Ashley House Share Discussion Threads

[yump] 20/12/2017 10:48

Thanks.
Will have to have a few more if the drop continues.

[norbert colon] 20/12/2017 10:30

I have added some further notes to my thread on stockopedia if anyone is interested.

[dave4545] 20/12/2017 09:42

Still 13.089p to buy . One 20k buy on NEX and that's your lot so far. One mm has this stock to offer. When they run out you know what will happen.

[yump] 20/12/2017 09:36

This looks like one of those stocks where a guess-the-share-price-in-a-year could be fun, although I'm not sure I could show my workings...

[urigem] 20/12/2017 07:44

Thanking of adding now its nice and settled, looks a very good investment at these levels

[dave4545] 19/12/2017 11:59

A few taking advantage of the value here today, chased to 15.5p high Friday but now 13.2p offer

[greedfear] 19/12/2017 08:50

SP of ASH was 10p while they were in a "bad" financial shape.
They've sold 50% of their pipeline (not 50% of their entire business!) for 7p per share.
Share price should be at least: 50%*10p + 7p = 12p.

It should do better than that because the financial condition (of the remaining 50% pipeline + modular busines + medical business) is very good now and there's no longer the chance of an equity raise.

Furthermore the JV will likely get ASH 50% of bigger profits (I expect the JV to realize bigger revenues sooner).

[irenekent] 19/12/2017 08:46

I wonder how all this is going to impact upon ASH's standing with its potential customers. The positives up to now have been its reputation for ethical value helped by its position as a prominent member of the Social Stock Exchange. Also its understanding of the special needs sector which makes a major impact upon the design and usage aspects of the buildings it delivers. A loyal and skilled workforce based on the healthcare credentials of the early founders and carried through to the present day gives a level of knowledge that Morgan Sindall would struggle to replicate. The downside of course has been the government's attitude to the sector which has now fortunately been changed. MS have obviously recognised the gap in the market and seized the first mover advantage represented by ASH. What has to be preserved are the values that ASH have brought to the sector and their specialist negotiating skills when dealing with local authorities, health trusts et al. The fiscal advantages of the JV should hopefully mitigate any worries about ASH's ethical values being compromised as long as ASH continues to be forward face of the JV. Quality must be maintained whilst project volumes must now be increased. The existing pipeline is the tip of a potentially large iceberg. On this basis I have increased my holding.

[yump] 19/12/2017 07:20

If ASH were already going to make 3.6mln in earnings 2018 and 2019, then presumably that was based on a modest increase in pipeline projects actually undertaken, which will now increase as a result of the JV.

[yump] 18/12/2017 23:23

NC

Thanks for that. I got the cash issue which is a relief and I can see what you mean about the existing expectations for ASH without the JV.

Although MS have what's termed a 50% interest, I think judging by what I've read about LLP's, the profits don't have to be divided 50/50. May be wrong, but as an LLP doesn't have shares, there's no proportion distribution of dividends.

I guess we'll find out more in 6 months or so as we're not going to get to see the JV details.

At least all agreed on undervaluation I think.

[microscope] 18/12/2017 21:16

Norbert.See where you're coming from, however I would be surprised if MS would have gone for the deal, paying 4 million up front, if as you imply they were going to only make £900k in each of the first two years - assuming approx 50/50 split of course.Yump is right that the 50/50 is 'variable' to an extent depending on small print etc, that said I don't think it is going to be too far wide of the mark.With cash in the bank and for me a ball park figure of 1.5 million by the third year, at some stage my target of 40p feels reachable, even if my original timeframe of 12 months is probably overstating it.No share is ever a one way ticket, but it's hard to see how fair value for those of us following progress closely, is even close to the current rating.

[norbert colon] 18/12/2017 20:03

yump

Not sure but I think you are slightly missing the point with respect to JV profits. The key issue hanging over ASH after the LHA rent cap issue was recently resolved was cash i.e. they didn't have any. The partnership with MS has provided them with a much needed cash injection of GBP 4m - problem solved / decent balance sheet. This is huge relief for the Board and investors.

Now, the related issues....

So whilst they have got some cash into the business they have sold 50% of their housing pipeline valued at circa GBP 200m. What does this mean? Well, I am having to take an educated guess somewhat as I have no further details than anyone else but ASH were due to make circa GBP 3.6m in earnings over 2018 and 2019 from their housing pipeline so this partly answers your first question i.e. they were ALREADY going to end up with several million in profit despite the MS partnership.

So, depending on the exact commercial details of the partnership you could crudely estimate that ASH will now only earn GBP 1.8m over the next 2 years (plus profits from the health schemes so say GBP 2m). The actual numbers could be very different depending on the deal. So the partnership wont (over the short term) increase profits - the opposite in fact.

The plus side is that as well as the up front cash, ASH get a well established and reputable partner to help develop the schemes with lots of opportunities to leverage that relationship going forward. MS may even buy ASH if the partnership works and Extra Care does get the predicted growth.

Now, MS would not have paid GBP 4m for the 50% share without still wanting to make a good ROI. Whilst margins for typical house building developers are circa 15 - 20% I am not sure of the margins on extra care as it wont include the land element, but MS have paid 4% margin already (GBP 4m / GBP 100m pipeline) and I would anticipate them wanting to make at least a further 10% on that as a target.

I think you need to look beyond the PE in valuing ASH although its certainly very handy. Peers such as MS are on a PE of 11 compared to ASH on a PE of 4.4. That would imply circa 30p but remember that ASH's earnings will likely fall by 40% due to the MS partnership so perhaps 18p is nearer the mark. That doesn't allow for the cash injection and future prospects under the MS partnership so I have an initial valuation of 23p.

These are just my initial thoughts and I welcome corrections. The Broker note in January will enlighten us.

I was very surprised to see the retracement today but am already overweight so haven't added further - if Mr Market gets very depressed over the next few days / weeks I will gladly take some more off him though.

Good luck to all.

[topvest] 18/12/2017 18:29

I suspect Ashley House will provide design and project management at agreed salary rates plus overhead and margin up to a budgeted level. You would have then thought that Morgan Sindall deliver the construction contract on a fixed fee basis adjusted for any variations. Suspect you will need to look at the combined impact of the Housing Division and the JV result.

[yump] 18/12/2017 16:20

Has anyone any views on how ASH could not end up getting several million profit out of the joint venture ? Basically I'm trying to find a reason not to mop up as many shares as possible, on the basis that the p/e might well be less than 10 based on a couple of years away...

Seeing as they have a 50% share, I can only think of 2 reasons:

- Pipeline just doesn't go ahead much for some reason
- Costs are billed in a complicated way to the venture that results in profits being limited. However, that would imply that the profits would be hidden within the costs for both parties, in which case ASH would still benefit because their margin on revenue would be much higher.

I imagine there will be a 'best' way of handling costs billed to the venture from a tax and accounting point of view. ie. do you let the venture make the profit, or do you bill higher and have the profit within the charges to the venture ?

- Or MS bill much more to the venture than ASH and their costs include a high margin, so they get their 'profits' that way, even if ASH have the same margin on costs billed to the venture

thinking aloud a bit...

[yump] 18/12/2017 16:10

Think some of them must have gone to OMIP as that took off on the back of 2 big name NED's joining.

[microscope] 18/12/2017 15:30

Something like 900,000 shares traded so far today. Sadly will be a while before the traders have gone to the next hot stock. Doesn't impact me as i have a 1-2 year perspective, possibly longer now in the light of the news. If the pattern of edging down as traders left the last time is repeated, might even move my position from obese to obscene!

[norbert colon] 18/12/2017 13:37

Don't forget it's a micro cap and off the radar for most. WHI issued a morning note today saying they seem the partnership with MS as very positive and that they will issue a new note in Jan post results. FY 2018 to be profitable which in itself is fantastic. A buying opportunity at current prices but I am already circa 10% in both SIPP and ISA.

[dave4545] 18/12/2017 13:32

Bit baffling. Maybe because ASH does not issue a RNS every day some people are taking advantage of putting their money elsewhere and 13p+ is a lot better than 9.3p which it was on Friday before the news. But it should trade a lot higher than this in the medium/long term

[yasx] 18/12/2017 13:29

I had assumed that the threat of dilution was holding back the shares - with the recent announcement the risk of dilution in the near term has been rendered moribund, yet the shares are still drifting.

Not sure what holders and potential investors were hoping for....

[yasx] 18/12/2017 12:06

Surprised this has retraced following the announcement on Friday - impatient traders, but I this morning have taken advantage of their stupidity and bought a few more.

[dave4545] 18/12/2017 09:30

Does not matter yump. There is a big herd of traders who play the biggest % risers regardless of news and ASH was one of the chosen ones on Friday. The herd all bailed late Friday and first thing. Now they are out the smart money arrives to buy the dip. I'd not be surprised if it gently recovers to get all the losses back or close to it.

[yump] 18/12/2017 08:39

At the moment its difficult to work out what the value might be, so likely to be pretty volatile. I don't mean 'volatile' as in 'the share price is tanking', which is a common use of volatile. I mean up AND down !

One to just leave if you've got a timeframe longer than a few months imo. I'm assuming as a minimum that at some point in the next year or so ASH will get at least £1mln a year in profit from the joint venture. That would be 1.7p in earnings without any contribution from the rest of their businesses.

Stick that on a growth p/e and I'm not even thinking about selling any until at least 35p and not bothered about when that happens.

[dave4545] 18/12/2017 08:23

No early follow through so all the traders new to this Friday are all rushing for the exits. So bit of a dip downwards followed by a recovery later when others buy the dip.

[palwing13] 17/12/2017 16:02

Thanks Yump. Apologies for the duplicate posts.

[yump] 17/12/2017 14:38

On most browsers you can just highlight the link, right click and then hit 'go to' or similar in the drop-down menu, so its not dependent on advfn at all.