Alpha Real Share Discussion Threads

[pavey ark] 12/6/2019 18:12

This is from IC but from six years ago so I think I can post it.
This review of the company brought ARTL to my attention six years ago but the comments made still look pertinent.

Nick Greenwood, manager of Miton Worldwide Growth Investment Trust

"Alpha Real Trust (ARTL) has a NAV of 106.7p, but this is probably out of date (property portfolios are only revalued a few times a year) and it is starting to pay out dividends. If you buy it at a deep discount of 52.44 per cent you will get a much higher yield than the risks you take on from buying the shares. The management team's policy seems to be to allow the share price to languish while using the trust's cash pile to retire any stock which becomes available, thereby ratcheting the NAV higher as a result and increasing management control. The team are clearly good at what they do and no doubt once sufficient loose holders have exited, the vehicle will get taken private at a level closer to NAV. In the meantime, the recently adopted policy of distributing cash flow by way of a dividend should generate some useful returns."

[davebowler] 12/6/2019 13:23

I'm pretty sure they intend to do what they stated,to use the cash to provide more commercial loans. If so, RECI is vaguely similar. Maybe they hope that investors will recognise this and push the share price to NAV like RECI.

[pavey ark] 12/6/2019 08:53

The upcoming results could and certainly should be interesting.
With the massive, realised cash pile I would expect some indication of where they intend to go from here.
A one off special dividend payment is a possibility but I suspect that this would not fit in with any management plan to take the company private.

The dividend could/should be increased further although 4x0.8p would give a 2% yield at 160p and this is about the historical average.

The cash that has been realised was previously not producing income (Data centre and Leeds property)so they should now have generated cash to distribute.

Another possibility would be a serious share buy back at say 170/175p.
With the share asset value of 205/210p any buy back below this would enhance the value of remaining shares.

Who knows ?

I would be disappointed if we just got "business as usual" with a few million more in loans.

Edit: I wonder what they intend to do with the Birmingham BTL and we must get some positive news from India at some point.
Sales of these two assets would push the cash to ridiculous levels and could take NAV above 220p

[davebowler] 24/4/2019 10:47

SMTP at 35% discount to NAV
Liberum
Strong returns, further growth to come

Mkt Cap £460m | Prem/(disc) -38.6% | Div yield n/a

Event

Summit Properties’ 2018 results have confirmed a period of strong performance for the company. NAV per share rose by 53.8% in the year to €1.894 (December 2017: €1.231). NAV total return for the year was 56.3%, maintaining the company’s strong performance since IPO in 2013.

The principal reason for the large NAV uplift was a €297m revaluation gain over the period. We estimate a like-for-like portfolio revaluation gain of c.25% in the period as a result of yield shift and asset management activities. Operationally, the portfolio continues to perform well with a further reduction in EPRA vacancy to 7.3%. The average portfolio rent per sqm rose by 8.7% in 2018.


Cash generation from the portfolio is high with funds from operations of €44.3m in 2018, representing a 21.4% increase over the prior year. FFO per share was 9.5 cents and we calculate recurring EPS of 8.5 cents (24% increase) after stripping out gains from apartment disposals. Summit has completed over €200m of acquisitions since June (average yield of c.6.6%). We estimate these acquisitions could increase annual recurring earnings by c.20%.

Market conditions in the German commercial real estate market remain very favourable. Rising office-based employment is leading to increased demand for space. Over the last decade, the number of office workers in the top 7 cities has risen by almost 25%, compared to an increase of just 6% for office space. The high level of demand, in combination with a lack of supply, has driven the average vacancy rate down to 3.6%. The majority of new supply in 2019 and 2020 has already been pre-let. Investment demand for German commercial property remains high, aided by a supportive financing environment. Transaction volumes have exceeded €50bn for each of the past four years, and achieved a record €60bn in 2018 according to Savills data. Market forecasts indicate volumes will again exceed €50bn in 2019.


Liberum view

We note the confident outlook from the company regarding the potential for future growth. Rental growth is likely to continue due to a combination of ongoing asset management and positive market fundamentals, suggesting further increases in market rents. Even if there was no growth in market rents, there is still plenty of upside to aim for within the existing portfolio. The portfolio ERV is 28% above the current annualised rent roll.

Summit’s -38.6% discount to the December 2018 NAV is 36 percentage points wider than the -2.7% average for peers (Alstria, TLG Immobilien, Aroundtown SA, Dream Global Office REIT and Sirius Real Estate). This is despite Summit’s significantly stronger NAV performance since IPO in 2014. In our view, the outlook for sustainable double-digit NAV returns remains robust given the stable recurring income, asset management potential (reversionary upside, low capital values) and positive market fundamentals.
Submit

[davebowler] 24/4/2019 10:45

Here is another potential bargain similar to ARTL but in German Commercial -
SMTP

[davebowler] 21/3/2019 12:10

RECI, which has a lot in Mezzanine loans, trades at a slight premium to NAV.
I wonder if that is what they are aimimg at??

[poacher45] 18/3/2019 16:19

From the last report:-
The Company has invested £13.9 million as at 30 September
2018 in FIAF, an open-ended fund that invests in UK freehold
ground rents with a net asset value of £295.8 million as at
30 September 2018.
During the period, ART redeemed £15.0 million of FIAF units
and, post period end, the Group redeemed a further £3.0 million
of FIAF units.
The following highlights were reported in the FIAF fact sheet as
at 30 September 2018 (published in October 2018):

[pavey ark] 18/3/2019 13:12

IC update noon today.
Nothing that hasn't been said here but again nice to see it.

At the end of fairy detailed report:-

"Please note that following the introduction of MIFiD II, your broker may require you to pass a sophisticated investor assessment prior to being able to deal the shares. It would pay to do so because with Alpha’s shares trading on a 22 per cent discount to NAV, and the investment risk firmly skewed to the upside, new share price highs beckon. Buy."

[pavey ark] 16/3/2019 11:52

I've been number crunching this morning but mainly shares I hold and I felt I need an update on some.
Giving the old calculator a bit of a rest I had a few random thoughts on where ARTL is and try and figure where it's going.

My pet theory is that it will be taken private but it's only a theory so perhaps it would be better to look at the actual situation as it exists now.

The only non income producing holdings are Birmingham and India and a very large pile of cash.

Birmingham may be sold and India MUST come to a conclusion (hopefully before all interested participants are dead !!) but we know something about the cash.

"ART is currently planning to allocate the proceeds from its recycled capital to augment and diversify its portfolio of secured real estate senior and mezzanine loan investments. This is expected to increase the company's current earnings."

Giving the weightings and ranges of interest quoted by the company for their loan book I suspect they are aiming at c 13% return on the total loan book.

One way to reduce the massive discount is to drastically increase the dividend as high dividend funds are rarely at large discounts.

If the share price is 180p and the yield is 6% then the dividend payment is 10.8p
the existing dividend payment is 2.4p so 8.4 p to be found.(more as ground rent income has gone)
A 10% return from the current cash (c. £70m without Birmingham and India) would give 10.4p/share.

All of this is VERY hypothetical but if the cash is invested in the loan book then the cash generated will be significant but I would also expect them to dabble in things like the German industrial site for some diversification.

One thing is sure, the recent increase in dividend will not be the last and that alone should narrow the discount.

Edit: from the 2014 results:- --" 94% of the Company's investment portfolio is in income producing investments in the UK and Europe"

Perhaps they are getting back to basics and have a much larger pile of cash to play with.

Worth noting that they have doubled the NAV/share in five years and that is 15% COMPOUND for five years excluding dividend.

[belgraviaboy] 15/3/2019 17:44

I am still holding here - the better the news gets, tha happier I am to hold long term, and add on any dips...

[pavey ark] 15/3/2019 17:29

Obviously selling at a profit is always a winning strategy but I am not sure that yield can be used as a reason for a sale.
I am quite sure I could sell 10% of my holding every year and not eat into my original investment here.

Anyway good luck with your reinvestment plans and I hope things work out for you.
With the Brexit "freedom fighters" ( almost) in charge perhaps cash is not a bad thing.

[skyship] 15/3/2019 13:27

I feel like a traitor, but GLA as I take my turn and sell my 7500 @ 158.5p.

I was really ever only here as a trade, as my principal propco holdings are RGL & HCFT. Clearly I favour propcos that not only provide a discount, but more importantly in my book - provide a yield. Respectively 7.8% & 5.0% (though the latter more like 5.7% when we see the Finals later this month).

May well have parted too early; but really depends upon what I do with the cash - at the moment devoid of new ideas!

[cerrito] 15/3/2019 12:41

I have just been on to the thread of RECI who I have not owned for some time but did for about 8 years.
Was interested to read that earlier this year Cheyne-their very good manager- commented on the lack of competition in the mezzanine property loan market.

[pavey ark] 15/3/2019 11:04

Cerrito, I phoned early this morning and asked about this ground rent fund, the message is being passed on (up?).

Their lack of enthusiasm for the ground rent fund goes back some time and my only surprise is that there was no announcement about the sale.

[pavey ark] 15/3/2019 10:56

Never one for a conspiracy theory ....BUT!

The extension of the loan book is obviously a good way for them to employ their rather uncomfortably large (inefficient?) cash pile and they do have expertise in this field.
If they are out of the ground rent market then a replacement has to be found.

BUT!!!

The loan book is rather liquid and gives a very good return without the money being locked away in a long term, albeit highly profitable, investment project.

In the last year they have cashed in the ground rent portfolio, sold down their Spanish shopping centre holding, sold the data centre and the Leeds development but only really invested a comparatively small amount in a German industrial site.

It looks to me like moves are afoot to do something here but if not this still looks like an excellent investment.

My guesstimate is for a NAV of 230/240p by the year end and a discount of 20% give a year end price of c. 185/190p.

[cerrito] 15/3/2019 10:42

For me the most noteworthy change in the portfolio in these three months is what appears to be saying goodbye to the Freehold Income Authorized Fund which at the end of September was £13.9m.
I use the word appears because I cannot find it listed in the 31.12 asset list but I cannot find any commentary on its disappearance.
Perhaps I am missing something.

[davebowler] 15/3/2019 10:22

Its aiming to be lower risk judging from this-
....ARTL is currently planning to allocate the proceeds from its recycled capital to augment and diversify its portfolio of secured real estate senior and mezzanine loan investments. This is expected to increase the company's current earnings.

[pavey ark] 15/3/2019 10:01

Just noticed (a bit slow !!?)that the cash has gone up to £17m but the data centre and Leeds cash have still to be added.
At 160p this company is valued at £107m but could have close to £70m cash or c. £65m to include expenses due to sales.
Some small additional loans deals have gone through and I take it that the ground rent investments have been sold.
I don't see any details of the ground rent portfolio sale but I may have missed it.

Given the historic nature of the discount here 164p takes us back to where we were with the half year results :-
NAV 178..... 20% discount .....142.5p
Nav 205..... 20% discount .....164p

It would be a very short sighted investor that would take both sets of figures as in any way comparable.

The half year cash position was £7.9m and today the cash position is closer to £67m

Most of the additional cash comes from non cash generating development projects and I suspect this cash will now be invested to generate cash so I expect additional dividend increases.

India can only really produce a boost to NAV (but when?)
Spain:looking for a NAV increase with any additional planning permission.
Birmingham: do they get involved directly or move it on at an increase in present value?

These guys are well paid but they do produce results.

Will this be taken out ?

I think so and not at current prices.

Edit: the data centre sale is in the improved NAV figures but Leeds sale isn't which pre expenses would add 4.8p to NAV
The Nav figure is very close to 210p

[red army] 15/3/2019 08:19

Still too much of a discount offered on share price IMO.

[skyship] 15/3/2019 07:15

NAV already at 205.6p. So Pavey, where from here?

What do you make of the statement; and in particular the likelihood of ever getting our hands on cash from India?

[skyship] 13/3/2019 10:02

Well, I would certainly love you to be right on that one...

[pavey ark] 13/3/2019 10:00

This was after an early morning run and then my early morning fix of very strong coffee!!

Perhaps I'd be better off going back to bed ?

On a more serious note I was rather suspicious of the delay and still think there is a chance of this being taken private perhaps not this week but I think it is possible that it could happen at some time.

Obviously the NAV figure will be interesting but still plenty of upside in the portfolio and I expect the NAV/share to rise well above 200p this year.

[skyship] 13/3/2019 08:46

Away with the fairies it would seem!!! Go and pour yourself a strong coffee man 😊

[pavey ark] 13/3/2019 08:32

Skyship, stop showing off ....just because you know what day of the week it is !!!

Have corrected my post.

(fairy major change in routine this week but it doesn't take much to throw me off course....I blame Brexit !!)

[skyship] 13/3/2019 08:27

PA - thnx, but tomorrow is Thursday.....so Thurs. or Fri.