Empiric Student Property Share Discussion Threads

[spectoacc] 14/5/2018 13:08

Thanks @chucko1. It's Numis I want to see turn bullish, they called the fall..

Still - hard to argue that ESP is over-valued here, assuming everything has been going as per their updates.

[chucko1] 14/5/2018 12:31

Another thing I did not expect was a Buy recommendation from Stifel. They have a target of 100p and they have just initiated coverage of the stock.

[chucko1] 10/5/2018 15:02

I agree. This steady, unspectacular rise is consistent with constant buying by a fund who believe that the risk reward made little sense at 83p. What is of note is that there does not appear for the first time in a long time to be a keen seller.

I still remain of the belief that the management will substantially deliver the targeted EPRA div cover at the end of this year (two thirds, they state). They have been consistent over the past months in saying that they had got a good handle on the cost overruns and the selectively poor bookings.

In any event, were that not to be the case, the share price remains at a 15% discount to NAV and if UTG and DIGS can make the model work, then there will be someone to take this portfolio of our own hands to make it work!

I would also add that if they do prove adequate progress at FY 2018 YE, some might assume that this would continue to FY 2019 (full div cover) and so the recovery in share price would be front loaded. Given all that, a 100p share price within the year would be what I was looking for and that would represent a 17p gain plus 5p divs, or a 26.5% return over this one year period. And with limited downside. I prefer this risk reward to most other things (all, actually), I currently see in financial markets. (actually, PLUS500 might run it close, or at least did do until it jumped 50%!).

Be aware that I am talking my own book as I do own a number of these, and although I am roughly break even (only because of trading profits on this stock), I did not expect what happened in Sep last year.

[stemis] 10/5/2018 14:28

Looks like sentiment might have turned a bit...

[chucko1] 25/4/2018 14:13

I suspect the experience of going to university is likely to remain a key attraction to those in the 18 to 26 age bracket. The online experience is certainly growing, but much more for those who are more mature and in jobs. They are targeted on courses that augment business/work skills, so for example business-type degrees (so far).

But yes, a risk that should not be discounted. University lecturers going on strike and not preparing candidates for final exams hardly helps someone decide to fork out £50k plus for a three year residential course.

But I see a near unlimited supply of Asians looking at the UK education “product”;. So long as UK PLC does not wreck the franchise.

[epo001] 25/4/2018 13:06

I am doing a masters degree at the moment, all lectures are video recorded and there are a considerable number of distance learning students who do it remotely. The Uni also has a considerable number of European and other overseas students and how (or whether) this will change next year is obviously of concern to the University and companies like ESP.

[jonwig] 25/4/2018 12:43

Will the growth of online degrees have an impact?



This isn't an immediate threat, but it might indicate that the property aspect is going ex-growth. DIGS (which I hold) hasn't made much share price progress for ages, though London's prestige value for rich overseas students is propping it up.

ESP is probably due a short-term boost, but how will its estate value react to extra voids? Are its buildings adaptable for alternative use?

[chucko1] 25/4/2018 12:24

Well, if and when the dividend is covered and the price remains <90p, the only remaining long term point of consideration is whether or not they can raise annual rents by around inflation.

I am not sure who are the constant sellers of ESP, but I am not sure I really care anyway. The inherent value of ESP depends on the facts over the next 21 months or so, not one or other fund’s risk aversion. But we shall see in the next publication of the share register.

[hannath] 25/4/2018 10:49

... which is reflected in the price, when we get the dividend covered I doubt if you will be able to buy in <90p. ... so if your an investor (and in for the longer term) as opposed to trader its a good time to be on board. ?

[clausentum] 25/4/2018 10:08

The problem is the near 6% yield is earnings + repayment of capital, for another year at least!

[kev0856153] 25/4/2018 09:51

the yield of 6% is hard to beat

[stemis] 25/4/2018 09:31

I imagine it's because he is a partner of RevCap and not independent. Here's the relationship between RevCap and Empiric

hxxps://www.revcap.co.uk/portfolio_page/empiric-student-property-uk/

I don't see how he can stay on the board with such a big vote against his re-appointment. Clearly a lot of institutions are very unhappy that he is there.

[epo001] 25/4/2018 09:15

Why all the votes against re-appointing Stephen Alston? EDIT, Note at the bottom says there are doubts about his independence.

[hannath] 25/4/2018 08:59

.... and with the big discount to NAV !

[spectoacc] 25/4/2018 08:21

I've added (again) but market still seems very suspicious of ESP. Those costs are still high and could fall faster, but as long as they're succeeding operationally - which they keep saying they are - then I'm a lot more comfortable.

[kev0856153] 25/4/2018 07:55

nice trading update

[spectoacc] 26/3/2018 06:56

Thanks @chucko1, all interesting stuff.

You nearly had me on NRR until the Woodford bit :) :)

[chucko1] 25/3/2018 20:54

SpectoApp, I agree (although classifying DEB as quality [even in inverted commas] can be healthily debated. That said, I once bumped into Rod Stewart in a huge white fir coat accompanied by a lady with impossibly long boots, albeit back in the early 80s (Britt Eckland?) at their store on Oxford Street.

It is worth checking out NRR which focuses on discretionary spending outlets (mainly convenience). This makes it rather remote from most troubled outlets although they do have some small exposure to New Look, but notably none of the stores scheduled for closure are in their portfolio. They also had an exposure to one small Maplins store. The management of NRR have seen a few cycles and this is the third successful venture of the current CEO. There are a number of informative interviews with the management on their web site, along with some other articles that describe the strategy of the company.

The reason I mention all this is because it suffers along with other retail stuff, allowing a good entry point. This has allowed me to diversify a little away from ESP but on a REIT with a 7.25% yield which is more than covered. It trades also a few percent below NAV. Mind you, it seems that many of the REITs have lost their premia and so, if you feel that rates are not going to go too high, many are pretty good value now. Of course, if stocks generally fall from here, and I see good signs of this in the medium term, the REITs likely get cheaper too but I see many of them having pretty solid cash flows.

FWIW, Woodford has a very large stake in NRR.

Just a quick word on property, Prime resi in London is basically off 20 to 40% depending on required speed of sale. Trying to sell decent detached houses in the South east is also a nightmare with stuff stuck at stale prices for over a year. But around Bristol,midlands, Manchester etc., all seems fine.

[spectoacc] 25/3/2018 19:56

@chucko1 - they're fine until the tenant threatens a CVA, & the landlords find themselves with a stark choice. Have to say I'm not sure what the future is for a lot of the High St - even some of the former "quality" players now wobbling, eg DEB & John Lewis.

[chucko1] 25/3/2018 12:59

Yes, in some regards (referring to both being wary and tipping point).

Long leases with upwards only reviews should be fine with rates low and likely not to move significantly higher. But Next has shorter leases and significant power to renegotiate, as demonstrated. Smaller retailers would have far less power as the landlord simply takes it on the chin (in a smaller way) until a replacement is found. And if Next remains the key (or one of the key) tenant in a shopping centre or retail park, then it remains likely to find a replacement for any smaller tenant.

But levels of leverage are still relatively low as compared with 2006/7. This is slightly o/t and I am not sure that it relates that closely to the ESP portfolio which is closer to residential and not really south-east focused (where resi property is at record multiples of wages/salaries). Of course, they hardly have long leases but at least the use for the property is seemingly non-discretionary. Will the students continue to arrive? - seems so from the current level of forward bookings for 2018/19. At least one of the risks (Brexit) does not look like being as damaging as some had feared a year or so ago. I would not be confident about discretionary retail with credit card debt approaching the red zone.

[stemis] 25/3/2018 11:15

Personally I'd be very wary of retail property. See comments by Next about rent reductions they have negotiated and expect to negotiate on renewal of leases (p32, 33)

hxxp://www.nextplc.co.uk/~/media/Files/N/Next-PLC-V2/documents/reports-and-presentations/2018/Final%20website%20PDF.pdf

That's a 27-28% reduction. I wonder if we are close to a tipping point on property valuations.

[spectoacc] 25/3/2018 08:14

Indeed; results were historic.

[chucko1] 24/3/2018 19:17

Brwo349, the results were a positive in the sense that they indicated a likely sustainable improvement. In that regard alone, it should be somewhat encouraging relative to before the announcement. That said, it would appear that someone remains unimpressed.

Yes, there are better REITs out there, but few at such a large discount. Those that are have their own distinct risks in particular those with exposure to London offices and discretionary retail.

[brwo349] 24/3/2018 17:13

The only surprise is the share price went up after the results. There are far more attractive REITS out there than this one.

[spectoacc] 24/3/2018 07:37

Numis would be my guess. Surprising, considering the positive answers to their questions. And even if they think covering the divi not going to happen, you'd think the NAV discount would back the current s/p. But agreed re price action.