Seneca Growth Capital Vct Share Discussion Threads

[barryrog] 30/8/2004 19:35

Hawk,
there hasn't been too much financial press over the bank holiday and a you say the co. is unlikely to warrant a mention being so small. it was picked up on by Ruth Garrett who edits the Stockmarket Reporter for UK-Analyst.com.
you can bet that eagle eyed punters would have noticed and clearly RAB Capital shareholders who have a major stake are now well aware.

[ukhawk] 30/8/2004 19:12

I know this is only a "tiddler" but a little surprised there hasn't been any press comment over the long w/e. Be interesting to see how the mm's play this one in the morning.

[dunnie] 30/8/2004 14:18

Barryrog,EJ,
having just read through the posts, i feel one of the most interesting points made was the one about the cutting of staff from 62 to 9.
This company in my opinion put itself up for sale at that time, you could not contemplate doing a project the size of Swaylands with such a small staff. Before anyone says about sub-contractors there is a national shortage of building workers at every level, 9 staff would certainly include a receptionist, a wages clerk clerk and some other general staff. architects, quantity surveryers are all needed and would have to be in-house.
Another main consideration which EJ touched on is planning hurdles, i have first hand experience of the impact of the land over supply situation in this country. Up and down the county councils are slapping moratoriums on, which is a temporary ban on any new planning approvals, this is while they produce new planning policy guidance for future planning applications.I can give a example of West Lancs,Sefton and the Wirral were this has happened and they are allowing no new permissions for the next fifteen years, except for shared ownership schemes and other social needs. This has caused a upsurge in values, and the trick will be for Honeygrove to get out now whilst they will benefit from this upsurge, as Gordon Brown is trying to push through new legislation to get more land released which would send values back down.
Optimum time to sell with the big firms needing sites with permission already granted and moratoriums popping up and the fear of the reverse if Brown gets his way.
It sounds like a done deal to me, and a massive profit for RAB Capital which has 30m shares and 30m warrants all at 10p,Honeygrove at 20p is a profit of 6m for RAB.
Good luck to all in Honeygrove, we RAB boys will be watching with eager anticipation.
Regards

[edmondj] 30/8/2004 12:22

It's interesting to reconsider Insinger's analysis in February, with the shares at 9p, and what was said in relation to Bett Brothers which got acquired:

"Using Bett's exit multiple of 5.7x as a base, we have applied a 15% discount to account for the size differential between the two businesses, and a further 20% discount to account for Honeygrove's exposure to the riskier high end of the South East housing market. Even using these conservative assumptions, we still arrive at a target multiple of 3.7x, which based on our forecasts (rebased to end January 2005) would equate to a target price of 14.2p, 58% above the current share price."

Although Insinger has slightly trimmed its forecasts, this would appear to support a scenario of an offer pitched at 15p to 17p a share as someone suggested earlier.

Insinger added: "As the housing slows we expect another round of consolidation both because of the attractions created by the economies of scale and as companies try to enhance earnings through rationalisation from takeover synergies."

Well, the writing is on the wall!

[edmondj] 30/8/2004 11:52

barryrog,

I feel less sure that RAB can dictate matters owning 24%, with the directors also owning a hefty chunk and likely wanting to stay independent - with a fair case for long-term value. They would get payoffs if bought out though.

But another reason I see a takeover as a serious prospect is that I know of no private shareholders willing to tough this one out given the risks at the upper end of the southeast housing market. Private shareholders are likely critical to the outcome here.

[ukhawk] 30/8/2004 11:36

Barryrog, agree entirely, RAB driving this one.

Also bullish about housebuilders, but it'll be cash if it's any of those guys. Could be a smaller player like Raven though, and that might be a little more complicated.

[barryrog] 30/8/2004 11:22

edmund,
i think RAB are in the driving seat.
as by far the single biggest shareholder,they only need to threaten to pull the plug.somehow,i believe they will be in harmony,not conflict.

[barryrog] 30/8/2004 11:16

i'd be happy to take a share swap if it was bovis,barrats,persimmon,wimpey etc as i am bullish about the big construction cos.
but if it was one of the the big boys, i am sure it would be cash, £20/25m is loose change to them.

[edmondj] 30/8/2004 11:03

LOL, I haven't been a "long-term holder" unless that means a perspective on this BB of months! Came in around March time as the Insinger forecasts started to percolate out. Am not adding to a chunky position.

I figure the approach could be in the mid-teens but they may not even have mooted price yet. A punt with fresh money currently looks OK but if talks were to get protracted (or fail) then one needs to respect downside. The approach could at least help to put a floor around 10p though, relative to twice drifting into a single penny range.

I agree that NAV could well be over 20p a share, which puts the board in a dilemma in terms of agreeing a deal as fair. However it may be in RAB's interests to accept an offer in the teens that gives them a substantial gain over last autumn's 10p placing. Hence the risk of negotiations drift.

[barryrog] 30/8/2004 10:41

hawk,
good luck to you mate, i would think that it is a buy at least up to 15p.

[ukhawk] 30/8/2004 10:20

barryrog, for the record I've only had a small holding for a few weeks, and a much larger top-up @ 11p last week. As I said before I didn't expect to be able to still get them at that price once the news was out.
I purchased initially on the "if they stay this cheap they'll be taken out" theory, but didn't expect it be so soon !

Bovis is a good choice, and was looking at them when I bought HYG feeling they were in the same category !

[barryrog] 30/8/2004 10:04

hi saturn,
i don't know if you have read back some of the recent posts but i am a very recent holder,i bought in early last week.
greengiant,edmund,hawk etc are long term holders who have lived with the share underperformance for some time.you should read my post and how i perceive this co. and why i thought it such an incredible bargain.
although it is impossible to value the company , the policy of having asset values at costs means they are grossly undervalued on the balance sheet.
if you take swaysland,sitting at £7m but worth over twice that and then put a conservative value on the rest,i believe the NAV is over 20p per share.
in addition,following the takeover of honeygrove and changing accounting policy to only booking profits on completed sales,produced an interim loss.
however forecasts for this year are eps of 3p and next year 5p,you can see the p/e for yourself. (0.60p divi proposed this year).
RAB Capital and the directors own over 50% so don't need shareholder approval to proceed.i have said that i believe it is a done deal,the move to applying rule 2:10 (takeovers and mergers) appeared to be done with unseemly haste.
i believe if they are allowed to trade normally on tuesday they will surge up in price forcing a suspension in order not to jeapordise any pending deal
just my opinion though,dyor.

[saturn5] 30/8/2004 08:55

Barryrog

Looking at the chart and Mer Ly projection,BVS seems a good choice.

[edmondj] 30/8/2004 08:45

Below 20p may not be seen as acceptable to directors (involved in the business and recognising potential), though it may to shareholders fearing the trend at the upper end of the southeast housing market.

[saturn5] 30/8/2004 08:40

Barryrog

So the offer will go unconditional if the price is right.

[edmondj] 30/8/2004 08:22

I still think there is a risk of things dragging out if the directors don't want to accept an offer in the teens, and a bidder wants to avoid going 'hostile' above their heads to the shareholders. That's a 'shade of grey' rather than 'black and white' issue though.

[barryrog] 30/8/2004 01:33

i am going to go for Bovis Homes Group.

[ukhawk] 29/8/2004 22:34

Anybody like to hazard a guess who the stalker is ?

I'd go for one of the big boys and say Persimmon.

[edmondj] 28/8/2004 22:39

Sure, I made the point about RAB being under pressure to deliver better performance in the second half, in a Citywire piece the other day.

barryrog, I agree about 20p (or better) is probably the true value of the shares, intrinsically, but ukhawk you appear spot on to suggest a deal may compromise in the teens. RAB are shrewd at leaving something on the table for the next player. And so the wheels of capitalism turn...

[ukhawk] 28/8/2004 22:08

Of course it's pure speculation but my feeling is there's an acceptable offer on the table but HYG will "sleep on it" and see if something better comes in. Sure RAB need the profit but they will also want the best price just like any other shareholder.My guess is that the price will be in the 15/16/17p range, and most would be happy with that.

[barryrog] 28/8/2004 21:37

first and foremost, i have to say i am a very new shareholder having only bought in early last week.
i will give a response though because i have done a lot of research and i can give you a perspective almost from an outsiders point of view.
i am a fundamentalist not a chartist, clearly no chartist would have come near this share.
when i first saw the projected numbers for the full year, i didn't believe them.
the projected eps was showing the lowest forward p/e on the stock market.i checked out the validity with several sources and it all appeared ok.
i researched the history over the last 2 years and one of the first conclusions i came to was that the acquisition of Honeygrove was a steal.
i think the change in accounting procedures which produced, what appeared to be, very disappointing numbers was perhaps not emphasised enough by the directors.at the same time,director sales were perhaps misinterpreted as they were very small in the context of overal director holdings.
i don't profess to know the directors but there were 2 key actions they took that made me sit up and take notice:-
1)cutting the Honeygrove staff from 62 to 9 was a brutal corporate move by any standards.
2)they turned down offers for swaysfield for over twice the book value.had they sold and said they would concentrate on all their other projects,they could
have become heros in the eyes of the shareholders by producing an eps of 12p and paying everybody a huge one-off dividend.
anyone who read my earlier posts last week would know that an educated guess at the real NAV would suggest that the true value of the share was near to 20p.
i am not sure how many people know that the projected numbers for 2004/5 are £8.8m profit and an eps of over 5p. and revenues from swaysfield start to kick in during 2006.
who wouldn't think that this share was the bargain of the year?
well you guys for a start,you have been the guys living with the share price under achievement and all the other trials and tribulations you have encountered along the way.
but clearly the value is there and although it was patently obvious that someone would recognise this and take the co.over if its value was not reflected in its share price,i never thought for one moment it would be so soon. i can assure you when i bought in, i had no idea this was about to happen.i'd like to pretend i'm in the know! but i am not.
unlike you, edmund, i do believe its a done deal given the majority of the shares being owned by Rab and the directors.
you yourself are a RAB shareholder and you would know only too well that their shares have been underperforming and if their stake in HYG can be realised at
double what they paid for it, the impact on their bottom line would be significant.
as a newcomer, i am only giving my perspective as i see it.
i wouldn't pretend to know as much about the company as any of you long term holders or the emotions you have experienced as shareholders.
i don't think you will be asked for your opinion by the co. on any offer thats made but i hope you all do very well out of any deal that is struck.
good luck

[edmondj] 28/8/2004 19:24

RAB 'holds' something like a third of this company, fully diluted, due to negotiating a slug of 10p warrants in last autumn's fund raising. But I question whether that counts currently.

I don't assume talks are at an advanced stage; indeed like many bid situations the matter could drag on for months. I still think the probability favours Honeygrove gets taken out though I speculate.

I'd had the shares in my sights after noticing RAB buy in, then missed the turn (focused elsewhere) from about 8p after prelims when the chief exec + FD bought materially at 8p and 8.5p. Then I learned about Insinger's bullish profit projections and reckoned (perhaps a tad naively) the directors would not let a newly appointed broker run with unrealistic numbers. So I bought. That the deputy chairman then sold a chunk of shares at 11p to 12p made me realise one needs to be wary here.

Several shareholders were perturbed when I started writing about Honeygrove in The Sunday Telegraph, on account of 'too many related party transactions' involving directors, to give the share respectability. Readers who acted on my idea have also seemed to get frustrated with this share. I have felt that value would 'out' because Honeygrove appears a classic unloved small cap share - where if the market won't recognise value, a bidder eventually will.

So one reason I feel probability favours a deal is because the consensus of shareholders seems edgy: nervous of uncertainty about the housing market and frustrated with seeing the share price drift. In this sense any bidder has timed their move well. I speculate the approach is somewhere in the price teens and enough shareholders would accept that, even though (long-term) it cedes potential value.

What do other holders think?

[barryrog] 28/8/2004 11:57

morning ukhawk,
you may be right on the possibility of another bid because i believe rule 2:10 is there in order that other potential bidders are aware of the exact no. of shares in issue in order for them to do their own calculations on NAV,eps etc.
i personally believe that this is at a very advanced stage and probably a done deal.
one things for sure though,if it does open up as per normal Tuesday a.m. i will get my hands on as many as i possibly can..

[ukhawk] 28/8/2004 11:35

I saw that "shareholders are advised to take no action" statement and just put it down to clerical error. In reality though it's probably not too far from the truth. The directors hold about 30%, RAB 24% and a few other key holders 20%.
It's either a done deal, and we'll hear to that effect, or there's the possibility that Honeygrove are open to other offers.
A similar situation happened with Brancote a few years back where the share-price got ahead of the takeover bid price and the deal collapsed, although it eventually happened a while later.

[shirishg] 28/8/2004 00:57

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