Empiric Student Property Share Discussion Threads

[riskvsreward] 13/12/2017 06:48

Cannot see how the investment executive officer can survive in the long term with poor investment decisions like the Cardiff and Aberdeen investments, unless he has disagreed with those investments but overruled by the fired ceo.

a 5 to 6% yield is achievable if they make wise investments and control the costs. Afterall even private individual buy-to-let investors can be profitable so cannot see why a reit like esp cannot make a roe in the region of 10% per year unless the management is too poor, especially in today's low interest rate age.

[jonwig] 13/12/2017 06:34

Not much press coverage, but it would be nice if this sort of thing catches on:

It floated at 100p per share in June 2014 and edged up slightly today to 83.28p. One property expert said the discount would make Empiric look “very attractive to suitors at the moment”.



Numis seems to have dropped its target price from 94p to 91p yesterday.

[spectoacc] 12/12/2017 15:05

If Attlee went too I'd agree, but sounds like if there is a successor as CEO, he'll be choosing him!

[jonwig] 12/12/2017 14:44

@Jombasto, @Spec. Thanks for the comments about "affordable" dividend.

Since they need to remain a REIT (surely?) they must pay out 90% of nri as a pid. They seem capable of paying ~4.0 to 4.5p which includes costs (look at the last half year's divi breakdown: Dividends declared in respect of the period totalled 3.05 pence per share. Of this, 2.098 pence has been paid as a Property Income Distribution under the UK Real Estate Investment Trust rules).

And, as Stemis says, they have properties coming on stream where developemnt costs have already been booked. I do think that pruning under-performing assets (Cardiff, Aberdeen) would be a good idea, even at risk to asset value.

I'm not suddenly getting enthusiastic about this just because I bought a pretty trivial amount, but I do think this is a play on management, and one blockage has been removed.

[spectoacc] 12/12/2017 13:55

@Jombaston - a point @Jonwig made at the time of the announcement, that they shouldn't be targetting 5.5p then 5p annual dividend - they should be targetting what can be afforded, and then look to grow it from there.

No one has commented on my post above but I'd say the share price agrees with me.

I remain a holder, underwater, but today's announcement was poor.

No one's mentioned Cardiff or Aberdeen either - isn't as if there weren't trading issues too.

Merry Christmas :)

[jombaston] 12/12/2017 13:48

I've put this back on the watchlist after today's announcement.

This has prompted me to go through the latest results (6mths to Sep) and the problem is quite clear when you look through the accounts and particularly the cost ratios.

I calculate the 'true yield' of this REIT (using the 6 months data annualised) as 0.5%! Virtually all the rent collected was being spent in operating, admin and finance costs. Of course, you can also see this in the unadj EPRA earnings and cash flow numbers.

Subsequent statements acknowledge the need to improve operating margins and reduce admin costs. Looking at the numbers I would say they need to reduce them by at least a third if not more. The targets on admin costs target this sort of saving. For operating expenses they have a target of reducing them by a quarter over time (from 40% to 30% or expressed as an operating margin from 60% to 70% margin). But this will take time - if they can manage 65% next financial year it would be a good start.

However, they are not at the point where a divi of 5% of NAV or even 5p in the pound is sustainable.

My point is if they want to position this as a REIT that pays a sustainable (and possibly growing) dividend they need to do something more radical than has been proposed.

Clearly there is good asset backing but are some of the assets more profitable than others? Do some cost more to run? Should they be expanding so rapidly?

How about selling some assets and focusing on the most profitable and cutting the div to 4p? After all, it would still be a decent yield at the current share price. Or maybe they could sustain the current divi by selling some properties and making clear that this represented part of the distribution until the divi could be properly covered.

It is tempting to buy a few shares but I think it is still speculative so will wait for some pointers from the new management first.

[riverman77] 12/12/2017 13:07

Also established a small position here. You'd hope that as turnarounds go this should be relatively straightforward and largely a matter of reining in costs. There don't appear to be any issues with the buildings, which in any case are independently valued. Also a lot of the upfront acquisition and development costs should naturally start to fall, while rising occupancy should boost earnings going forward.

[killing_time] 12/12/2017 11:14

Picked a few of these up this morning. With a near 20% discount to NAV and a div of 6.67% im crossing my fingers that things can only get better, and we start to see a turn around. KT.

[loglorry1] 12/12/2017 10:08

Against my own judgement to some extent, since it is clear investors were taken of a ride in the last fundraise, I've topped up a bit here. If 5p is sustainable and given the discount to NAV I think current prices are a decent enough entry point.

[stemis] 12/12/2017 09:06

The board clearly want to send a strong message to the market; it's more than the usual 'left by mutual consent'. I'm guessing some of the institutional shareholders have given a strong message that they have lost faith in the CEO, especially those who stumped up for the last fund raising. It seems the strong commitment to recovering margin and overhead reduction in the Business Review wasn't enough to placate them. At least something is happening. There's a pretty strong commitment here that things are not good enough!

Tim Attlee has been appointed acting CEO. Unless you expect them to plod on without a CEO I'm not sure what else people expected them to do?

Paul Hadaway hasn't yet left the company (although may be on garden leave). The announcement is clear that he has been given notice and stepped down as a director.

[daveofdevon] 12/12/2017 09:02

Nice timing JW . If my experience is anything to go by overheads will fall quite quickly. Sell the Bentley, sack the chauffeur, cancel the in-house magazine etc and then watch as morale climbs.

[jonwig] 12/12/2017 08:46

Well, I did my bit for the share price: 4,000 @ 83.373 though it shows as a 'sell'.

DAVE - I think I agree. Perhaps he was the alpha chimp, and they're looking to recruit a CEO from outside.

[daveofdevon] 12/12/2017 08:33

I used to make my living sorting out problems like this. In almost every case the remaining executives were a meek bunch who just got on with their work and kept clear of the problem, most of them had no aspirations to take the lead.

[spectoacc] 12/12/2017 08:19

I must be reading a different RNS to the rest of you. The only positive I can see is that "Tim Attlee, co-founder and Chief Investment Officer" is only going to be "acting" CEO - ie they may yet recruit someone who isn't responsible for the shareholder destruction we've seen so far.

Exactly how firing the current CEO, paying him off, and replacing him with the "co-founder and Chief Investment Officer" from the current mess is a plus, I'm not sure.

Signed
Disgruntled holder

[Edit - "A bunch of foxes have been killing the chickens. But don't worry - we've shot one, you're paying for his funeral, and we've put one of the remaining ones in charge"]. :)

Not sure today's news is going to change Numis's view.

[hannath] 12/12/2017 08:15

Sounds like the major shareholders have had a say, and possibility a condition of their continued support.

[spectoacc] 12/12/2017 07:46

@jonwig - I don't see that as good news - he's being replaced by another culprit. ESP is suffering death by a thousand cuts.

[jonwig] 12/12/2017 07:44

Andy - I imagine it could be.

DAVE - if he behaves rationally, he'll be as keen as every other shareholder to get out at a profit, so won't 'dump'. (His incentive plan shares might be subject to a lock-in.)

[phowdo] 12/12/2017 07:43

Course he will. Hes been given the sack and told to leave immediately, not even given the chance to fall on his sword. He'll be dumping his shares and running off with his huge severance package ASAP.

[daveofdevon] 12/12/2017 07:38

After what must have a "night of the long knives" I wonder if he will be unloading his 1.5 million shares

[a1n1d1y1] 12/12/2017 07:32

Jon wig is this good news, enough for a recovery?

[jonwig] 12/12/2017 07:11

Hadaway away:



So maybe a bounce now, at least pro tem.

[1hippo] 07/12/2017 17:05

Need to see some Mgt changes pronto , once confidence goes it takes years to rebuild and these days investors want instant results

[spectoacc] 07/12/2017 12:14

Has the feel of going lower. Remain a holder.

[andyj] 07/12/2017 11:58

Sadly orient, with the price down another 2% today it seems few agree.