Civitas Social Housing Share Discussion Threads

[spectoacc] 14/6/2019 18:07

Agreed re results, tho looking to buy more here.

[gopher] 14/6/2019 15:29

I can see little extra beyond the news which caused the initial fall

It looks overdone but if there is a seller in the market who likely invested when the stock was trading at a premium to NAV instead of today's huge discount then its unlikely there are buyers waiting to snap up stock

The problem with Civitas is that it is not an established Investment Trust in an existing part of the IT market therefore finding an appropriate discount to NAV may take time.

results on 24th June may bring clarity and I cant see why people would invest ahead of that date

[apollocreed1] 04/6/2019 14:00

Any idea why the price has fallen again today?

[spectoacc] 13/5/2019 08:36

Seems a reasonable update - SOHO's out today too. Much prefer CSH for the NAV discount.

[2sporrans] 09/5/2019 12:28

Note: Dividend raised to 1.375p; xd-16May19.
2019-20 Target of 5.3p. [4.3% higher than year ending 31Mar19].

Not greeted with any enthusiasm to judge by the share price action after the 8May19 RNS declaring the divi.

[2sporrans] 18/4/2019 07:22

Well, they did buy that £86-mn of property v. recently Gopher; so 37% of that £230-mn of borrowings invested.
But yes, even 1 significant Director's share purchase would assuage investor pessimism somewhat.

If they raise the divi. a bit above its current 5p, that too might engender some enthusiasm that 84-85p is indeed a bargain price.

[gopher] 15/4/2019 23:51

My thoughts also SpectoAcc - The directors believe the share fall is unduly harsh but buying by them would be a good sign

[spectoacc] 13/4/2019 07:44

Excellent report, thanks.

"It warned investors, that if it had to intervene in future it could not guarantee they would not suffer financial losses."

"Analysts believe the share price falls in Civitas and Triple Point triggered by the report are justified given the real estate investment trusts may have to slow – or even stop – investing the £230 million and £150 million of borrowings they have arranged, with knock-on consequences for investment and dividend returns."

‘The RSH currently has regulatory judgements on over 240 RPs outstanding, Only three of these are non-compliant for both governance and financial viability and they are tenants of the listed social housing Reits,’ he said.

Numis Securities said it was ‘more wary’ of the risks now that it was clear the sector faced more than ‘teething problems’ and that the regulator was prepared to intervene ‘in order to achieve the best outcome for tenants, which may be to the detriment of investors.


Personally, I wonder if a c.20% discount to NAV (tho NAV itself can be a variable feast) is pricing in quite a lot already on CSH.

[mushypeas] 12/4/2019 18:33

Just published- a clear summary.

What’s wrong with high-yielding social housing trusts?
citywire.co.uk/investment-trust-insider/news/what-s-wrong-with-high-yielding-social-housing-trusts/a1220525?ref=investment-trust-insider-latest-news-list

[2sporrans] 12/4/2019 10:23

SA

Thanks for info. and concur with your conclusions.

[2sporrans] 12/4/2019 10:20

Thanks mp
Also castigating myself for not having read the actual report at earliest opportunity.

I did reduce my holding a bit on the last rise, as concerned the earnings weren't growing much and related ratios/margins look set to remain low.
That combined with quite rapid expansion of Civitas portfolio ongoing and rise in debt-ratio - [though still well within CSH own stated tolerance]if only temporary.
The rental growth looks ok, at this time; ditto the NAV growth.
However, yes, these may be considerably more vulnerable than I've thought; the RPs do look shaky, especially the smaller ones.

Excerpt from that regulatory report:

These regulatory judgements and notices have revealed some recurring themes, which include:

 the concentration risk that comes from having long-term, low-margin inflation-linked leases as a single source of finance
 the thin capitalisation of some of the RPs undertaking this model
 poor risk management and contingency planning undertaken by some of the RPs
 some inappropriate governance practises that have led to poor decision making
 a lack of assurance about whether appropriate rents are being charged.

Perhaps potential political/regulatory risk will weigh heaviest upon that last noted concern?

[spectoacc] 12/4/2019 09:43

Thanks @mushy, must admit I've only read the summaries & co responses, not the report, which I'll wade through later.

@2sporrans - good points, tho this caught my eye from a glance at the report:

"...Weak governance at many of these
organisations has led them to develop business models that are unsustainable in the
longer term and cannot withstand foreseeable downside risk."

So whilst a recession/downturn may not be a problem, the business models of the RPs may be!

SOHO is the other big one - and yes, has taken a similar tumble to CSH. SOHO has less exposure to the smaller stuff mind. Impact claims to have none at all (sub-1k beds). I guess that does imply it's the report - not yet Labour - to have done the recent damage.

[mushypeas] 12/4/2019 09:18

All holders should read the report that triggered the most recent S.P. collapse.

Lease-based providers of specialised supported housing - GOV.UK


Presumably some institutions are no longer able to justify the risk of holding here.
Private investors on the other hand, as their own taskmasters, are free to sit it out.
Still, personally annoying not to have been paying proper attention in class from back in last summer,

[2sporrans] 12/4/2019 09:12

Yes SA, could be some of the share price drop is Corbyn/Mcdonnell regime discount being priced in.
But, if so, a similar drop in Civitas's peers - or near peers - ought to be evident.
Are you aware of any?

I'm not as not invested in any other specifically Social Housing REIT.

However, I hold a bigger stake in Impact Health Reit [IHR] which is largely dependent upon state financing of its tenants in its care homes; tenant income: 59% LA / 8% NHS / 33% private.
In contrast to CSH, IHR has performed well recently: share price up ~7% past 3 months, RPI dividend raise for 2019-20....currently ~5.75%.

Guess that while the risk from a Labour Gov't is potentially pretty crippling, in reality the rhetoric would prove far more deleterious than the reality.
On t'other hand, these REITs won't suffer [directly] from the woes of business/financial downturns to the extent that most REITS will [very variable, as portfolios and length/terms of rental agreements vary widely]; at least their incomes will keep on coming in full to extent the downturn[s] prove to be merely cyclical and not 'structural'.

[spectoacc] 12/4/2019 07:46

Should also mention the political angle/Corbyn:

"Discussions are well advanced for the introduction of a force majeure clause into new Civitas leases that will bring all parties together in the unlikely event of a change in law or government policy that permanently reduces the income received by registered providers (registered housing associations and local authorities) ("RPs"). The clause that we have evolved in conjunction with the sector is based on similar provisions found in many other long-income/infrastructure sectors and we are advised it will not alter the value of leases as it does not change any underlying risk or expectation of cashflows. However, it will address the specific concerns expressed around RPs and their exposure under leases to any future changes in law or government policy that affects their income and their ability to service leases."

[spectoacc] 12/4/2019 07:27

Agree on both those points - reminds me a bit of ESP. Was amused how totally quiet this (and another I'm watching)'s ADVFN BB's were - I get the impression it's the insts who are selling out, and some big (7-figure) trades implies that may be the case.

Raising more money would seem to be out for all of them in current climate.

Edit - this was interesting this morning, from RESI:

"12 April 2019

Residential Secure Income plc

Clarification following publication of regulator's report

Residential Secure Income plc ("ReSI") (LSE: RESI), which invests in affordable shared ownership, retirement and local authority housing, notes the report "Lease-based providers of specialist supported housing" ("the Report") published on 4 April 2019 by the Regulator of Social Housing.

For clarification, ReSI has never had any exposure to the specialised supported housing sector, the subject of the Report. ReSI's strict investment strategy means its acquisitions are limited to those assets with sufficient cashflows, counterparty credit quality and property security to be capable of supporting long-term investment grade equivalent debt. Accordingly, ReSI's Housing Association partners are typically large, credit-worthy institutions who own significant portfolios of property, currently including Places for People, owning or managing 198,000 homes and rated G1/V1, and Metropolitan Thames Valley, owning or managing 57,000 homes and rated G1/V2. "


The way I understand it, only those with 1,000+ beds get a formal rating. The likes of CSH also deal with sub-1k bed, who don't receive a formal rating, but are now getting investigated (and in many cases, being found wanting). Sort of the sub-prime of the supported living world! :)

[alter ego] 11/4/2019 22:32

Thx for your thoughts. I have read the rns’s and as 2sporrans implies the impact on the share price seems a bit ott. Not sure we have found a base yet though.

[2sporrans] 11/4/2019 17:25

There was an issue with First Priority - one of Civitas's RP's [Registered Provider - Housing Association]earlier this year That caused a dive in the sp, recovered later after Civitas took action to assist FP to meet obligations/standards.

Excerpt from the RNS [above] 10Apr19 - "Advisor's Update":

"Focus on the Tenant. Since each of the underlying tenants has a recognised high level of acute needs to qualify for life long care in the community, Civitas has the ability to reassign the lease if the RP is not performing its obligations, thereby ensuring continuity of care and accommodation for individuals and longevity of income for Civitas. This was achieved in the case of First Priority and would be available to be undertaken in the future if needed."

Why the woes of this dissociated RP should cause an even deeper dive in the sp, ongoing is a moot point.
Guess it's a kind of compounded concern; there's maybe a fair bit of rot amongst theSe RPs?

Interestingly, Civitas have expressed their intention to raise the dividend this year; so maybe best just to hold and see if the RP concerns abate, share price revives and hopefully a fillip from divi raise news.
Then reconsider how much one wants to [continue to] hold...

IHR looks like could be a better model/bet to me and paying over 6p divi, ~5.75% currently.

[spectoacc] 11/4/2019 16:39

Read last few RNS's! From what I can gather (and I've only come to it recently), the issue is the tenants. ie the co that signs the lease and runs the care home (or whatever) may be of dubious financial and operational quality. May all turn out fine, but the regulator has picked on several smaller operators recently. CSH isn't alone in being affected by this.

Some people apparently think the entire business model is flawed. Not sure I'd go that far, but there's an element of uncertainty now which there wasn't previously (that uncertainty presumably being "what happens to the rent if the tenant goes pop").

I'd be interested to hear the views of anyone who's followed these happenings throughout. CSH say "Today's regulatory announcements are expected to have no impact on Civitas' portfolio or financial position", but it certainly had an effect on the share price.

[alter ego] 11/4/2019 16:31

CSH has lost 20% of its value in the last 6 months but there's been little comment here. There still appears to be a lot of selling going on. Anyone able to explain why?

[njdlucas] 28/8/2018 14:20

a useful document

hxxp://hardmanandco.com/docs/default-source/company-docs/civitas-social-housing-plc-documents/24.08.18-housing-security.pdf

[2sporrans] 20/8/2018 16:51

Not RESI but hold IHR - Health rather than social REIT.
Divi. solid at 6%pa [PID]; 6*1.5p paid out last 18 months; decent NAV growth + discount.
Get the gross PID in ISA

Dunno why Civitas shot up today; no RNS.
But sold off the taxed 1/2 not in ISA for 109.3p as close to 2 year highs and the downside risk is not insignificant, as the First Priority fandango demonstrated and trough of ~95p.