Matrix European Real Estate Share Discussion Threads

[sleepy] 08/7/2010 17:02

Panrico



"There is no equity left in the company, and Apax is unlikely to inject any more capital into the business. The most likely outcome now is a debt for equity swap whereby creditors' take control, the people familiar with the matter added."

[tim00] 08/7/2010 16:22

Sleepy, no, not currently. My interest is in other sectors.

[sleepy] 08/7/2010 16:20

Thanks Tim

Do you believe there are better prospects elsewhere in the property sector?

[kimboy2] 08/7/2010 15:17

The Spanish properties are leased to Panrico which is a Spanish baker. This company is owned by Apax Parners. There is a buyout in process;



If the company is being bought then presumably the leases on the properties will go with it. The MERE leases are for 22 years on these properties.

Europort has been a problem for a while. The vacancy rate in March was given as 31%. I think that this is the Europort property;




There is no doubt to me that rents and occupancy is under pressure. However I suspect the company would say that this why the portfolio valuation is so low.

The fact that the market has then added another 60% discount above that would suggest that people expect more trouble to come.

IMV it is a fund which is highly geared to recovery, particularly in the German and French markets, which is what I am looking for.

[tim00] 08/7/2010 14:48

Based on the RNS I estimate NAV of about £2.85 at end-June. That includes the negative value of the interest rate hedge. While the discount to NAV remains large, there are some negatives as Sleepy has pointed out, in relation to a lack of progress in getting new tenants at Europort and problems in Spain. These properties are now a higher percentage of the total portfolio now that IZD is sold. So I decided to sell the remainder of my holding, since I believe there are better short term prospects elsewhere. But I may be back if prospects improve.

[sleepy] 08/7/2010 13:56

Yesterday's announcement refers to high vacancy levels at Europort (now their most valuable property?) and to the tenant of all their Spanish properties being in discussions with its banks regarding financial restructuring. We may both be too optimistic re net rents.

[kimboy2] 07/7/2010 22:00

In 2009 the gross rental was £55m with £11.3m of operating costs giving a net of £43.7m.

The Austrian property had a gross rent of £17.1m so if I make a pro rata then net rent is about £29m.

The admin fee was £8m and may be reduced with the sales. Perhaps £7m.

The debt level has been reduced to E239.9m. They are paying a margin of 2.25% and they have a hedge at I believe 3.6%, though these seem to be expiring soon.

If we assume they are paying 5.85% that would be a bill of E14m or £11.5m.

Under these simplistic assumptions we would get;

Net rent ....£29m
Admin........£7m
Interest.....£11.5m

PBT.........£10.5m
Tax.........£2.31m

Post tax....£8.19m

EPS.........22p

There will of course be a load of 'funnies' this year. The re-financing will cost about E4m and there will no doubt be various legals expenses with the sales.

I would expect a small dividend this year but perhaps a larger one next year with the interest hedges coming off and, hopefully, values beginning to increase.

[sleepy] 07/7/2010 19:35

FCF - Looking forward, what is the annualised net rental income?

According to the 2009 Annual report was €49.1 million last year but will have dropped considerably due to property sales. Should still be around €30 million?

Would guess cash interest and other costs should be c. €20 million assuming no funnies.

[kimboy2] 07/7/2010 14:57

Hi Sleepy
Well European commercial property is not a particularly happy place with the threat of a double dip and the PIGS possibility of a calamity.

As a resulk the asset values haven't quite bottomed out yet with a 3.7% fall for the last 6 months, which is of course magnified with gearing.

IMV the company was significantly de-risked with the sale of the Austrian building. However news of this was followed fairly quickly by the tender offer which put a cap on any potential rise.

For me the most interesting thing is the cash flow and any potential dividend which I think they will be proposing for the end of the year.

Any views on FCF/market cap ?

[sleepy] 07/7/2010 14:37

Thanks Kimboy - looks roughly right to me.

So why is the share price so low?

[kimboy2] 07/7/2010 14:03

Not easy to calculate the NAV. FWIW I think

Property - E385m
Loans - E239.9m

Exchange hedge liability - E35.4

Equity of E109.7m = £90.6m

Cash of £40m

Working capital deficit of £12m

Net assets = £118m

Shares 35.933m

NAV per share = 328p


I have ignored the interest rate hedge and the defferred tax.

More than happy to be corrected.

[sleepy] 07/7/2010 11:53

Thanks Tim.

I reckon the 3.7% fall in the portfolio value reduces NAV by c. €15m or c. 42c (c. 35p) per share - share price still on a whopping discount

[tim00] 07/7/2010 08:47

About £30 mn cash. I'll redo the calcs, but the NAV will obviously be lower than expected given the fall in property values.

[sleepy] 07/7/2010 08:17

How much cash do they hold?

[tim00] 07/7/2010 05:49

fwiw, I estimate NAV per share of £3.20 at end-June, assuming flat property values in the half-year. The increase from £2.93 at end-Dec is due to the buy-back and the stronger pound against the euro, substantially reducing losses on the exchange rate derivative contract.

[johnv] 06/7/2010 14:10

havent sold out, just following other shares in my portfolio,

[kimboy2] 06/7/2010 08:30

Just nothing to say I suspect. We should be getting an update with June valuations pretty shortly.

[karldinnel] 06/7/2010 08:21

No posts for a long time. I suppose everyone has sold out now, then...

[johnv] 17/6/2010 14:45

were doing the usual here, drifting down slowly

[johnv] 17/6/2010 14:45

duplicate of last post

[geng] 09/6/2010 13:54

I've finally done what I've been considering for a while and sold the last of my IERE and bought more MERE.

The continual mystery for me is why this isn't over £2 I realy am begining to think this is a chance for free money now.

[sand dollar] 09/6/2010 13:52

Baring Asset Management seem to like the prospects.

[tim00] 07/6/2010 19:24

Sleepy,

it does seem odd that a company with a positive NAV is better off when sterling rises against the euro, but this is indeed the case. Let me demonstrate. Assuming property values haven't changed since end-Dec 2009, I estimate that at end-June 2010 MERE will have fixed and current assets of about euros 449 mn, and current and long-term liabilities of 275 mn, making net assets of euros 174 mn. On top of this it has the negative value of its exchange rate hedges. Let's assume the exchange rate is £1 = euros 1.124. A table in the Annual Report says that at this exchange rate, the value of the hedges is sterling minus 44.8 mn. Converting the NAV of euros 174 at this exchange rate, and adding back the derivative losses gives £110.0 mn. Now, instead let's assume an exchange rate of £1 = 1.265 euros. The same table in the Report says this produces a loss on the hedges of only £22.7 mn. Converting euros 174 mn at this exchange rate gives £137.5 mn. Deducting the hedge loss gives £114.8 mn. Voila!