Airea Share Discussion Threads

[oregano] 07/3/2016 12:56

If i had a bigger position, or they had fallen back further I would ring them and ask. no reason why they should not disclose. they seem to be doing a respectable job of cleaning it up and generating shareholder value, so I am going to remain in trust mode for the time being.

[rhomboid] 26/2/2016 21:14

Hi Oregano , I agree I'm totally unclear as to the scale of the future annual cost savings but I'm assuming they are c. £500k? given the sketchy details given, maybe they would prefer to buy back some more cheap shares before lifting the veil?

All guesswork but I had fresh funds to deploy today and didn't top up here due to the lack of clarity.

[oregano] 26/2/2016 15:01

it is a bit strange they don't quantify the benefits of the relocation, as this is required to help us assess value . It is still trading at a discount to NAV, and as long as they are increasing shareholders funds, which they are if you ignore the exceptionals, then it is right to own.

But that might be newsflow over for six months. Probably one to buy on weakness.

[illiswilgig] 07/11/2015 10:49

Interesting predictions!

I hope that they come true. Lots to like about this company. No debt. No massive share options (the CEO owns 5% of the shares). Good cashflow. Only problems are the massive pension deficit and tiny market capital.

Unfortunately (or perhaps fortunately) AIEA is too small to be on the radar of the city (though lowland investment trust is the biggest holder at 9.5%)and there are no forecasts on Digital Look - so your guess is as good as mine?

Historic P/E is 15.5 with eps of 1.29p and price of 20p which is above average for a tinpot illiquid small company so is in expectation of some further growth in profits.

Sales growth last year was around 12%. Will that continue this year? Hard to tell. Director speak seems cautiously positive - not much different from last year, but 2 years ago they had a sales blip. So I am also cautious.

Taking a 6% sales growth and using an operating profit margin of 5% I get a current year eps of 1.8p and FY17 eps of 2.5p which at the current P/E would give a share price of 40p in FY17. This assumes no futher impact from the pension scheme - the deficit of which is similar to the MCAP of the company.

Everything depends upon the interim statement - but with no bad news, the construction industry continuing to grow and wages rising I will be minded to top up on any weakness in advance of the half year results.

cheers and good luck,

[red army] 02/11/2015 12:59

Initial target 40p I would say in the next year.

[mesquida] 14/9/2015 19:00

Myself I am looking for rather more than a 30 or 40 percent premium to current share price. Perhaps I am being too optimistic but my 2 year target is 50 p !

[oregano] 14/9/2015 10:02

How about Victoria picking us off? that would be nice.

[irenekent] 12/6/2015 13:48

Certainly making a comeback so far today.

[illiswilgig] 21/5/2015 07:59

FD just bought another 50,000 shares taking his holding to over 200,000 at 5.3p

Interesting?

Not a huge investment but when the FD buys it's probably confirmation that a profit warning is not around the corner, and just maybe the reverse?

price has predictably moved up - but if I get a chance at 15.3p I shall follow suit

cheers

[red army] 01/4/2015 13:52

SSSSSHHHHHHH keeping this one quiet before the pumpers and dumpers move in.

[fillipe] 01/4/2015 12:34

Now being appreciated more - historically the company was always a high dividend payer with a loyal shareholder base due to that, and as profits come through there they will quickly feed through to the dividend.

A little more benefit from the supposedly improved consumer mkt will reflect positively onto Airea, as will the trend towards the more furnished look in the domestic environment.

Little downside risk here, imo.

f

[illiswilgig] 10/3/2015 10:10

Yes, I think the H1 results are promising. They not only reverse the H1 decline of last year but are also significantly better than the H2 results as well. Statutory profit of 371k and cashflow generated by operations of 398k despite a 400k increase in working capital.

As always the defined benefit pension deficit is the blot on the landscape. Deficit of 5,776k is almost as high as the market capital of around 6,300k (assuming the revised no of shares post buyback).

The net assets are 12,586k so still trading at an enormous discount to book value which gives some comfort against a worsening pension deficit and of course a measure of the potential upside if the improved performance continues.

I've bought a few more - and surprised to see that so far this morning nobody else has bought any, but thats the problem with such a microcap!

cheers

[irenekent] 10/3/2015 08:42

Definitely on the mend. I wouldn't be surprised if some tries to snap them up.

[gingerplant] 10/3/2015 07:41

Excellent results from the market's single most dour, pessimistic, and taciturn company.

Op profit of £700k, post-tax of c.£371k, no interim divi (as per last year), net working capital £11.65m, NTAV of £12.6m, market cap <£6m, pro-rata PCF less than 2.7.

As ever - the price makes little sense.

[irenekent] 06/12/2014 08:56

And what has all that to do with Airea?

[diku] 03/12/2014 21:28

Is this gone on the cheap at lows...

[arthur_lame_stocks] 30/11/2014 08:47

Hi Glen

I can't reply on your thread on CNN as I'm not a premium user. I had a quick look at them and I think at the prices you were paying you may well have got a bargain given that all their property is valued at cost and now much of it has pp and you have bought at a significant discount to cost. They remind me a bit of Inland a few year ago which was a successful investment for me.

I guess the two factors which you should be thinking about are the direction of the Scottish property market which I have no clue of and the integrity of the owner which again I have no clue of.

By and large I don't like shares with a controlling shareholder as there is always a risk of delisting and subsequently being screwed, that's the reason I kept my NAR investment small despite the fact that I see obvious value in them at the price I paid (around 31p).

I probably wouldn't be a buyer of CNN at the current price and if I'd bought at the levels you did I would probably have kept my investment small just because of the delisting risk. Just look at the goings on at SRG where they carry out a strategic review and decide they should sell one of their businesses, then change their mind, then announce excellent results which leave them looking very cheap then 3 weeks later announce that they are delisting to sell off all the businesses over 3 years and return the cash which hammered the price.

Cheers for now.

Arthur

[gingerplant] 28/11/2014 10:35

Thanks Glen.

I have a huge amount of sympathy with what you say but the bottom line is that not all value shares have such ownership profiles. The mark of trust and the reason for holding is usually a reasonable income. So, for example, I was happy (and fortunate!) to buy PHO at 40p early last year despite the Peel brothers holding over 60% as I saw this as a future income stream as they’d paid a good income pre-recession etc. I still do – and still hold.

The latest dodgy deal came at value share SRG. I was fortunate enough to have bought just before the recent results at 40p. The results were excellent, all looked rosy and the shares promptly went to 60p at which I sold half my holding. Then 21 days later they announce their intention to de-list (for the usual reasons). Now this may be a wise decision and shareholders hanging on may well eventually receive payments in excess of the share price etc., but why was this not mentioned with the results three weeks beforehand? It was surely in the offing and this would have been the logical and seemingly more honest and open time to have stated their intentions? Even if it wasn’t a done deal, it could have been flagged up as a possibility. So this is the kind of concern I’m talking about. I’m sure Douglas Lowe is a perfect gentleman – but these things are unknowable, even if you do look him in the eye.

Also – with SRG, the register looked OK, as it does with the other share you and I have in common, TON which I last wrote about for TMF back in 2012 at 36p:



Have you looked at SMJ by the way? It’s value by most measures but the Smarts are on the register with 75% - though at least there’s a c.3% yield. I don’t hold any shares there.

I can’t reply on the CNN thread as I don’t subscribe to advfn as I don’t spend much time on there. I’ll be happy to share my email with you – or you can PM me, as I understand it, on here?

David

[profdoc] 28/11/2014 10:01

I think I'd better mention that I started buying CNN at 70p in July 2013. I have not bought any above 84p. I'm waiting until I get some more information from the company and then I'll undertake a fresh analysis. I'm not recommending that anyone buys at current prices (it may be a bargain, it may not), merely that you look at the company. Also that you can tell us if you know anything about the character of the managers or about the properties they own.

Shall we switch further discussion to CNN's BB?

Glen

[profdoc] 28/11/2014 09:45

Hi GingerPlant,
You're absolutely right that Caledonian Trust is dominated by one man. But, then, so are many of the small cap bargain shares. We have to admit we are taking a risk on the character of a lead shareholder in many cases.

If they are that way inclined they will have no difficulty in ripping us off. The legal protections are of very limited value. The main protection is day to day human decency. Woolly though it may be, our whole civilisation is built upon trust (and reciprocation).

If you can't bring yourself to trust how can you ever do a business deal?
Is he a man of integrity, particularly with regard to minority shareholders? Is he a gentleman with honour? From what I've seen so far I'm willing to give him the benefit of the doubt. I'll travel up to meet him face to face at the next AGM (I could not make it last year).

Of course, I'm going to look foolish if he turns out to be a bad guy. But that is the game were in - nothing is certain, least of all the qualitative factors, which are the most important. All we can hope for is to play the odds and hope we win more than we lose.
Glen

[gingerplant] 28/11/2014 08:03

profdoc I hold AIEA and fully agree with Arthur ref SNCL - but with CNN, doesn't the 79% holding by Douglas Lowe effectively make it his own private fiefdom? It's a similar deal with that other Scottish value share SMJ.

[profdoc] 25/11/2014 10:34

Arthur,
I've got one for you: I'd value your opinion on Caledonian Trust (owns a number of properties in Edinburgh and countryside around there, spent the recession getting planning permissions, could be sitting on a lot of hidden value which could be released with a tailwind of an economic recovery). Very neglected share.

Glen

[arthur_lame_stocks] 24/11/2014 15:30

Hi Again Glen

Another company which I think is worth a look as a recovery play with substantial, potentially surplus property assets is William Sinclair (SNCL). Maybe if you get a moment you'd cast your eye over them and let us know on the SNCL thread what you think.

Thanks

Arthur

[profdoc] 13/11/2014 09:29

Thanks Arthur,
The residential zoning makes the case for these shares even stronger.
As I understand it the pension deficit is strongly influenced by the ups and downs of corporate bond interest rates. The current discount rate used to reduce the liabilities to present value is that of high quality corporate bonds at 4.25%. This gives total liabilities of £46.9m compared with assets in the scheme of £41.2m.
This interest rate is remarkably low compared with what the fund has used in the past. Indeed, in the history of the corporate bond market 4.25% is a remarkably low number.
If the discount rate went lower by 0.1% then £0.63m will be added to the deficit. What are the chances of that worsening occurring? Here we need to make a judgment on the path of future interest rates in the bond markets. Will they go up or go down?
If they rise by 1% to a more normal 5.25% then the pension deficit (ceteris paribus) disappears as the liability drops by £6.3m.
Another way in which the deficit can be eliminated is if equity markets rose, increasing the value of the fund’s assets.
On the other hand, Airea could be hit by a rise in life expectancy. If the average pensioner lived for one year longer than the current assumptions then £1.7m will be added to the liability.
But the current assumptions do not seem too worrisome because the pension scheme was closed to the accrual of benefits in 2005 and the average age of a beneficiary is now 65.
On average Airea’s pensioners are estimated to live to 86.3 years for males and 88.5 years for females. What are the odds of these numbers having to be raised? Would the average pensioner have to live into their 90s for there to be a serious problem for this company?
There are 53 active scheme members, 54 deferred pensioners and 70 pensions in payment.

I note your point on operating profit. But that is offset by annual the pension contribution (about £0.4m) to bring profits after that to around zero. However, you might like to look at the difference between depreciation (a million or so) and the actual expenditure on capital items (a quarter of a million). Thus if you used Warren's owner earnings analysis you get a nice positive number for each of the last five years of what can be taken out of the business by shareholders without damaging economic franchise, unit volume or investment in value-generating projects.

Looking at the business prospects and management I agree that Airea is a much more comfortable investment than Holders, but with Holders MCap so low relative to Net Current Asset Value I simply had to give it a go. The more likely scenarios for multibagging with Holders are takeover or liquidation rather than revival. Time will tell.
Glen