just discovered this one. The payout plan looks compelling but are they going to keep paying quarterly dividends? |
Surely this strategic review makes the remaining GABI equity an even more attractive takeover target. Indeed, one could argue that given the new implied proximity of cash receipts, a 7% discount to the current stated asset value, would prove to be a very juicy morsel indeed to any successful bidder. |
It's not as bad as I initially feared, only bought in despite my misgivings because it was simply too cheap; giving considerable room for errorGABI suffered from taking large losses on their co-living loans and from the stench of making loans to borrowers that the investment manager had equity interests in Better corporate governance and communications and they might have survived As it stands I think RECI is now the only listed commerical real estate credit vehicle; which is a shame - there was little wrong with Starwood's vehicle and it's going too |
The pulling forward is what this is all about. This provides both the shorter average life, and the sale of asset above NAV, as the 12% discounting would have been misapplied (effectively). |
The base case shows a very aggressive pulling forward of loan repayments into this year, almost £100m more than the loans maturing. In 2025 they bring forward another £60m odd versus the schedule, only leaving a relatively small amount for 2026 and 2027.
If they are correct, the IRR is indeed a stonking 36%. Cashflows I see them using on slide 4 are:
05-Jul-24 (191,531,081) [current market cap]
30-Sep-24. 82,153,000
30-Dec-24. 54,661,000
31-Mar-25. 1,837,000
30-Jun-25. 1,857,000
30-Sep-25. 19,610,000
31-Dec-25. 60,869,000
31-Mar-26. 450,000
30-Jun-26. 455,000
30-Sep-26. 460,000
31-Dec-26. 460,000
31-Mar-27. 450,000
30-Jun-27. 455,000
30-Sep-27. 27,557,000
31-Dec-27. 4,514,000
Going to do some digging in the coming days, but this looks pretty compelling. |
 The shareholder cash returns are substantially higher than the NAV, since they are using a scenario analysis to determine cash returns from their investments and timings - 5 separate scenarios, in fact - rather than a blind 6.5% default rate (coming from 12% discount rate minus 5.5% risk free rate)
The seemingly high IRR is from a modelling of the precise timings of the returns, and the base case high IRR of 39% presumes a rather shorter average life than the others. Additionally, the final scenario (downside) is the lowest owing to an implied higher degree of credit loss on top of a longer average life.
IRRs in themselves are a little meaningless as they depends on the average life, which has not been explicitly stated. Nevertheless, the NPV assumes a 12% discount rate, it seems, and applying that over, say, a 2 year average life (probably a bit shorter) and suffering de minimus defaults, will jack up the IRR considerably.
To be quite honest, something like this has been clear from even when the share price was around 60p and it was likely they would enter run-off. Why it needs printing in black and white to get investors excited is a mystery. Moreover, why they needed to enter run-off is as much of a mystery owing to the (now apparent) excellent stewardship of the IT. Same applies to a few others as well. It is mad. |
So this was what the share price jump was about
Good document. A lot to digest.
Irritating to be told a day later than the favoured few!
Struggling to reconcile their shareholder returns NPV and the shareholder IRR they quote. |
If GCP paid 85p (in stock) for the rump of GABI and using between 10% and 15% haircuts on the rest of the loans (0% on the 2024 ones), still gives a 8.8% XIRR to GCP on the remaining book that they would acquire. There's plenty of meat on the bone to interest GCP shareholders while still being able to give GABI holders a decent uplift from here and for Gravis to make out like bandits. |
I have more GCP than GABI; always have had. I would be happy for a discounted transfer to there for shares. Those that really wanted cash in hand have a had a chunk, and a reasonably liquid market to sell down more. |
The 78p bid was before the big cash return at NAV of around 1/3rd of the market cap. Bar around £42m there isn't much in the way of loan repayments until 2027.
That's not to say there isn't significant value here. I still think best returns will come from Gravis merging the rump into GCP. The last merge was rejected by GABI but that seems less likely now. I think it can be made attractive to GCP holders and for Gravis to still get their nice juicy bonus. |
Inside dealing and as usual nothing will be done. Suppose to be a criminal offence. |
Surely everyone (?) would be happy with a take out at a 7% discount to NAV i.e. 85/83p |
loglorry1
I was intrigued by the share price action today versus yesterday.
Yesterday, stock was bought at a level of 68p with consummate ease. Today, volume jumped to circa 4 times yesterday’s and ended the day at 72p bid.
After enquiring with 2 ex colleagues who work in the financial services industry, the above explanation was cited.
I would remind followers that the last 3 price-sensitive announcements, have been preceded by significant upward share price movements. |
Now I have a good chunk of cash back, I wouldn't object to GCP/GABI merger at NAV for the balance, if coupled with a 93% cash exit for those that prefer that route.If it could be done, that'd take care of any share overhang as those who wouldn't be happy with GCP shares would go for cash. |
If true I wouldn't be upset |
Where did you see that rumoured? |
My understanding is that an offer has been made for the remaining portfolio that represents 93% of the current asset value i.e. a 7% discount. If this is acceptable to several of the larger institutional holders, the offer may be put to shareholders. |
I'm not sure GCP shareholders would want the GABI rump (would depend on price) but Gravis would want the bonus so might find a way to push it on them to enable them to hit their target and get their wind up bonus.
There's only another £46m of loans due for repayment in 2024 I think and then it goes very quiet for 2025/26.
Price very strong today - not sure why. |
Paid 68p yesterday and sold at 71p. Nice 4.1% profit in a day. |
I can't see any rump being sold to GCP after the way the last proposed merger was dumped by shareholders. GCP's main interest was in the short dated loans coming up for maturity - they will be used to return cash to GABI shareholders instead.Would GCP want to pay close to full value for longer dated loans? Surely they'd be better off buying their own shares? |
No problems with any of the above analysis. Discount applicable to any "rump" holdings is not easy to judge, but considering their long term default/impairment rate, the high discount rate set to arrive at the current NAV is a gift to medium term/patient investors.
I have generally held a fair few of GABI, and reinvested my ROC at the time. But will add more as and when. |
Just brought 4000 at 68p, yielding 9.3% paid quarterly and 25.6% discount to NAV. |
Likewise - thanks for setting that out Shame we can't easily share/post spreadsheets on ADVFN |
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