Empiric Student Property Share Discussion Threads

[stemis] 17/10/2017 09:20

"Building critical mass in target cities" should reduce management costs (or at least improve efficiency).

[jonwig] 17/10/2017 09:10

Not producing income and a cost so could reduce gearing - looks like their strategy is getting more prudent.

[stemis] 17/10/2017 09:01

ESP sell property in Stirling for £2m (bought in August 2015 for £650k)

[bscuit] 15/10/2017 09:52

Awhile back Mr Bearbull concurrently reviewed ESP and PHP and preferred the former for its 1% more yield, but in the same timeframe ESP share price has much more significantly declined and the WJG has performed significantly better albeit with a sharply lower yield. Overall for me ESP has been a poor investment.

[jonwig] 15/10/2017 09:21

Spec - thanks for post.

Haven't access to the Numis note, so can't give any detail on their 94p tp. Agree about the sector, and price per bed is a decent metric. It's going higher quickly.

[spectoacc] 15/10/2017 08:46

@jonwig - I've already bought in so my answer can only be "yes" ;)

I'd like them to address some of Numis's concerns tho, & am surprised there's been no dcb.

I've also a slight fear that the sector is an example of one of several that have attracted far too much capital, chasing too few opportunities & bidding them up too highly. However - I'm in, for discount & yield.

[jonwig] 14/10/2017 10:15

Clausentum - actually, that's not the situation.

Each of them received vested nil-cost option shares (276,495, 11 August) and sold sufficient of them (130,521, 17 August) to pay the tax and NI due on the award. Note that the CEO bought 46,000 shares on 15 Sept, using real money: 107.185p.

Although not a holder or a fan of ESP, I don't approve of using "alternative facts" to support a case!

Spec - you say "only a buy on a discount". The pre-issue NAV was 107.75p, so I suppose it's at least 108.5p now. Is an 8% discount enough do you think?

[clausentum] 14/10/2017 09:36

The two directors must be very pleased that they each sold 130,521 shares @ 111.5p on 16th August!

[spectoacc] 06/10/2017 15:59

Been no dcb whatsoever, rarely a good sign.

[speedsgh] 28/9/2017 08:09

Investors plough £2.3bn into student halls - hxxps://www.thetimes.co.uk/edition/business/investors-plough-2-3bn-into-student-halls-2hx92n2p8

The amount of capital that international investors are piling into building new student accommodation blocks in the UK has shown no sign of abating so far this year.

Property consultants CBRE said that £2.3 billion of capital from across the globe has been invested in student halls of residence in the year to September...

[spectoacc] 21/9/2017 08:13

Valid point on the big REITS, albeit they have their own problems (retail exposure). Agree that ESP only a buy on a discount.

[riverman77] 20/9/2017 20:16

From when I last checked it was only at a few per cent discount and arguably should be more given it lacklustre performance and spiralling costs. If you're after discounts look at British Land, a far superior company in every way and on a 35% discount.

[spectoacc] 20/9/2017 14:59

I'd disagree with "uninvestable" mainly for the NAV, at which it's trading at a discount.

But agreed re admin costs etc.

[belgraviaboy] 20/9/2017 14:46

For me - this is uninvestable until they demonstrate they can get property costs under control. These are, and have been running at 40% of the rent (site management, utilities & repairs). Add to that the growing admin costs and the cost of finance and returns for investors are wafer thin.

[riskvsreward] 16/9/2017 14:58

The figures seem to be difficult to understand. There is a valuation gain of more than £90m, the initial cost yield of the investment is 6.9% annually, the finance cost of debt is about 3.4%. And the company managed to have the NAV reduced, which seems to suggest a huge running cost for the company as there seems to be good income and capital growth which are wiped out by costs.

[stemis] 15/9/2017 14:11

There's a company presentation on the interim results if anyone is interested

hxxps://www.empiric.co.uk/investor-information/company-documents

Some interesting data. At 30 June 2017 they had 6,833 revenue generating beds (all of those wouldn't be generating during the full period though). The interims say that a further 758 beds are due to be operational for 2017/8 ( = total 7,591) and that this results in an annualised revenue of £66.8m. According to the presentation they have a current portfolio of 9,449 beds (not all operational) with a further 1,608 in assets under development. So eventually 11,057 beds. Assuming a prorata increase in annualised revenue to beds that gives £97.3m.

Now let's assume future property operating costs increase by 29% of increased rent (see above), that gives total property operating costs of £30.8m. Assume admin costs increase by another, say, £2m per annum on the run rate in the interims - thats £17.2m. Interest charges stay at current level = £11.4m. Result is a net profit of £37.9m which is 6.3p a share. Boom, there's your dividend covered from rental income. Not sure what the timescale is on that.

There's some assumptions in there but the point is that I think they have established a route to dividend cover. I'd rather they concentrated on delivering that plan than look over their shoulder at the share price and drive the business accordingly...

[horndean eagle] 15/9/2017 13:52

Dividend cover is indeed based on underlying profits rather than valuation gains. H2 16 was poor. Thought H1 17 would start to reverse but it was equally poor. Fall was overdone earlier and it should bounce a little but they will need to demonstrate they have a better grip of costs before it recovers much more ground.

[stemis] 15/9/2017 13:25

SteMis - OK. I know better than to argue with you :)

We are not arguing, just constructively exchanging opinions. I don't know where Numis get their '34% dividend coverage' from (Citywire article). I make it 95% on H1. Presumably they are stripping out the revaluation surplus in the period (although it still doesn't add up). If we did that though, DIGS (lower) dividend wouldn't be covered either.

I suspect ESP have been guilty of poor communication, assuming that 'everyone' knew what was going on. If you look at the split of H1 06, H2 06 and H1 07 something happened in H2 06. In H1 06 Property Expenses were 28% of Rent. In H2 06 Property Expenses increased by 67% of the increase in rent. In H1 07 Property Expenses only increased by 29% of the increase in rent. Some big one off (recurring?) cost happened in H2 06

[horndean eagle] 15/9/2017 12:43

Numis downgraded to 94p today i think. Reduce.

[jonwig] 15/9/2017 12:34

Citywire, but read the comment at the bottom from 'chazza':

[spectoacc] 15/9/2017 12:30

My bet is - they will get their bonuses.

Worries me when these things start imploding long before their end markets do - student accommodation seems a bit of a bubble IMO, but a bubble that's yet to pop.

P2P lending would be another good example - P2P, VSL & RDL have all had mini blow-ups long before the next recession has come along.

Or the small co lenders, eg SQN.

I'm sure there's sectors I've missed. An awful lot of ITs have been created to satisfy the hunger for yield, some going to big premiums & encouraging more entrants. Can't see it ending well.

(Infrastructure ITs may be the one exception, as most have been through a downturn - but some eye-watering premiums).

[jonwig] 15/9/2017 12:27

Horndean - I haven't access to Numis' notes, but I see from another site that they retained their 115p TP with 'hold' on the 12th. Have they updated since then?

House broker Jefferies has retained a 125p TP.

Bonus scheme:

(i) 50 per cent. is triggered if dividend growth is above
RPI; and (ii) 50 per cent. is triggered if the NAV growth of
the Group’s development assets meets agreed levels.

They might get (i) on a 2% divi increase and (ii) is, typically, obscure.

[horndean eagle] 15/9/2017 12:14

Numis very bearish today. total loss of trust in management's abilities. Uncovered dividend for the forseeable future. If they can actually deliver and get a handle on costs then it will get re-rated but their track record is shot. Will be criminal if they get any bonus for the year

[spectoacc] 15/9/2017 12:13

@jonwig - same here.

CEO buy was yesterday fwiw - presumably he hadn't read the Numis note ;)

[jonwig] 15/9/2017 11:56

SteMis - OK. I know better than to argue with you :)

I'm an opportunist at times, and the current NAV discount might tempt me back (101p vs. 106p). I see borrowing limit is self-imposed at 40% and is now 36%, with WAIP of 3.42% (DIGS 2.96%) which might temper their ambition. There does generally tend to be a discount applied to development assets. Trouble is, I'm 19% in property-related stocks, which is more than I'd like.

To clarify, I meant "total return" to be total shareholder return - DIGS 14.2%pa.

EDIT: CEO bought 46,000 at 107p earlier.