Hirco Share Discussion Threads

[the original goldbug] 08/12/2011 08:17

It has all the makings of a good Bollywood movie. Greed, jealousy, envy, we are just missing unrequited love... Also there is an interesting twist as to who the actual villain/villainess is... I would not want to cast aspersions, but the article is reasonably clear...

[nilip] 06/12/2011 08:35

Here we go again ...

[kenny] 15/11/2011 11:56

Because HRCO is currently in a close period, it must be someone other than Weiss Asset Management that is soaking up the selling? Interesting?

[scburbs] 11/11/2011 07:53

Kenny,

Sadly I don't think the management contracts are overtly linked to the valuation of the families equity stake. I don't believe HRCO has any mechanism to take control other than through actions for non-performance (which will be difficult).

The Board needs to find a way to get them to perform/co-operate or to replace them via court action for non-performance on certain terms of the management contracts.

It is hardly going to be difficult for the family to argue that the valuations are too low. They will just say that 25-30% is too high. Its also worth bearing in mind that whilst this discount rate gives zero value to the family equity now, the implication of the valuation increasing at 25-30% p.a. (whilst the prefs accrue at 12% albeit from a much higher number) does not necessarily mean that the family equity is worthless at all points on CBRE's projection.

[kenny] 10/11/2011 23:41

Horndean Eagle – I think you have hit the nail on the head.

Hopefully, a court would decide that if the family likely have no remaining financial equity in the management contracts, they must either a) manage the contracts for the benefit of the sole party that does, namely HRCO, in other words act in such way that is for their benefit and facitate distributions up from the Burke companies, or b) withdraw and cancel their management contract leaving HRCO to manage the developments albeit reserving the family's potential share of profits, should the family ultimately accrue any such profit.

Also, it is quite an interesting tactic to offer the family an opportunity to provide a "comprehensive analysis" of the revised valuation. If they accept the lower valuation, the family acknowledge they have no equity in the projects so can hardly stand in the way of HRCO taking control. On the other hand, if the family argue that the revised valuation is too low, implicitly, any merger of interests must be based on the family's own higher valuation.

[hvs] 10/11/2011 20:36

They Dacoites will MAKE SURE ther IS NOTHING LEFT.

[horndean eagle] 10/11/2011 20:24

I am not surprised that the valuation changed so drastically when the timescales for the projects have been extended by 6 years and the discount rate used having almost doubled. I think we are heading towards arbitration. Producing a valuation which shows the family have no equity left in the projects would strengthen our case that the family are acting against the spirit of the management agreement. A keen buyer was sat on the book happy to mop up the sells. Happy enough if that continues.

[hvs] 10/11/2011 20:10

Can Grant Thorton be TRUSTED ???????

[hvs] 10/11/2011 15:46

Looks like the Dacoites in charge still have their hand in the till.

[kenny] 10/11/2011 15:43

The latest valuation seems extremely low when, for example, compared with the money raised by HRCO over the years e.g. £393m raised against current valuation of £343m and the fact land/property values in India have been increasing in recent years.

Of course the above figures are not comparable as one should deduct operating costs and add in cash in the holding company as well as any cash in the Burke companies from property sales.

I also agree that the discount rates now suggested seem extreme. I guess the sanguine point is that for property companies, values rise and fall over time so, hopefully, the next valuation should be upwards. The very worst scenario seems to be priced into this valuation.

[praipus] 10/11/2011 15:10

Duplicate deleted Delirium tremens.

[praipus] 10/11/2011 15:10

Reading between the lines...from the 2010 report

"The Directors consider that the Group is a venture capital organization and have elected under IAS 31 to designate the equity component
of its investment in jointly controlled entities"

Could all this be about tax management?

If so Weiss are sharp in that area and could probably help "da faaaaamilyaa" do a deal.

In the meantime a flat on the Moon ...hmmm...wouldnt be too bad the 270,000 mile commute might be an issue but expenses at 40p mile could be useful.

What's the nearest tube?

[hugepants] 10/11/2011 14:44

Building blocks of flats on the moon is a non-starter. Forget it, not going to happen.
Some form of merger looks the only solution.

[praipus] 10/11/2011 14:25

Its all well documented if you ferret about Nilip.

Just wonder what Weiss and Laxey are thinking will give them an exit they must have known all this before they began picking up the stock up.

[nilip] 10/11/2011 14:12

"The prefs have a running accrual of 15%" !!

[nilip] 10/11/2011 13:27

scburbs,

You have to reserve judgement no matter what when you see such contrasting assumptions/approaches between valuers. I think it's a farce I really do.

[scburbs] 10/11/2011 12:40

Nilip,

Take two long term income streams, discount one at 13% and the other at 25-30% and see what it does to the NPV.

What we need is an explanation of why JLL thought 13% was correct (interest rates were much lower at the time) and why CBRE thinks 25-30% is now correct.

Has anyone seen any other developers applying a 25-30% discount rate?

[praipus] 10/11/2011 12:13

Kenny agreed although once again I make new NAV £4.48...lol Just taking new valuation and dividing it by shares in issue I guess youve included debt?

[nilip] 10/11/2011 12:03

some volume now ...

[scburbs] 10/11/2011 11:29

These valuations will be massively sensitive to the WACC, 13% looks far too low given current interest rates, but 25-30% is pretty high (i.e. if this valuation is correct then these valuations should increase by 25-30% every year!). The WACC should come down as the interest rate cycle turns. Start of construction on Navi Mumbai airport would also be a huge positive, but this still seems a while away.

"(i) CBRE has used a weighted average cost of capital of 24.4% for Panvel and 29.6% for Chennai while JLL used a cost of capital of 13% for both projects"

Negotiated settlement looks next to impossible off the back of these valuations! Unfortunately a negotiated settlement and alignment of interests are exactly what is needed.

What they need to do is provide a land valuation so we can really understand the back stop to the value. Also the leverage/cash flows in the propcos is key.

Panvel sales numbers look very low given where they were at 31 March 2011 (2414 vs 2394).

[kenny] 10/11/2011 11:15

Net asset value is still over 300p per share, even after the write down. Also I prefer a "realistic" valuation than a unrealistic valuation.

Note also the potential sale of part of the project(s) or distribution after phase 1 is built.