Highcroft Investments Share Discussion Threads

[topvest] 01/4/2013 08:59

Why? It's a great company that makes steady progress. For those invested, there are few better homes for your money.

[semper vigilans] 29/3/2013 09:42

When the company said that no Kingerlee shares were any longer pledged to the bank, we could have read a lot into it.
There does come a point as the share price gets closer to the NAV that there should be a plan for the sale of the whole company.

[topvest] 29/3/2013 08:38

That's a possibility I suppose if Kingerlee Holdings needs to raise some cash by selling a few of its properties.

[coolen] 28/3/2013 21:45

Could there be a related-type transaction brewing where his departure may now make it non-related ?

[topvest] 28/3/2013 21:14

Yes, a bit of a surprise. There is a still another Kingerlee on the Board. He was possibly a bit stretched being CEO both here and the Kingerlee Group of Companies. I suspect the other side of the business is not a walk in the park in this type of environment.

[crumppot] 28/3/2013 20:26

The MD J Kingerlee is leaving at 31 July to pursue other interests but he represents the family. Seems strange that he is going.

[topvest] 21/3/2013 20:56

Yes, really solid company this one. Boring, but dependably solid.

[semper vigilans] 20/3/2013 08:57

Decent results.

[semper vigilans] 13/3/2013 08:13

Thanks Coolen.

[coolen] 12/3/2013 19:07

Some of the lumpier trades look like put-throughs, perhaps across to Isas where the dividend tax is now reclaimable.

One historic buyer is probably still in the background.

Otherwise it looks more like a shortage of sellers rather than aggresive buying by HCFT's small but loyal fan club. Perhaps the rise might bring out a few more sellers ?

[semper vigilans] 12/3/2013 11:29

Anyone any ideas on why the gentle uplift?

[semper vigilans] 29/1/2013 12:51

Creepin' up on tiny volume!

[semper vigilans] 09/11/2012 17:57

Showing 15000 traded @ 570p on other sites - buy or sell? - biggest chunk that has gone through the market if it really happened!

[mtioc] 06/11/2012 21:57

Good spot. Shortish term, but 9% on Ikea covenant is attractive with residual bet that Milton Keynes market will be stronger in 7 years.

[topvest] 06/11/2012 08:46

Yes, missed that one. Looks a very good deal given its let to Ikea and yielding 9% - nice!

[semper vigilans] 06/11/2012 08:02

Decent purchase yesterday. At that price I presume Hobart needed to sell!

[mtioc] 02/9/2012 14:21

Thanks. I was not aware that HI was such a large proportion of the Kingerlee group assets. I agree with your conclusion and I too would prefer long term income over a "one off" gain.

[topvest] 02/9/2012 11:19

Kingerlee are a circa. £45m turnover construction outfit and the main trading company operating in the same offices. Circa 2/3rd's of its balance sheet is the investment in Highcroft Investments. Kingerlee were profitable in 2010 and seem to be doing ok, but I guess you have to bear in mind that the directors of Highcroft have a full time day job with the main trader. I think the net result is good as Highcroft has lower running costs than it would otherwise do and their purchases have probably been more patient than would otherwise have been the case.
Nevertheless if Kingerlee got into trouble then that would likely have repercussions and play into the Conn families hands who own 20% and have been in "open warfare" with Highcroft for a number of years.
Any break-up would be positive for shareholders in the short term, but can't think of a better long term investment than just letting this run and collecting the dividends. Both scenario's look a winner from my perspective.

[mtioc] 01/9/2012 21:42

TV, Thanks, I have always assumed that the REIT was discrete and ring-fenced from any other family or group interest. Obviously, if things are not going well elsewhere the main shareholders may look to realise cash/value from REIT, but I am not aware of a risk beyond that. Am I missing something?

[topvest] 01/9/2012 21:11

I agree with you. In the go-go days of the property boom 5 years ago, this looked way too cautious. Now, 5 years on...they are seen as being "spot-on"...funny how things change. They are very cautious, but holders can sleep well at night. The only slight concern is the wider construction group that it is related to, which is not quite so healthy. Nevertheless, I intend to hold for quite some time and add if bargains appear.

[mtioc] 01/9/2012 18:36

This post follows the recent announcements and the interim results.

1. Sale of SW1 Property

The sale price was of £4.9m was £1.5m (44%) above the 31 Dec valuation and £0.6m (13%) above the 2006 purchase price. While there may have been exceptional factors (London, redevelopment opportunities etc..) the level of uplift suggests conservatism in the property valuations. This property accounted for 11% of the total property valuation at Dec 2012, so the sale and reinvestment should increase diversification. Property specific factors aside, the bet appears to be that London office yields have stayed relatively low and in the current market there is better value elsewhere.

2. Purchase of Bedford Industrial Property

The purchase appears to lock in an 8.1% yield for at least 14 years to a reasonable covenant (Booker) for what appears to be a cash and carry (which while not open to the public does not appear to be trade only either).

This, together with the purchase of the industrial property in Andover (in November 2011), suggests the board are looking to industrial property in the SE with decent yields in preference to: office (portfolio still has quite a bit), retail (structural change in market and again quite a bit in the portfolio) and further north (different dynamics and outside board's area of expertise). I am not a property expert, but this seems pretty sensible. Does anyone know the long term average (real) yields on London office vs ex London light industrial?

The challenge appears to be acquiring properties with current cash and equities let alone borrowing (at c. 3% fixed for 7-8% inflation linked).

3. Interims

The interims were pretty self-explanatory. Revenues up a bit, costs down and profits up. Administrative costs are remarkably low compared to similar operations.

4. Valuation

The market cap is £29.7m.

I calculate an NAV of £38.3m. The main assets comprise £5m cash [Dec 11 cash, plus Victoria proceeds less Midlands purchase], £5.6m equities (Dec 2011, little change in FTSE) and £29.2m property [Dec2011 value less Victoria plus Midlands]. There appears to be net working capital of c. -£1.5m.

Assuming the cash and equities should not trade at a discount, this implies a property valuation of £19m versus a balance sheet value of £29m or a discount of 30%. As discussed in para 1 above, I think the property values are bit conservative, but not as conservative as the SW1 transaction may suggest. A 10% uplift in property value, increases the property valuation to £32m and implied property discount to 40%.

A 20% discount to my property valuation (i.e. Dec 2011 adjusted for transactions and +10%), with cash and equities at par, suggests a market cap of £33m or a share price of £6.40/6.50 (vs £5.75 mid or £6.0 offer).

The investment thesis outlined in this thread and elsewhere appears to still hold. Highcroft is a conservatively run group that targets attractive yields with a minimum of risk, with an ungeared and well diversified property portfolio with low management costs (that is an effective partnership with the Kingerlee family). The high-ish yield and REIT status has significant tax advantages within a SIPP. The wide bid/offer spread and low volumes seem to deter both short term traders and market commentators. All this seems to work very well for the (smaller) long term SIPP investor. At the current price, there still seems to be some "margin of safety", but recent share price increases have reduced it. I remain a long term holder and may buy more if the price fell back or spread narrowed.
MTIOC

[topvest] 25/8/2012 15:40

Hopefully just a reflection of how undervalued this was and the very good interim results. Ungeared property is back in vogue, so you can expect the discount to narrow in my view. It is very difficult to pick up shares in this company (reflected in the large spread), but very happy to hold and add if opportunities happen. A safe home for your money!

[semper vigilans] 25/8/2012 09:10

Someone paid 610p yesterday to buy - price has moved well this week - could there be something afoot or was it just the decent results?

[semper vigilans] 02/7/2012 07:29

Could be two angles to the story - if all properties are in the books at conservative values - great!
Or JLL aren't that good at valuations!

[topvest] 01/7/2012 21:16

Yes, agreed - it doesn't complete until later in the summer, but it looks a good move. Happy to hold these. Would buy more if the spread wasn't so disappointing.