Capital & Regional Share Discussion Threads

[monkeywrench] 11/9/2009 15:33

Off topic, but as people are suggesting other potential winners -
Not property I know, but DYOR on Monitise and Corac.

[esanlfc] 11/9/2009 15:28

other stocks which can multibag in the next couple of years are:

IERE, MNR, UCP and OTE

[noddy31] 11/9/2009 15:23

gdasinv2 - The next one to rocket will be Minerva,

It has been negotiating its loan covenants and is due to announce the deal anyday now.

Once the loans have been sorted we could see a jump of 40-50%. Remember CAL jumped from 40p to nearly £1 before the RI.

I can see MNR doing exactly the same as CAL and TW. where i have made huge sums.

I have put a big chunk in MNR and will put more when the news is announced next week.

[2jupster] 11/9/2009 15:04

OTE guys!!

[gdasinv2] 11/9/2009 15:04

For sure CAL is very undervalued, long term holder 6-1 year will make 3-4 baggers, Same for WKP too ( I made 60% in last 2 months- still goes up...) - Can any 1 recommend similar stocks Pls.

[goodwill3] 11/9/2009 15:01

OTE going for it guys, sorry o.t also in here

[cyberbub] 11/9/2009 15:00

911, it is the bottom of the property cycle and CAL can only go one way from here, they could be back at £2 in a couple of years IMO, DYOR

[lomax99] 11/9/2009 14:44

911man - because they have an asset management arm making £20M PA, which is probably worth anywhere between 20 - 40p per share and will be well positioned, due to their gearing, to take benefit from a bounce of, what is generally perceived to be, the bottom of this cycle's dip in commercial property values.

[goodwill3] 11/9/2009 14:26

Guys check out the buying in OTE this afternoon!!

[911man] 11/9/2009 14:25

Can someone enlighten me why this stock is worth investing in when the post share issue net asset value is 32.4p?

[cyberbub] 11/9/2009 13:10

Sounds encouraging.

[lomax99] 11/9/2009 12:56

There was a helpful link to a Property Week article over on iii, it's worth a read:


Capital chap
11.09.09

By Laura Chesters, Deirdre Hipwell

Capital & Regional's rehabilitation culminated this week with a £70m equity raising. Deirdre Hipwell meets chief executive Hugh Scott-Barrett and Laura Chesters analyses the state of the markets in which Cap & Reg operates

One investment banker calls Hugh Scott-Barrett an 'unsung hero', while another favours the more biblical accolade of 'miracle worker'.

But the chief executive of co-investing asset manager Capital & Regional is having none of it.

Despite spearheading a turnaround of a company, which, just before he arrived, had the dubious honour of the being the worst-performing property stock in 2007, Scott-Barrett stresses the restructuring has been a concerted endeavour.

'This has been a team effort and it is very important that the market recognises that,' he says. 'What we have engineered over the last 15 months shows that the business as a whole is in better shape than people might have assumed.'

This is borne out by Monday's fully underwritten £69.2m equity raising for the main Cap & Reg group, £23.5m of which comes from South African property company Parkdev in its debut UK investment.

Final furlong

The equity raising completes the final stage of a complex restructuring of the company, which, on 1 April 2008 – Scott-Barrett's first day on the job – was nearly on its knees.

Two weeks earlier the extent of Cap & Reg's problems had become clear when chief executive Martin Barber was ousted in the wake of a share price plunge and a 21% decline in net asset value in 2007. The three sectors in which it operates – retail parks, shopping centres and leisure – were bearing the brunt of the consumer downturn (see below).

With Scott-Barrett at the helm, Cap & Reg began a methodical restructuring of the three main funds it manages and co-owns – the Mall, the Junction and X-leisure – before reorganising its German business and sorting out the company at a group level.

First in line for repair was the Mall shopping centre fund, which Cap & Reg jointly manages with Aviva Investors.

'The Mall fund was self-selecting because of circumstances,' says former investment banker Scott-Barrett. 'Its loan-to-value ratio issue was apparent relatively quickly on joining the company and it was such a big part of the net asset value that its health was fundamental to the group. With Aviva, who have played a large role in stabilising the fund, we set about the task of fundraising.'

The two partners raised £286m of equity from Mall unitholders last June, which was combined with the proceeds of property disposals to pay off a £572m Royal Bank of Scotland loan. The Mall, which is now valued at £1.35bn, owns 21 UK shopping centres.

Next was the Junction retail park fund, which averted a loan covenant breach in April this year through the sale of three properties for £148m and the injection of £64m of equity from Bill Benjamin's Area Property Partners. Area not only joined existing Junction shareholders Aviva Investors, Hermes and Cap & Reg, but built on a relationship it formed after buying a 50% interest in Cap & Reg's German portfolio for €65.6m last August.

'Our partnership with Area began in Germany and then evolved into the Junction. The logic of disposing of a stake in Germany was that the capital that could be realised to the group from establishing a German fund [on its own], would be substantially less than selling a stake,' says Scott-Barrett.

'With the markets deteriorating and in terms of maximum value, a timely execution of a joint venture was a more logical solution.'

And last month came the shoring-up of the X-Leisure Unit Trust. This was accomplished with another £50m equity raising, a revision of the banking facilities, the sale of the O2 Centre in north London for £92.5m and a refinancing of the main Brighton Marina property.

Scott-Barrett says the X-Leisure restructuring was an 'important step in strengthening the financial position of the fund'. It was one of many deleveraging steps and loan renegotiations across Cap & Reg's business that culminated in the equity raising this week. Indeed, even before Scott-Barrett joined Cap & Reg, his predecessor, Martin Barber, had begun the reorganisation by selling an 80% stake in 2007 in its Fix UK trade counters arm to Paradigm Real Estate Managers and Bank of Scotland Corporate for £32.2m.

'It has been a major restructuring and the focus has been on stabilising the funds as well as the group,' says Scott-Barrett. 'During the last 18 months I have counted up 17 separate negotiations with banks across the funds that we have been a party to, which is an indication of the number of moving parts that we have had to deal with.'

The equity raising and the renegotiation of the group's core banking facility with Lloyds Banking Group was 'the last step in the stabilisation of Cap & Reg'.

'It positions us defensively against further valuation falls and gives us the potential to grow again, having been on the back foot reacting to events,' he says. 'Now we can begin to anticipate events.'

And Scott-Barrett is confident not only that Cap & Reg can rebuild value for its shareholders but also that, even with its diluted equity stakes, it can benefit from its geared exposure to the performance of the funds and from any market turnaround. It will maximise the value of the existing portfolio before seeking to add other ventures or funds in its core UK and German retail and leisure sectors.

Scott-Barrett says this potential for renewed growth has been a central theme to the restructuring, which has gone beyond fire-fighting, as evidenced by the Parkdev tie-up.

'The partnership is not limited to the current arrangements but it will be a partnership to work with and leverage in the future as Parkdev diversifies,' says Scott-Barrett. 'We had been thinking about who best to bring in as an anchor investor, who would bring more than just capital for a one-off financing, so we could accelerate our [recovery] strategy. Parkdev is a savvy investor who recognised the value of the portfolio for all Cap & Reg's challenges.'

In a further sign of the company's renewed confidence, Scott-Barrett says Cap & Reg could invest what available equity it has in its funds alongside new and existing partners to 'scale up' the business if desired.

'A significant part of the business lies in its historic core as a significant property investor,' he says. 'We can continue to build on our asset management business while continuing to invest in property.'

Cap & Reg's underlying business helped it to secure the support of its banks and equity partners for the restructuring in the first place, and will further assist a recovery, believes Scott-Barrett. 'The strength of the underlying business was a critical precondition for the success of restructuring, because you need a strong cash-generating business to gain the support of banks.'

'The strength of the underlying management team at an operational level was also critical in gaining the confidence of the banks.'

He believes the management can handle any further market volatility and the recession.

"During the last 18 months I have counted up 17 separate negotiations with banks across the funds
"



'There will still be challenging quarters ahead and there are issues that retailers are having to prepare for such as fiscal deficits ... and that is clearly something we have to be prepared for. It is one of the reasons why we opted for the capital raising now, as we needed the additional cushion if these uncertainties do have an impact.'

However, he sees signs of a nascent recovery in the 'real' economy.

'We have seen a slowdown in retailers entering into administration this year and, if I look across the board [at Cap & Reg's property portfolio], footfall is up year on year ... and the consumer has shown extraordinary resilience in a challenging environment.'

The same could be said of Cap & Reg. Since April 2008 it has sold around £1bn of property, reduced the level of group debt from £625m to £119m, raised more than £500m of equity in total across its business, and secured the future of its funds.

JP Morgan analyst Harm Meijer said last month that Cap & Reg management had 'done an outstanding job and the company has entered safe waters'.

Scott-Barrett believes it was not only his investment banking credentials and insight into the issues important to banks that helped him.

'Any new chief executive always has an advantage because you are in a position to look at things completely afresh and it is the luxury of an incoming CEO to have a certain honeymoon period, if I can call it that in the circumstances,' he says.

Cap & Reg still has to return profit. Its 2008 results showed a pretax loss of £513m driven by a slump in the value of its assets from £6.1bn to £4bn. In the first half of this year it has reported a £131m first-half loss, almost all of which came from writedowns on investments. Its proforma net asset value after the capital raising will be 32.4p a share.

This is the real challenge that ABN Amro's former chief financial officer relishes.

'I am looking forward to the opportunity to try and prove myself in an environment where we can look forward to growth.'



Read more:

[cyberbub] 11/9/2009 12:16

That's good to hear all - just hold on to your shares and the share price will continue to climb! Am very pleased to see us breaking 40p - if we can hold above 40p by EOD then it will bode well for next week IMO DYOR

[wongman] 11/9/2009 11:51

I am with HSBC and I have not got my shares yet. However, I do not intend on selling anytime soon.

[lomax99] 11/9/2009 11:00

Added more recently at 35p, 37p and now 42p - this is looking good, can see 55p - 60p before the end of the year.

[leopold555] 11/9/2009 10:21

I have dipped me little toe in

[jerrylu] 11/9/2009 09:12

Havent got time to loook after this property baby since i took CR's tip,glad to see 24p open offer grows to 40p in a week time. It once peaked over £10,after dilution,£2-£3 still looks realistic imo! It is a property share for long term investment...

(PS RGM is another long, DYOR and check it out)

[cyberbub] 11/9/2009 08:48

come on come on CAL

let's see if we can break through 40p. If we can then it could be bullish for pushing on rapidly next week

IMO

DYOR

[utsushi] 11/9/2009 08:33

Many thanks Kibes.

[cyberbub] 11/9/2009 08:21

LOL Jenny! Mind, when oil hits $200 a barrel in 2-3 years it might be worth CAL knocking down their properties to drill for it!

Pleased my prediction of 40p today has been hit. I think we might see a little resistance here but continue the push on in the coming weeks.

All IMO, DYOR

[jenny tulwought] 11/9/2009 08:11

Circa 20% gain since the lows of Monday - rumours of a oil field under the Mall perhaps?

[lomax99] 11/9/2009 07:36

If it was £18M on a PE of 10 that would equate to £180M less, say, 30% tax = £126M/350M shares = 36p per share. It made £10M in the first half from this and it's probably worth anywhere between a PE of 5 and 10 - so add 20 - 40p to NAV.

[kibes] 10/9/2009 18:03

cyberbub - out of fee income of £18 million lets say £8 million is profits (or recovery of overheads which would otherwise reduce profits). On a p/e ratio of 10 the value of the property management business would be £80 million, divide by 350 million shares post dilution and you get 22p/share. That is a bit off the wall, but perhaps someone else has a more accurate idea? I do think the earnings business income is significant though, mainly as a way of reducing overheads.