Tamar European Share Discussion Threads

[praipus] 09/11/2011 19:21

Agreed Skyship better to have Laxey and Weiss on side with 29% and 10% respectively. Interesting that Laxey have only committed 1.28% of their funds here.

[praipus] 09/11/2011 19:16

langland Peter Gyellenhammar has a holding at MDY I'm tracking the rest of his known holdings in post 4 of the WAM thread.

[sleepy] 09/11/2011 18:55

SKYSHIP - thanks for your 14.31 post. Suspect they will be around or above 35 tomorrow

[langland] 09/11/2011 18:25

Excuse off topic but, Skyship, you may like to look at MDY for a sort of liquidation play.

[skyship] 09/11/2011 18:00

Praipus - not overly concerned, a short-term paper loss likely to be made good and some. I just can't see LAXEY waiting patiently and doing nothing whilst nursing an unnecessary book loss.

[praipus] 09/11/2011 17:51

Grim news Skyship but interesting to compare notes, I'd only allocated 1.6% but bought before you so now down 30% on the entry price!

[scburbs] 09/11/2011 17:50

I put in for a few more, but no one seemed to want the 32.25p I was offering.

[skyship] 09/11/2011 17:20

Good for you - I was sorely tempted but am already at over 6% allocation (7.5% on cost!). Also very heavily committed to property companies overall; so unwilling to add further.

It was only 60k of sales that took them down, so I hope you've made a profitable buy today.

[colonel a] 09/11/2011 15:02

Hope so, picked up some of the slack.

[skyship] 09/11/2011 14:31

Strewth 32.0p-32.75p. We may be in Europe; but this is just absurd surely.

[alanji] 02/11/2011 15:47

The point is that the liability need never be triggered - see scburbs post 260. Of course a purchaser would expect some discount (in case tax laws are changed, for instance) but this is already reflected in the values.
See note 9 to the accounts:
On the acquisition of certain properties, the Group negotiated a purchase price adjustment for contingent deferred tax. The aggregate amount of such adjustments obtained to 31 December 2010 was £5,029,000 (2009 – £5,779,000). It is assumed that in the case of a future sale, any prospective buyer would seek a similar adjustment and so the closing valuation has been reduced to reflect this.
Presumably where there has been any appreciation since acquisition the potential deferred tax is also taken into account in the valuation.

[scburbs] 02/11/2011 15:37

It is a conditional liability for the corporate purchaser and you would expect them to request a degree of discount.

However, as it doesn't crystallise on the purchaser (it is only a potential liability which may never crystallise) you would not expect a full discount. Hence 71p being a prudent estimate.

You also need to bear in mind there are other aspects to buying property companies. In particular there are a number of countries (Norway being one) where transfer taxes which apply to buying properties do not apply on buying companies. In these circumstances a purchaser actually saves money buying property companies and are less likely to seek such a large discount.

[skyship] 02/11/2011 15:28

Tilts - that is rather how I read it, as going forward it is surely a conditional liability for whoever holds the assets.

[tiltonboy] 02/11/2011 15:25

If I have read this all properly, in the event of a takeover of the company the deferred tax position would then fall on the acquiror, which means they would always make an allowance for this in the price they were willing to pay. On this basis, I would tend to use the lower NAV figure.

[scburbs] 02/11/2011 14:51

Skyship,

If Laxey took over the company and sold individual assets through a sale of those assets then you would expect 60p to be the relevant NAV.

However, the only sensible strategy for Laxey would to seek to make corporate sales where an asset sale would trigger a significant tax liability. Therefore, for anyone following this strategy I would expect a result closer to 84p, although they might need to offer some discounts to incentivise purchasers. Your use of 71p seems prudent as I would expect the result to be closer to 84p than 60p.

In 2008 they sold €62m of property and paid €2.4m of tax, in 2009 they sold €92m and paid €1.3m of tax and 2010 they sold €35.5m and paid €0.6m of tax. This shows that the tax liability is not be crystallised in the form of cash tax on the disposals made to date (although they may accept a discount on the property value to persuade a purchaser to take the company).

[skyship] 02/11/2011 14:33

Scburbs - great stuff; but incredibly difficult to get one's head around these numbers.

As a practical example. If Laxey were to make a cash bid for the company then individually sell off all the assets, what in your estimation would be the likely NAV/share achieved assuming current values.

Sounds to me as though you too would assume an achievable realisation at nearer that Gross NAV of 84p..

As I've already posted, even the median figure of 71p means we are at a 50% NAV discount.

In the same way Nature abhors a vacuum, the wider Markets never allow such value to continue in perpetuity; so if Laxey aren't ready to do something the likelihood has to be that someone else will buy their stake and launch a General Offer.

Can't conceive of Laxey accepting anything less than 50p; something in the 55p-60p range perhaps more likely.

Interested in your answer as I'm convincing myself to add here...

[scburbs] 02/11/2011 14:00

The temporary difference referred to is the difference between the effective acquisition cost of the property and the tax book value of the property in the company acquired.

The TEIF accounts treat the corporate acquisitions as if they were asset acquisitions. If you buy an asset for 100 and sell it for 100 then normally there would be no tax. Here if they buy an asset for 100 in the form of the acquisition of a company then if the company sells the asset for 100 then there may or may not be tax to pay (depending on the tax book value in the company which is unaffected by TEIF buying the company). This is the deferred tax which is not recognised.

[alanji] 02/11/2011 13:41

Sky - It is not a question of 84p or 58p. I would use a figure near to 84p. Very near perhaps on the basis that the auditors have been satisfied - no guarantee I readily admit but surely something they are happy with - it is not as though it is hidden away. I have not really noticed this question in other CP company accounts - need to have a look but no time this week.
The deferred tax asset is currently (30 June) 6.6pps. See note 10A of Dec accts and I have no idea of what that is actually worth.
Note 10b lists the unrecognised deferred tax which accounts for the reduction of 26p to 58p. This is described as "temporary differences at the time of initial
recognition arising from transactions treated as asset acquisitions have not been recognised in accordance with IAS 12."
Maybe scburbs can throw some light on what this means - I cannot.

[skyship] 02/11/2011 12:58

Alan - so what NAV are you assuming in yr calcs. Net 58p, Gross 84p or the median figure of 71p?

[alanji] 02/11/2011 12:50

Thanks scburbs. Believe it or not I used to be a tax consultant but was never an accountant. Tax losses as an asset I can understand but as you say they are only worth anything if you can utilise them. I also remember (it was a long time ago) that legislation was introduced to prevent one company selling losses to another company so a buyer of a company could only utilise losses in that company and neither transfer them out or transfer another business in to utilise them. However that was trading losses and, as I said, a long time ago.
Assuming losses can only be utilised within the company being acquired they obviously still have some value to the purchaser but would be heavily discounted.
However, the auditors have signed off the accounts so they must be satisfied with the valuation placed on the deferred tax asset? The values of property held which has a deferred tax liability have been discounted in the accounts to reflect what a willing purchaser would be likely to pay because of the potential liability - presumably the deferred tax assets have been similarly discounted?

[scburbs] 02/11/2011 12:12

AlanJI,

Agreed, the deferred tax assets (unrealised losses on properties (i.e. would generate tax losses if they sold) and realised tax losses) are rather dubious (i.e. can they ever really be used particularly the unrealised losses).

However, they are stripping those assets (or at least the losses on investment properties bit with is most of it) out of their adjusted NAV numbers, so I haven't worried too much about them as I am already treating them as close to nil.

[praipus] 02/11/2011 12:08

scburbs, thank you, definitely getting clearer. Bit like the old split cap NAV calcs you have to consider all the liabilities.

AlanJI: I thinks it's where an asset depreciates faster than usual..

[alanji] 02/11/2011 11:57

Excellent description of 'normal' deferred tax, scburbs.
However TEIF are showing deferred tax as a credit which I have never seen adequately explained.

[scburbs] 02/11/2011 11:44

Praipus,

The deferred tax provided is only the tax liability that has arisen post acquisition. Where TEIF have bought properties within companies then they may acquire an inherent tax liability (i.e. the tax that would arise if that company sold its asset). That inherent pre-acquisition tax liability is not provided in the accounts, but will be crystallised if they sell the property from within the company that they acquired. If they sell on the company then it will not be triggered.

The unprovided deferred tax can not be totally ignored as market practice can change as to the acceptability or benefits of corporate deals. However, based on the sales to date there is no indication that this inherent tax has been materially triggered by the disposals made to date. You can see the gap between the two numbers slowly closing, for instance the NAV to 31 December 2010 including all deferred tax rose by 3.4p against a 1p rise in the normal NAV. In addition if it was being triggered you would see large tax payments in the cashflow statement. These have not appeared.

The other way the tax can be reflected is in a reduction in the price that a purchase pays for the company containing the property (i.e. the purchaser requests a discount for part or all of the inherent tax). This will show up in variations of the sale price to the book value. Again there is little evidence of sales at well below book value.

If they continue to successfully sell without triggering the inherent tax then the lower NAV will continue to trend towards the higher NAV.

Hopefully that is clearer than mud even if only a little clearer!

[praipus] 02/11/2011 11:31

Skyship, sorry to have put you to so much trouble, great info, thank you.

Agreed on average down.