Town Centre Share Discussion Threads

[jonwig] 28/2/2015 12:09

IC reiterates its BUY on TCSC this week.
It quotes:

Analysts at Oriel Securities are forecasting adjusted net assets per share of 342p by the end of June (from 308p in 2014).

So what are "adjusted net assets"?
Plain NAV was 326p at end-Dec and triple-NAV was 305p.

Anyway, a 12% uplift over the next half year on whatever measure would be welcome.

[jonwig] 24/2/2015 14:09

inki - not intended to be more than an anectode :-)

[inki] 24/2/2015 13:04

Not comparable to Berkeley Homes, in size or in the same market.
As for the corporate characters, the younger generation have maintained the same profile after the demise of the founder.

[chairman20] 24/2/2015 12:06

yup but what a brand.

[jonwig] 24/2/2015 09:07

Maybe - I love the story of Berkeley Homes: founder Tony Pidgley was a cautious sort whose son thought he was a dinosaur and moved off to found his own building company just before the 2008 GFC.
Son went bust in quick time, Berkeley came out stronger.

[chairman20] 24/2/2015 08:54

younger generation??

[jonwig] 24/2/2015 07:39

Interim results:



They're a busy lot, with developments and disposals. Particularly expansion of the car parks division.
Opening a London office in Duke Street (posh - Mayfair).

Share price will love all this, though it's already risen well in recent weeks.
But are they getting rather over-confident, brazen even?

[jonwig] 19/1/2015 20:00

Actually, we'll find out on 24 Feb, when the interims are announced.

I read your post on i i i recently about Leeds rental values - it's exactly the sort of thing the firm has been expecting and might be the trigger for an uplift.

[castleford tiger] 19/1/2015 18:20

move to 300p by march based on NAV GOING TO over300p

tiger

[inki] 19/12/2014 08:27

As the directors have effective 'control' of the company, new non-exec's may (?) show some independence of mind.
Usually everyone would be a friend of the Chairman to get a look in.
However despite the additional cost this could be positive.

[jonwig] 19/12/2014 07:16

Two new non-exec directors announced this morning. Both appear to be highly qualified and experienced.

These are additions, not replacements, so one might reasonably ask "Why?" To my mind, either they have run out of ideas and need refreshing, or they have lots of ideas and need a bigger pool of expertise to push them forward.

Or maybe a cynic (not me) would say they are just good mates of the boss.

[castleford tiger] 23/9/2014 17:45

Thanks Guys.

I have spent the last two weeks adding to my stake.

tiger

[chairman20] 23/9/2014 15:02

jr

better ask a tax expert on the advantages of gross income in the hands
of a controlling shareholder

[josephrobert] 22/9/2014 19:22

Hello Chairman

I wonder if you could expand on the business relief on their personal tax position. Sounds interesting. I've had a look on the net and can't quite find anything pertinent.

As to the point well yes it's cheap but will it remain so, well I would suggest two bits of guidance - the historic discount to NAV overweighting the times where the environment was similar to where we are now (whenever that is - the last 12 months?) and the relationship between the company's NAV discount to the market.

NAVs here: hxxp://tcs-plc.co.uk/financials/record
Industry discount/premiums here: hxxp://www.bpf.org.uk/en/reita/performance/epra_uk_index_nav_discount.php

It would need a bit of work here to work out the relevance of the guidance and any other factors that should be taken account of during that time. A lot of the heavily discounted REITs and the like have had a strong rerating over the last year or so - Standard Life Property Income (SLI) for example.

However with this REIT appearing significantly cheap relative to the market i'm not sure how careful we need to be with such a large 'margin of safety'. In particular if TCSC was recently at a approximately 10% discount to NAV, then following what I can see as improved figures, then why the share price should not reduce it's discount to NAV -ie somewhere above 277p, not where it is now - I mean everything being equal and the last two weeks have been pretty equal in terms of market conditions. The other metric is the yield, well some of these REITS is all about the yield such as SLI, but some I guess don't so would it be wrong to expect above average capital growth in space of below average income yield?

Ideally a company such as this needs to grow - more properties, the same or similar fixed cost base; again not sure how the controlling shareholder feels about that.


For what it's worth it was converted into a REIT in 2007 www.uk.advfn.com/news/UKREG/2007/article/22164801

'Following a review of the implications of the new Real Estate Investment Trust
("REIT") legislation, the Board has taken the decision to convert to REIT
status. Broadly, this will mean that the Company will be exempt from corporation tax liability on profit from property rental and property disposals and the deferred tax liability on revaluation surpluses, estimated at 30 June 2007 to be #65.9m,will be extinguished. The Company will pay a charge on conversion based on 2% of the value of its tax exempt property assets at the date of entry. We have posted a circular to shareholders to seek consent for the changes to our Articles of Association which are necessary before we can enter into the new REIT regime in October 2007.'

[chairman20] 21/9/2014 18:45

to ponder

not "is it cheap?" but "will it remain so?"

The REIT decision was clearly to benefit
some family members who can take biz relief on their
personal tax position.

as personal tax is a big issue there is negative pressure
on raising dividends (family don't want bigger payouts which
will cost them post tax). They have gone in for buybacks but
this is not an alternative way of sending value to shareholders
its more an offset to the generous tap of executive options
and share issues (to mitigate dilution)

[josephrobert] 21/9/2014 10:44

Yep, sorry amateur hour in my previous post, my last sentence stated 'These factors are why it is so cheap imo.' The stock is clearly too cheap using those metrics, however the other side of the coin explains why it currently so cheap. Won't last imo and shows the stock market can be inefficient at times.

[jonwig] 20/9/2014 10:02

Good points, josephrobert.

The family control is probably a bigger factor than I had believed: it certainly makes for poor liquidity and a wide spread, most of the time. As you say, there's no great institutional interest and as far as I know no broker coverage.

I'm also wondering why TCSC chose to convert to a REIT. For example, a close company can't be a REIT, but TCSC must be pretty near to being one. Also there's a limit to how much non-rental business it can undertake, but here there's car parks, commercial development and a housebuilding scheme (Apperley Bridge). I think the total of non-REIT business can't exceed 25% of total assets.

Incidentally, dividends tend to be a mixture of PID and non-PID to reflect this but they don't seem to have said how this applies to the current final.

Having said all that, I still think the discount is too wide - but being a holder I would say so!

[josephrobert] 19/9/2014 20:03

As far as I know these real estate companies can be assessed on a small number of metrics such as:

Company discount or premium to NAV relative to industry
NAV Growth
Debt structure and affordability
Cash available for income payment


TCSC has:
25% discount to NAV
15% NAV growth
4.4% WACC
Covered dividend


In other words:
Large discount to NAV when Real Estate IT's are 5%+ premium to NAV
NAV growing faster than the IPD index - minimal'over valued' London too
Low cost of debt
Covered dividend which isn't as common as many would think in this sector


On the other side of the coin is that the poor liquidity stops wealth managers and the like from adding it to their communal buy lists. There's relatively too much debt and needs to be reduced before the beginning of the end of the UK property sector cycle, fine now though imo with strong NAV growth. The controlling interest doesn't help either. These factors are why it is so cheap imo.

[castleford tiger] 17/9/2014 20:53

Stonking results plus 4.5% yield. A very strong buy.
Leeds is booming
Tiger

[chairman20] 17/9/2014 16:13

so would I like to know

seems most likely Leeds can borros against the asset to finance development
and TLC cant

[jonwig] 17/9/2014 11:14

I overlooked this on first reading:

We continue to work with Leeds City Council on Merrion House; the deal we have agreed will lead to the construction of 50,000 sq ft of new office space together with a complete refurbishment of the existing offices creating 170,000 sq ft of purpose designed space for their occupation. Upon completion the Council will take a new long lease and become a co-owner. The valuation of TCS' share of the asset will significantly increase as well as adding around £250,000 pa to rental income. Construction is scheduled to commence in 2015 for occupation in 2017.

I'd like more detail on the terms of being a "co-owner". If it means sharing development costs, for instance.

inki - I take your point about retail, but UKCM has a 5% premium to NAV and also pretty high retail exposure.

[inki] 17/9/2014 08:29

Consistant over the long term has been their mantra - despite external market forces. The discount to some extent reflects 'retail' which is comparably less attractive than other property categories.

[jonwig] 17/9/2014 07:35

Final results out on timme:



NAV of 308p against share price of 230p. Must be one of the few propcos sitting at a discount. High gearing might be a factor, but most of the debt is a 2031 debenture.

They talk about increasing cash returns to shareholders but only maintain the dividend. I suppose expanding the car parks division might be part of the reason, plus debt renegotiation next year.

Scotland gets a mention: 'No' might send it back to 260p or so?

[chairman20] 15/9/2014 10:12

not looking to change my view - this is really not a share for
short term trading -imho!!!