London & Associated Prop... Share Discussion Threads

[thomcooper] 20/2/2014 22:26

macdoni - I agree. My opinion is that NTAV is the right valuation for any prop co. Otherwise, you may as well go & buy a property yourself. Looking forward, I think property is a bad bet, especially with rising interest rates no talked about by a BOE chap in todays papers. Totally agree that the management know as much about when to buy & sell as the average Sarah Beenie follower.

NTV - Not sure who's behind the IRS here. If it is RBS then there could be, but I'd have thought that they'd have chased this by now. It appears that you're eligible for a payout if you did so little as walk past an RBS branch over the past decade.

Even so, I think shorting an over booked propco is the way forward from here rather than grasping at the after dinner mints.

If you've got the appetite, a dessert or coffee might go down well & provide a little more upside, but the main meal is over. I'm full personally! Pardon the analogies.

[ntv] 20/2/2014 20:11

looks some interesting about RBS paying for mis-selling interest rate swaps to companies. any thoughts? is it applicable here?

[macdoni] 19/2/2014 21:01

Not a holder here and sold out recently but have to express some doubts about the enthusiasm here . I work in the industry and this is a management who over leveraged in the boom and have sold off the Crown Jewels in Windsor and left with a decent asset and a decidedly ropey one . Was good value at 35p but looking full now .

[thomcooper] 19/2/2014 13:40

I guess my argument is anti-property full stop. A flick through recent columnist comments on Property Week shows that the industries leading lights think that property now offers great value with great yields.

I disagree with this. China is now in bond selling mode. The money that they have in bonds are now being moved. Some of this will be repatriated home. Other money ($50bn reduction in US Treasury Holdings in December) is likely going into purchasing other assets, including London property (as most of you should be aware).

I believe this is having the same effect as if the US Taper wasn't happening (they've only reduced by $30bn so far). It will be interesting to see when the US Fed loses control of the bond market. When it does, interest rates are going up, whether Carney & Yellen like it or not. Perhaps it creates another Credit Crunch of sorts as the central bank interest rate vs. the real world lending rate skyrockets. I've not thought through how exactly this will play out.

But, if you look at the RPI figures, prices are rising vs. CPI, which suggests that asset prices such as property are rising (similar is reflected in property price surveys). At the same time, the demand isn't keeping pace which is equalling relatively low yields.

Things look ok at the moment, but where are we going to be when interest rates rise. More expensive debt will equal less property demand, which will lower prices. Other higher yielding investments will make the rents from property less appealing which will create even less investment demand.

On top of that, if China do as they say & allow the RMB to appreciate, the higher cost of imports are going to create inflation in the west, which is going to show up in CPI & encourage the central banks to raise benchmark interest rates.

Not sure how soon this will play out, but China needs to make its people richer as the investment boom slows. Wage & currency inflation over there is going to shrink some of their problem debt (in real terms) & provide the people with a follow on from the investment boom. Their jobs & the continuation of the Communist Party depend on it.

Decreasing property values & higher debt costs (which could soon be uninsured if the LAS banks pull out of the IRS's)could quickly ramp up leverage whilst their tenants catch a cold.

I think that the likes of the columnists above can't see whats coming as they didn't when I was reading their comments back in 2007.

That being said, as my above comments - LAS is still not expensive, if it is no longer cheap in the near term.

[coolen] 18/2/2014 22:42

Do not forget the guy who declared a stake last year (14 Jan 2013). He is well regarded.

[topvest] 18/2/2014 19:45

Yes, it's difficult to read. EPRA NAV is probably about a £1, but the swaps are difficult to fully understand. Very difficult to estimate a year-end NAV. I think I will hold for now, but would definitely be tempted to sell at anything close to 60p. The trouble is with this company is that they are so late reporting in April. By that time valuations have moved upwards, so even then the valuation is out of date.

[thomcooper] 17/2/2014 23:50

My limit kicked in today. I was in way too early on this (feb 11) & I'm getting off too soon.

Here's my thoughts (##after Windsor sale figures are guessed based on statement##):

-------------------------------

Rents

£15m in rents (before Windsor Sale) £8.8m after
£11m in profit (before Windsor Sale) ? after - Windsor was probably more profitable than other holdings, but going to be around £6m or less

Properties

£260m Property Assets (before Windsor Sale) £156m after
£46m Equity (before Windsor Sale) £56m after
78% Gearing (before Windsor Sale) 67% after

Fundamentals

£204m Debt (before Windsor Sale) £100m after
NAV/Share 64.87p (before Windsor Sale) 66.44p after

-------------------------------

The sale of Windsor hasn't done wonders for the equity. Just made the company smaller, although 10% less geared. If rents/profit ratio falls by a similar amount, the company isn't going to be any better off. Although Windsor was probably a forced sale.

The likes of British Land, Hammerson, Segro, etc seem to be roughly in line with NTAV/Share. There are some prop co.s with stupid valuations like LAS in 2007 though.

It might hit 70 or 80 with a spot of Euphoria, but with the London Property Market waiting for the needle to be delivered - Amazon, eBay & Asos doing the high street continual damage (See the Moneyweek article about this decades Gordon Geckos are going to be eating up high street co.s? Stacks up in my mind).

In the 40s it looked tasty. In the 50s theres less upside. In the 60's, you're relying on the property market rises. Anything above - you may as well go & buy a bigger co such as British Land or a cheap flat in a town in the midlands & rent it out at 4%ROI.

If it drops back into the mid 40's I'll perhaps have another smaller punt.

A small concern is the bottom of page 56 of the 2012 annual. It appears the bank can opt out of the IR swap in Jan 2015. The US taper is already giving global markets a few sneezes. I don't see that they can wind down the program without having to pause the slowdown on a few months or perhaps turn the tap on again for a month or so. If they do end up turning the tap back on, or leaving it where it is for more than a few months, I think that the markets could get spooked. This could have a negative effect on the price of the IRswap just as the bank decides its a good time to get out (I know they're bankers, but they've got to know interest rates are going to rise in the future).

The 2012 annual price on the balance sheet for this is £16.5m, but it was £21.5 in 2011 & 2010. Throw in a Greek wobble in the summer & Super Mario whips out his -% screwdriver that he's talked about & the price of these swaps can skyrocket. It perhaps needs a bit more clarification from LAS as to what the different outcomes are on this though before you lose any sleep. But, if the markets bad & the banks get out & the numbers bigger - it could quite easily wipe out the £10m gain in equity achieved off Windsor sale. Don't trust my numbers too much on this though, I've not done too much research on it & don't fully understand the ins & outs of swaps.

For the time being, I'll look up & watch from the sidelines. Might get back in once the volume has been turned down a bit if you've not left me behind. Summers on its way & the shorts look more appealing.

[bisiboy] 17/2/2014 18:05

thanks cb7

yes he does have a good following and i suspected at some stage he would tip this based on his other recommendations.

perhaps a good way of making money will be to second guess other potential candidates that he might mention.
i can think of a few which might fit the category.

[cb7] 17/2/2014 14:21

let my subs lapse a few months back. But the main aspect is that las has transformed its balance sheet recently...so much reduced risk profile. With low gearing, a steady income, high occupancy and money to invest it shouldn't be valued at half nav (before todays rise).
So nothing new, just bringing it to the attention of the masses. It will appear in print on Friday (just online today). He has a good track record, so many followers; and will, no doubt, follow up this initial plug with more positive follow-ups during the year.

[bisiboy] 17/2/2014 14:09

thank you
i suspected that might be the case
does he say anything of note

[cb7] 17/2/2014 12:25

Its been tipped by simon Thompson in IC

[bisiboy] 17/2/2014 12:18

what news is there i cant see any

[ntv] 17/2/2014 12:15

nice to be holding when this happens

[thomcooper] 24/1/2014 20:30

Yeah, few months yet though. I wonder if they'll spend it by then on some more flash buildings.

The best thing they can buy is their own stock though at present if the Hellers want to flash the cash.

[coolen] 21/1/2014 22:50

Hi Thom, sounds like a splendid question for the next AGM !

[thomcooper] 21/1/2014 00:30

Without looking it up, I have a NAV of around 100mil in my head back at the start of the recession.They've done some downsizing since then! Although they should have done it in 06/07 when they were busy expanding.IMO they should sell all the London stuff to the highest bidder whilst the bubbles pumped up & the cash is cheap.They've got some iconic London property that they'll get a good premium for.

[coolen] 17/1/2014 21:16

The chart above suggests a price of 140p pre-recession.

What was the nav then and could its present portfolio return to those levels or has it lost a chunk ?

[thomcooper] 16/1/2014 23:00

- 55mil NAV 33mil market cap last annual.- Far less risk with Windsor sale if they use it to deleverage.- Interest rate rise protection in irswaps.- outlook for property not too shabby.Where's the downside! Admittedly, Windsor was probably a forced sale, but I think they're better paying down some debt & waiting for another downturn to buy new stuff as money will still be cheap if George Osbourne has anything to do with it.If property prices fall, there's plenty of room in the NAV/market cap if the company was shut down tomorrow.I have owned since 2011 by the way. Surprised it's not at NAV by now. In my opinion they should sell all the London stuff & wait for market to fall with a wadge of doh.Out of London stuff probably got plenty more upside.

[topvest] 06/1/2014 16:00

Up again. Nice to see!

[topvest] 05/1/2014 21:10

Yes, you could be right. It was taking too long on the re-financing. At least they had some family silver and live to fight another day!

[mw8156] 05/1/2014 20:18

looks to me that the bank forced them to sell the family silver...

[strathroyal] 19/12/2013 10:26

Following the sale of the Windsor shopping centre, presumably at a profit, whether these shares are a good investment or not seems to depend to a significant degree, on the cost of exiting these swaps. Does anyone know, where you can find the present 15 year interest rate and how this can be tracked.

Looking at the accounts, this was 2.47% at 31/12/12 and 3.09% at 30/06/13. In this case the higher the rate, the more benefit (or less liability) accrues to LAS.

[thomcooper] 18/12/2013 21:11

US taper will surely have a positive effect on the interest rare swap values on the balance sheet.

[topvest] 17/12/2013 22:05

At least the balance sheet and funding position is improved. We need to see what happens on the swaps, but I suspect we may not hear on this for a while. If all is good, then might actually get back to a modest dividend again. Hopefully they have learnt their lesson on just having a bit too much leverage for their own good!

[pka3] 17/12/2013 12:52

The Finance Director of this outfit has a lot to answer for having loaded it with debt and swaps. Surely they must have some legal recourse for mis-selling of swaps !!