We think the bearishness is overdone. The most recent results from HSBC were better than expected and the company has been disposing of assets. They sold an asset in Brazil recently and were able to buy back shares as a result, and they haven’t been able to do that for years. It is a top three holding for us in the fund.’ Another stock in which Curtis has been investing more capital of late is Ibbstock, a FTSE 250 company that manufactures bricks. He commented that, ‘there is a need for the UK as a country to build more houses, and of course that means to manufacture more bricks. There are only three brick makers in the UK, and Ibbstock’s yield of 3.8 per cent is pretty good. The shares fell after the EU referendum vote, but the housing shortage won’t be going away.’ The City of London Investment Trust has returned 12 per cent over the past year, compared to 6 per cent for the average fund in the AIC UK Equity Income sector in the same time period. The trust has a yield of 3.9 per cent and trades at a premium to its net assets of 1.2 per cent.
skyship: For those open to suggestions in the Private Equity space: ========================================================== After the bizarre happening last Summer when the LMS Capital (LMS) BoD tried and failed to usurp shareholders wishes for liquidation, many continue to harbour doubts as to the Board’s probity. However, there is no escaping the 4 principal facts: 1. Their past performance with the liquidation process has been impeccable, with 63% of the NAV at the start of the process having already been returned – a figure equal to the MCap at the start of the process 2. The liquidation process is again on track with a 32% tender at NAV in Dec’15 3. At the AGM last month the BoD again reaffirmed the liquidation process and the continuing return of capital through Tenders; and for the first time they put a timescale to completion of the process – essentially by Dec’17 4. The current NAV = 88p; versus the offer price of 63p; ie the shares are trading at a full 28.4% discount, even though in liquidation mode These are the basic facts which should justify an element of research. That research will quickly uncover last month’s AGM statement which revealed that already the Company is refilling the cash coffers – now up to £15m, so likely halfway to what will be needed for the next Tender. So, now one needs to practice a little conjecture. Say the next Tender will be declared again for 28.7% - that would translate to 29.7m shares @, well let’s be conservative and predict an NAV fall from 88p to 85p, so @ 85p would cost £25.25m. Note – we already have £15m in the kitty! So, buy @ 63p…..sell a minimum of 28.7% @ 85p…..yes, that’s a profit of 35% on that part. But wait, it gets better. First, there is the official Tender overage – that was an additional 3.4% in the last Tender, the 4th Tender providing these profitable trading opportunities. Add to that the unofficial overage which arises from having your stock held in a Joint Stock Nominee Account. I got another 7% from Selftrade last time around – a total of 39.4% redeemed at NAV. Many posters on the LMS thread did even better than that. The Nominees overage is a fickle friend paying out better for some than for others – but always more! This aspect will only make sense to the professional investor, but that is what most of you are here on the SHA thread, so I won’t bother to explain further. The final soupcon of information for the time-being. The well-respected IC tipster Simon Thompson has just revisited LMS. He wrote a piece on LMS yesterday. I won’t post his entire article as the IC Online is a subscription site; however, I will post his closing remarks: ======================= “Of course, the fall in LMS's net asset value from 96p last autumn, to 92p at end of December 2015, and to around 88p now will make some investors cautious even though the aforementioned one-off hit on an unlisted investment and the fall in Weatherford's share price account for the vast majority of the decline. However, I believe the discount is simply too deep given the impressive track record of the company in successfully divesting its interests. I also believe that given the surge in the cash pile, and the fact that LMS's uncalled commitments to funds it has invested in is only £4.1m, then it's only reasonable to expect LMS to make another hefty cash return later this year through a tender offer pitched at net asset value, a factor that is simply not being reflected in the share price. The company is due to report results at the end of July and I would anticipate further news on likely capital distributions then. I would point out too that every time the company has announced a tender offer the share price has bounced back strongly. Needless to say, I rate LMS Capital's shares a buy on a bid-offer spread of 62p to 63p.” ==================== So, in a difficult year VALUE is hard to find. LMS certainly represents VALUE. And if you are still looking for a hedge against a plunge in CABLE following an unlikely BREXIT vote, the LMS portfolio is 66% $-denominated. Help yourself @ 63p; and thank me later in the year…
ten bag man: CBUY: News late Thursday of £5.7M cash injection should see this fly today and through the week. Today's share price 6.5P Roberto Sella a long term CBUY shareholder has agreed to subscribe up to £5.7M ten year convertible and non convertible loan notes at 2.33% interest. Some of the loan notes can be converted to shares @6.5P at any time. If the loans are not repaid on the tenth year the share conversion price is 1P Mr Sella has in effect saved CBUY from going bust and also provided funding for growth. The company is also handing out new share options at 10P ( 55% higher than today's share price) Full details can be found by reading the RNS dated 24/03/16. This is absolutely fantastic news for existing shareholders in CBUY 1/ Without this cash injection CBUY would be bust and shareholders will have lost 100% of their investment. 2/ The loan note funding is by far the best solution for shareholders ( placings on the London market for companies in this position are being done at 50% -75% to the then share price at best. 3/ I believe the shares may well have been shorted over the last 12 months on the hope that the company would go down the pan, or / and billions of new shares would be issued ITRO 1P. ( if that is the case their may be a rush to close) One particular shorting web site has been in overdrive this weekend,trying to rubbish Thursdays terrific funding news. In my view it's a case of shooting themselves in the foot. !! 4/Any new investor has to ask WHY Mr Sella would risk a very large £5.7M investment unless he was absolutely sure of a return and on such good terms for existing holders.? 5/The company is now incredibly cheap as the risk of it going bust is removed. 6/ Cost have been slashed in the last 8 months. 7/ A new director is being appointed ( for Mr Sella ) 8/ A new investor is coming on board 9/ The outlook is good (see RNS ) presumably the reason for Mr Sella"s investment. ? 10/ To sum up, so long as things go to plan CBUY could be a rather good long term investment. One can buy ( if one wants to) at the same price Mr Sella can convert shares at and at a 50% discount to director share options
hpcg: P1nk - r.e. buybacks. I disagree. The appropriate way to return capital to shareholders is through a capital return. This reduces the share count, which is what the proponents like, and provides and equal outcome to investors. Buybacks reward only sellers. The buyback artificially increases the share price whatever the level but only whilst it is in progress. For example RIO was buying back shares as the share price declined in 2015; the buyback did not increase the share price, but it did artificially arrest the slide enabling sellers to exit on more generous terms. Once the buyback ends the buying pressure decreases and the selling pressure increases. I do accept that buybacks through generated cash are not a slight of hand, but they are still bad for long term investors. A fairly smart move is to buy shares when a buyback is announced and offload when the chart turns. This is why shares tend to pop on a buy back.
sefton1: "These moves in the market are like a tale told by an idiot: full of sound and fury, signalling nothing" The quotation is attributed to Jack Bogle, the octogenarian founder of Vanguard Group, the world’s second largest asset management group. Jack has a habit of bringing a good degree of common sense during times of stock market stress and in his 86 years has seen a great deal. Furthermore, with US$3 trillion of passive funds under management Vanguard, he is well placed to assess markets more objectively than the active funds that are causing the current upheaval with their manic trading. Jack urged investors thinking of selling amid the current market turmoil to sit tight commenting “This is speculation that we're seeing out there, and you can't respond to it.” While the share prices of some stocks had clearly risen too high, corporate balance sheets are, for the most part, in excellent shape with plenty of cash. The clear exception is the beleaguered oil and gas sector which has been a primary beneficiary of cheap money over the past few years and is now paying the price. However, even in oil and gas world there are plenty of well capitalised businesses that will exit the current maelstrom in terrific shape. The recent fall in stocks and commodities, particularly oil, has raised questions as to whether or not the economy is at risk of entering a recession. In the short term this market mayhem has been for the most part about the oil price which permeates all aspects of the global economy. Until the oil price displays a degree of stability we foresee the speculators to continue to run riot. Saudi Arabia is intent on breaking the back of US oil and gas production to secure their own market share and place itself at the head of the global oil and gas table. With the price now below US$30 per barrel, and no doubt set to fall further still, we sense that the time approaches when US production will fall materially as higher cost US producers throw in the towel. Up to now technological advances have helped the US producers drive down costs and improve production, but geography will ultimately win. Returning to the 86 year old Bogle he concludes that: "In the short run, listen to the economy; don't listen to the stock market," he said. "These moves in the market are like a tale told by an idiot: full of sound and fury, signalling nothing." On home soil, fund manager Gresham House Asset Management (‘GH’) recently published an excellent article on its Investing Strategy. GH commented how value investing has been out of favour with investors for a number of years, effectively since the financial crisis and that the material underperformance of “value” stocks versus “growth” companies is comparable to levels last seen at the peak of the TMT boom in 1999. With investors focusing on growth and momentum companies over the past few years the recent market activity reflects a reality check for the momentum trade. We are now hopefully returning to a time when the proper analysis of fundamentals will be rewarded. Investors have also questioned the business prospects of UK listed WH Smith with its dull portfolio of high street stores. WH Smith has also been going through a transformation with the high street operation essentially being run for cash which is subsequently being reinvested in a growing portfolio of ‘Travel’ venues. It’s hard to visit an airport or train station without coming into contact with WH Smith. The UK group has been returning cash to shareholders through dividends and share buy backs. We anticipate investors will need to pay greater interest to ‘value’ investments in the coming years and focus on real cash returns, high returns on equity and capital and sustainable dividends. So what does it mean for our client portfolios? Small caps Clearly many of the small caps we follow have benefited from the momentum trade with valuations becoming more stretched; although quite a few are also substantially less expensive following the falls of the past few days! However, unlike their blue chip peers, these businesses are also demonstrating real growth, generating plenty of cash and possessing the desired balance sheet strength. While large well established businesses have been the major beneficiaries of quantitative easing and low cost debt, UK small caps have, for the most part had to tread more carefully with debt less freely available. Don't be put off by the violent share price swings of small caps during heightened periods of market volatility such as the one we are currently experiencing; that's the nature of small cap investing and its important not be sucked in Mr Market's dark mood! We remain on the look-out for real value and businesses that are able to demonstrate an ability to generate meaningful free cash and a willingness to return this shareholders in some form. AIM News Real news from AIM quoted companies since the start of 2016 (it’s a busy period for AIM results) has been overwhelmingly positive. News from AIM can also a good gauge of the state of the UK economy with the majority of AIM companies more reliant on the UK economy than blue chips. We summarise below recent news from some of the companies we follow, across a vast array of sectors and industries: Majestic Wine (wine retailer) - Encouraging Christmas Trading Statement Majestic Retail like for like sales grew 7.3% in the Period (versus decline of 1.7% in comparator period) Breedon Aggregates (Quarrying of aggregates and the production of added value products)- Largest ever contract award KBC Advanced Technology (Software technology and consultancy for hydrocarbon industry) - Takeover at a 50% premium, look out for more like this in the oil and gas sector Shoe Zone (Low cost footwear) - Results in line with additional proposed Special dividend bringing yield to 6.8% at current share price Quartix Holdings (Subscription-based vehicle tracking systems) - Trading statement confirms revenue and profits are anticipated to be ahead of market expectations. Smart Metering Systems (Integrated metering services company) - New domestic smart meter contract wins as part of the UK Government programme, requiring domestic energy supply companies to provide all of their customers with a smart meter in homes and small businesses across the UK by 2020. XLMedia (Provider of digital performance marketing services) - Trading update confirms that the Company expects to exceed current market expectations with the dividend materially increased Plexus Holdings (Oil and gas equipment provider) - New customer contract and region win worth approximately USD$0.6m. Quixant (Specialised computing platforms for gaming and slot machines) - trading update confirms profitability over the 12 months ended 31 December 2015 was comfortably in line with market expectations. The Company has started 2016 well, with a healthy order book which underpins their confidence in achieving market expectations for 2016. We would urge investors to focus on real news and the real economy and ignore the market noise and actions of speculators. Long term investors (and real investment is all about the long term!) should view the current sell-off as a potential buying opportunity to acquire interests in good businesses at much fairer prices. Fundamental Asset Management Ltd
henryatkin: Don't forget your investment dividend allowance Posted on 20 November 2015 by Ian Cowie, Sunday Times columnis The Chancellor of the Exchequer has announced a new dividends allowance which will enable shareholders to receive £5,000 a year tax-free income in addition to any existing tax shelters, such as ISA and pensions. Dividends are the income paid by shares, usually twice a year but sometimes quarterly, and they are not guaranteed. It is important to remember that share prices and dividends can fall without warning and you may get back less than you invest in the stock market. Investment trusts are companies listed on the stock market that invest in other companies to seek income or growth or a mixture of both and which aim to diminish the risk inherent in stock markets by diversification and professional fund management. Investment trusts can help you benefit from the new £5,000 a year tax-free income allowance. A SIMPLE WAY TO INCREASE YOUR TAX-FREE INCOME With effect from April 6, 2016, everyone will be allowed to receive up to £5,000 annual tax-free dividends regardless of their other income. This announcement in the Summer Budget 20154 means shareholders will be able to increase the cash-in-hand value of dividends without needing to use tax shelters, such as Isas, to do so. At present, dividends are paid net of basic rate tax deducted at source. So most people have no further income tax liabilities on dividends from equities, another name for shares – including investment trusts. But the new allowance means everyone – including high earners, who may be liable to tax at the higher or top rates of income tax – can receive up to £5,000 tax-free income from shares, without needing to keep these shares in a tax wrapper. This simpler system will mean that only those with significant dividend income will pay more tax. If you’re an investor with modest income from shares, you’ll see either a tax cut or no change in the amount of tax you owe. Dividends received by pension funds that are currently exempt from tax, and dividends received on shares held in an Isa will continue to be tax-free and need not be declared on your self-assessment tax return. The new tax-free dividend allowance should be seen as complementary to existing tax shelters HOW WILL TAX-FREE DIVIDENDS WORK IN PRACTICE? The dividend allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive. For example, at the time of writing, JPMorgan Claverhouse Investment Trust is yielding just under 3.5% – that is, dividends paid expressed as a percentage of the share price equal nearly 3.5%. So more than £142,000 could be invested in JPMorgan Claverhouse shares held outside Isas or other tax wrappers and the current yield of less than £5,000 could be taken tax-free. Claverhouse aims to provide a combination of capital and income growth from a portfolio consisting mostly of companies listed on the London Stock Exchange. Its portfolio consists of between 60 and 80 other companies’ shares in which the fund manager has a high degree of conviction. As another example, The Mercantile Investment Trust is currently yielding 2.8%. So more than £178,000 could be invested in this trust before annual dividends paid would be likely to exceed the new tax-free allowance. The Mercantile Investment Trust aims to achieve capital growth through investing in a diversified portfolio of UK medium and smaller companies. It pays quarterly dividends and aims to increase the income it pays at least in line with inflation. However, it is important to remember that dividends are not guaranteed and may be reduced or cancelled. You may get back less than you invest in the stock market. Investment trusts aim to diminish the risks inherent in stock market investment by diversification – spreading assets over many different underlying shares to reduce exposure to setbacks or failure at any one company – and professional fund management. So it makes sense to consider investment trusts as a way to utilise the new tax-free dividends allowance. WHAT WILL HAPPEN IF MY DIVIDEND INCOME EXCEEDS £5,000 A YEAR? When the tax-free dividend allowance7 is introduced on April 6, 2016, new rates of tax will be applied to dividend income that exceeds £5,000 per annum. As a result, basic rate taxpayers – that is, people whose income during the fiscal year that ends on April 5, 2017, does not exceed £43,000 – will be liable to pay 7.5% tax on dividend income that exceeds £5,000 that year. Higher rate taxpayers – that is, people whose income exceeds £43,000 but is less than £150,000 during 2016/17 – will be liable to pay 32.5% tax on dividend income that exceeds £5,000 that year. Top rate taxpayers – or people whose annual income exceeds £150,000 – will be liable to pay 38.1% tax on annual dividend income of more than £5,000. Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance. DON’T FORGET TO ALSO CONSIDER USING YOUR ANNUAL ISA AND PENSION ALLOWANCES For the reasons set out above, the new tax-free dividend allowance should be seen as complementary to existing tax shelters, rather than as a replacement for them. The dividend allowance is a new tool for tax-planning, not an alternative or substitute for existing tax shelters and allowances. So, while many investors will welcome the new freedom to receive up to £5,000 annual tax-free income from shares, it makes sense to also consider utilising your Isa and pension allowances to build wealth tax-efficiently. These enable individuals to place up to £15,240 in an Isa and up to £40,000 in a pension each year. But all these allowances are annual – they expire on April 5 each year – so it really is a case of “use them or lose them”. JP Morgan Investor Insights.
simon gordon: Here's the IW piece - 11/11/15: SVM's Veitch: UK financials are safer holdings than ever before Neil Veitch, manager of the SVM UK Opportunities fund, has said the period of heavy fines for UK financials is coming to an end, with renewed dividend payments by Lloyds marking the sector's transformation into a safer investment option. The manager (pictured) of the £104m fund has been increasing his exposure to financials every month since June to reach a weighting of 22.7% against the IA UK All Companies sector average of 15.5%, including a 5% position in Lloyds. "In general, we are fairly optimistic on UK banks, but we have also considered the downside risk for many of these share prices should we turn out to be wrong, which we do not think is currently that high due to elevated multiples in the market," he said. "We are not outright bullish – we know banks will not return to their pre-crisis levels of profitability – but with the amount of regulation increasing and the regular payment of fines subsiding, we believe financials are perhaps safer holdings than they have ever been before." Like many of his peers, Veitch highlighted Lloyds as a particularly attractive investment, after the bank resumed dividend payments earlier this year and the government announced plans to offload its remaining 12% stake next spring. He said his positive view on the stock has remained unaffected by recent share price drops, as the bank reported weaker-than-expected third quarter results and mounting PPI costs. "Lloyds showed improvement in its tangible group value and the share price reaction was churlish, with many people reacting because they are long the stock," he said. He expects the company to offer more attractive dividends than the average FTSE All Share yield of 3.5p per share in the future. "If Lloyds can get to a point where it pays a 5p dividend, that to me argues the case for a share price of around £1," he said. "In a low interest rate environment, a 5% yield is quite an attractive risk/reward proposition relative to the opportunity set in the market place." The SVM UK Opportunities fund has returned 49.8% over three years to 2 November, according to FE Trustnet, outperforming the IA UK All Companies average of 36%.
simon gordon: What Investment - 23/9/15: Lloyds shares can gain 67 per cent in two years, thats why I have bought £115 million worth, but I won't buy Tesco shares, says star fund manager Steve Davies, manager of the £1.6 billion Jupiter UK growth fund which has returned 58 per cent over the past three years compared to 31 per cent for the average fund in the IA UK All Companies sector in the same time period, has revealed that while he expects shares in Lloyds Banking Group to gain around 67 per cent within two years, but he won’t invest in Tesco shares right now. Davies is optimistic generally on the investment case for UK banks generally, taking the view that, ‘they, not the oil or commodity stocks, are the best recovery stocks on the UK market right now. I don’t think the valuations will get back to the very elevated levels that were seen in the late ‘90s, but they can get to closer to the historic average, and that is considerably higher than now.’ Davies continued, ‘There are three factors that I believe will drive investment returns. The first is costs cutting, there is now greater automation of many of the functions that banks perform, and customers move towards electronic banking in greater numbers. The second is that for several years the UK banks have been making money, but then have seen it whisked away in fines, compensation and regulatory issues. That should recede a little in the coming years. The final factor is simply the growth of the UK economy, as the economy expands so so the opportunities for the banks.’ He invests in RBS in his fund, but believes that the premier opportunities within the sector are Lloyds, his largest single investment, and Barclays. On Barclays he commented, ‘People keep talking about the investment bank, and worrying about it, but they forget that Barclays has a retail bank and Barclaycard, both exceptional businesses that on their own may be worth more than Lloyds. There will be a new chief executive comes in, but I don’t think he needs to do anything radical.’ Davies ascribes a target price to the shares of all of the companies in which he is invested, this is the price he believes the shares should be trading at or near two years from now. In the case of Barclays, he remarked that his target price is £4.30, which is considerably higher than the £2.49 share price at the time of writing. He added, ‘The chairman of Barclays has set the staff the challenge of doubling the share price, we aren’t quite that optimistic, but then we are only thinking of it on a two year time horizon, he is thinking more long-term.’ Turning his thoughts to Lloyds he commented, ‘This is the largest investment in the fund. But as the regulatory and other issues recede, we think it will be in a position to increase the dividend to around 6p.’ This would represent an increase in the dividend of around 800 per cent. He added, ‘The chief financial officer of Lloyds has said he believes that every 0.25 per cent increase in UK interest rates will add £100 million to Lloyds profitability.’; Davies continued that his target price for the stock is 120p two years from now, which would represent a gain of 67 per cent on the current share price. He added that his investment style means he won’t invest in shares where he can only see a potential upside of 10 or 15 per cent, preferring instead to think in terms of doubling his money. The lack of significant upside is the reason why he won’t presently invest in any UK supermarkets, including Tesco. He remarked, ‘The recently appointed chief executive of Tesco, well I don’t think he has done anything wrong, there is nothing I would suggest he do differently, but I think the growth of the discounters will continue to put pressure on the margins. I also believe that the market has underestimated the amount of work that needs to be done to repair the Tesco balance sheet. They have already sold an Asian business and some other assets, but they are likely to have to continue to either sell assets or do a rights issue. So it becomes a case for the shareholder of getting either less assets per share, or there are more shares issued for the same amount of assets, either way it is not an attractive proposition, I started my career as a UK retail analyst, so I have been looking at the supermarkets closely, and I would like to think I know what I am looking for, and I cannot make the numbers work.’ Davies has no current investment in large cap UK mining stocks, believing that commodity prices will stay at the present low levels on an ongoing basis, he is also shunning Shell and BP. ‘I think we are in the camp that believes the oil price will stay lower for longer, the US fracking companies have been able to smash their costs lately, cutting staff, focusing on the more productive wells and technological innovation, People forget that fracking is a relatively new industry, and the technology is changing rapidly. Even if the Saudis were to try to tighten the market and push prices up, I think that would just see the fracking companies come back pretty quickly and increase their own production.’ Davies fund was 20th best out of 270 funds in the sector in the 2014 calendar year, posting a gain of 7 per cent, compared to 0.64 per cent for the average fund in the sector in the same time period.
skyship: I know a couple of us here follow propcos and also hold LSR. They are now well worth more than a casual look by the value investor: ==================================================== Tertiary property investment company Local Shopping REIT (“LSR”) has proved a helter-skelter ride over the past 21months. From a start in Sept’13 at 25p, the shares have traded: 25p/32p/25p/40p/32p/37p…and now back to 28p. Great for swing-traders; not so good for those that BUY & HOLD! Over that time the new managers Internos, brought in to implement the new liquidation policy approved in Jul’13, successfully sold 50% of the portfolio (Aug’14), so relieving the pressure on the Balance Sheet from the excessively high 82% LTV pertaining at the time. In Q4’14 they confirmed the marketing of the 50% balance, attempting to make another single block sale rather than liquidating via piecemeal sales. A buyer has been in the wings for some time; and with the Commercial Property sector still buoyant, interest rates still low and the General Election providing a positive result for business, it might well be that a single block sale could still provide an early, profitable exit for shareholders. There has to come a time however that Internos should call time on negotiations and enter into a more active asset management and disposal programme. The lack of news has caused the shares to drift back to an enticing level; such that just this week activist fund Damille Investments 2 has announced the £4.6m purchase of a 19.9% stake from long term holder New Solera – an investment company about which frankly nothing is known! Being a listed company one can more readily find out about DIL2. Their investment performance has been pretty dull since their 2011 launch; and they now run a very cautious ship, with 50% of their portfolio in CASH. Plainly they see LSR as a mis-priced opportunity – see Extracts below: Extracts from Chairman’s Statement in the Annual Report to 30th Nov’14: ========================================================= “At the date of this report the Company is cautiously positioned, with weightings of 49.25% in equities and 50.75% in cash (including net working capital) at the Year end. Since launch the Company has invested over £93 million and realised over £61 million, generating a realised gain of approximately 14.4% on its investments. Our view remains that near term the outlook is challenging for the risk averse investor. Our investment philosophy is that the price paid for an investment is the most important factor in mitigating the risk of permanent capital loss…………………. ……………….. In this environment – where the risk of permanent capital loss is high – we believe it is prudent to maintain a healthy cash balance. Fortunately, periods of extreme complacency such as the present do not last forever and we continue to monitor markets for the mispriced opportunities we seek and have traditionally exploited. In short, we believe that market volatility will increase and that the Company is very well placed when it does so.” They go on to say under the OUTLOOK heading: “There are a number of issues influencing market sentiment. The most obvious of these is the long-running support to markets provided by central banks through their ultra-loose monetary policy. It is clear to us that without such support, markets would likely not be trading at such elevated levels. What is less clear, and what concerns the investment community, is what will happen as stimulus is withdrawn and policy tightens. The Company is positioned with this probable headwind in mind. The Company is cautiously positioned and we have every expectation of being able to deploy further significant capital in a variety of existing and new holdings subject only to securing those investments at a sufficient discount to our opinion of the realisable value of those investments. The key is to apply patience and discipline in pursuing our investment strategy. In strongly rising markets and extremely benign market conditions this can be difficult but we are confident that this is the correct course to take. The Company’s aim remains to invest in situations where we believe the share price represents a significant discount to the realisable net asset value and then to realise that value in the medium term. We are confident that our investment strategy and processes will continue to provide attractive returns in the medium and longer term. Whilst we do not make macro judgements, we believe quantitative easing (“QE”) has distorted markets and added downside risk. It seems logical to us that if QE has inflated the prices of many risk assets, then its removal may at least lead to some volatility. The Company is well positioned to take advantage of any such volatility in the prices of the securities we track and analyse.” ======================================================= These words in particular seem relevant to LSR: “…we continue to monitor markets for the mispriced opportunities……… to invest in situations where we believe the share price represents a significant discount to the realisable net asset value and then to realise that value in the medium term.” So what of that VALUE? Well, the NAV has remained pretty constant over the past 2 years. As the Company itself admits, the secondary/tertiary High Street retail sector hasn’t really shared in the value uplifts prevalent elsewhere – see this extract from the LSR Interims in May’15: “Whilst other sectors have experienced a surge in demand from overseas and domestic institutional capital, local shopping has been largely ignored. Good quality shopping assets continue to sell well at auction, particularly when located in attractive towns or larger cities, but there is little investor appetite for lesser quality stock.” In those same Interims the NAV was stated at a static 42p; or an adjusted 47p stripping out the reducing debt swaps liability. The debt is dated to end Apr’18, but fortunately, as stated at the end of the Chairman’s statement accompanying the Interims, the hedges expire in just 12months time: “Since the change of investment strategy adopted by shareholders in July 2013 we have sold GBP84.2 million of property, representing 49% of the Group's portfolio at that time. The remaining assets have been marketed and ongoing discussions are taking place with an interested party. In the event that those discussions prove fruitless then we will continue with a sales programme of individual assets or small portfolio sales. The majority of the interest rate hedges attached to the Group's debt expire in June of next year. This should result in a significant reduction in the Group's financing costs, with a corresponding improvement in cash flow, enabling us to accelerate the pace of disposals unfettered. To that end we will seek, subject to market conditions and capacity, to complete the disposal process by the end of 2017 and return cash to shareholders as soon as possible thereafter.” So, one might assume that if Internos are successful in flushing out a single buyer, shareholders might expect a c40p pay-out in perhaps just 6months time. If instead they have to work for their fees and go the longer route, then shareholders might expect a higher net figure, perhaps nearer 44p, but will have to wait almost 3 years to get that figure. Either way, LSR surely represents great VALUE, as the GRY on the former would be 90%pa (a 40% gain in just under 6months); whereas the latter would provide a GRY of 16.9%pa to 31 Mar’18. An outlier view might be that power rests with the Buyer in this case, so an offer resulting in just 38p for shareholders might still gain acceptance, especially as that would still result in a 33.3% gain from the current oversold 28p. LSR is a classic, out-of-favour and oversold asset play, which benefits from the one simple positive – it is in liquidation mode, so that discount WILL narrow and the value WILL be returned – perhaps sooner; perhaps later. They represent a great value buy at Friday’s offer price of 28.5p. ================================================================= NB: At the time of this posting they are on offer @ 28.0p amidst quite high volume compared to their usual activity..
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