Mckay Securities Share Discussion Threads

[tiltonboy] 23/2/2010 09:58

Oriel have an ADD note out today.

[martincc] 16/2/2010 14:55

This REIT's Alright

By David Holding

Published in Company Comment on 12 February 2010

A UK commercial property group with a bit of everything for investors.

With continuing worries over UK commercial property valuations, it seems wisest for investors interested in the sector to try and find a company with a little bit of everything; a healthy discount to net asset value, plenty cash, a good yield, a proven track record and a good return on investment from properties managed.

Unfortunately, there's no such thing as perfection here; if there was, it would be easy. But real estate investment trust (REIT) McKay Securities (LSE: MCKS) ticks a lot of boxes. Its REIT status means it is obliged to distribute 90% of its property income each year, so this is really all about income -- and the perception of likely future income which gives us the market's estimation of capital value at any given time.

McKay specialises in the development and refurbishment of buildings in London and the South East. Its portfolio is 80% invested in the office sector, with the balance mainly in the industrial sector.

cont/

[alanji] 10/2/2010 18:44

Me to thank for today's rise - Post 210 "I think we will have to await the results before there is any movement - other than a possible drift down?"
Sky - maybe CIC will make a bid :-)
Couldn't see your post on IERP - I'll have a look tomorrow.

[crawford] 10/2/2010 16:48

Skyship,
I own from the OO. Who knows if they fall that far, I would have thought anyone taking up their allocation were doing it for the income so I wouldn't expect much turnover in them.

Personally, I have no intention of selling them, good income and I don't think they are too risky.

[skyship] 10/2/2010 16:44

Incidentally all, as I posted on the CP+ thread, I bought my first IERP @ 100.45p yesterday. Plan to accumulate a few on further falls, should that happen.

I am thinking they could trade down into the 90s as people rebalance their portfolios in a general Market sell-off, but I suspect that 93p might be the floor as they would then cross into a double digit Gross Redemption Yield.

What do people think?

[skyship] 10/2/2010 16:37

Yes - welcome back Nick.

I read everywhere that the main valuation increases are in the better properties, especially those with long lets to good tenants. However it is also true that the PIs are lowering the yields for secondary properties. What is more, valuations may continue to increase in Feb/Mar as there is still very limited release of distressed property from the banks.

I am increasingly confident that our NAV here will surprise to the upside.

A bid would obviously be nice, but I can't see that happening as:

a. we are not distressed
b. there are no big share stakes to be scooped up on the cheap

[alanji] 10/2/2010 15:16

Good to have you back Nick - your comments are valued. I took my comment on volumes from the IMS - "New bank lending remains constrained and the volume of investment transactions for more secondary property has been limited, leaving market values less clear." So, I am pleased to hear you think volumes are up.
What property co's are you holding now?

[nickcduk] 10/2/2010 11:58

Skyship

I would guess that MCKS will probably report an underlying increase in valuations of around 8-10% for the period. NAV will rise markedly. I disagree with Alan when he says not many actual sales are taking place. Volumes have risen very sharply. There is a huge amount of money chasing assets at present. Property funds are now attracting large inflows. Pension fund mandates for property in Q4 of 2009 were huge. This is likely to continue as evidenced by FPO raising 100m+ in equity for a new fund this week.

[alanji] 10/2/2010 09:57

Bonjour Sky,
I agree your figures but doubt valuers will be so bullish at March 2010 - as stated not many actual sales are taking place. The other big question is the dreaded interest rate swaps, as you know, and the adjustment that should be made for them. There is no doubt an 'actual' liability (because swaps exceed loans) so, imo, not all the liability should be added back to calculate the adjusted nav. Unfortunately calculating how much is beyond my knowledge but let us say the maximum liability (you can even consider it an asset as the co has available finance) would be about £9m (this will decrease if interest rates rise) based on the excess swap over current loans. That would give a nav of about 250p on a 15% rise or 230p on a 10% rise - still a very healthy discount.
I think the yield is pretty important as the only hope of realising value from MCKS would appear to be a hostile takeover.
I am not selling.

[skyship] 10/2/2010 08:24

G'morning Alan - yes, I agree the yield is uncertain - but what about the NAV. Do you have a view on that following both the IMS and recent IPD datastats?

At the end of the day the NAV is of course a more important factor than the yield.

[alanji] 10/2/2010 08:03

Hi Skyship,
Just seen your earlier post. I think you are correct that MCKS has been overlooked but also that it has been held back by the yield and prospective yield. When I last looked in detail a couple of months ago it was still very difficult to estimate net income and an email to the company did not get much more info. I think we will have to await the results before there is any movement - other than a possible drift down?

[skyship] 09/2/2010 08:09

Feroisis - just look at the yield compression already reported since the last valuation:

"This rally has been particularly apparent in McKay's core market, being the
South East office and industrial sectors, which together make up approximately
65% of the Group's portfolio value. Increased competition from institutional
funds to invest a resurgent inflow of cash, has seen prime office yields in the South East reduce by circa 100 bps to 6.75%."

That reduction from 7.75% to 6.75% translates to a 15% increase in relevant valuations. OK, we've got another 2 months to go; and OK that may not translate across the portfolio. But simplistically apply 15% to the full £200m and you get £30m upside. That = c.65p/share. An over-simplification perhaps, but IMO £20m upside must be the minimum we are looking for & just that would translate to 270p/share.

No, MCKS has been overlooked..... and I'm taking advantage of that fact.

[feroisis100] 08/2/2010 21:04

Skyship,

Long term holder here, but newbie poster.

Don't think MCKS will see the full impact of the yield compression. Selling Lotus Park and all the associated expenses, plus the two div payments since the interims is likely to lower NAV a bit.

Having said that, SE commercial property has done amazingly well over the last three months. NAV at 31 Dec must have been about 235p, so with the gearing we only need about a 4% increase in property values in Q1 2010 to be at 250p NAV. That shouldn't be to difficult! I'm looking forward to seeing the Jan IPD data!

F

[skyship] 08/2/2010 09:43

I think I'm being way too conservative! Surely that 1% fall in the yield equates to a c.£30m increase in portfolio value, ie NAV up to c.290p!! That would = a 47% discount @ 155p.

Alan - you're better at therse things - what do you make it? Assuming of course no change in the interest rate swap value.

[skyship] 08/2/2010 07:51

IMS earlier than I expected. Certainly makes encouraging reading:



Anyone any views on my 250p NAV estimate? Am I perhaps being too conservative?

[skyship] 06/2/2010 11:47

The Interim Management Statement may well be this coming Thursday - 11th February. Even though the Board's statements and actions are always notoriously conservative, I can't see how the underlying asset performance can be anything other than encouraging.

The next NAV revaluation to 31st March won't be revealed until the June Finals, so patience remains the order of the day, but I'm already pencilling in a minimum figure of 250p/share - so @ 150p, that's a 40% discount!

[skyship] 01/2/2010 17:25

No problem - I know it seems a bit skittish - but hyperactivity works for me!

[ammons] 01/2/2010 13:35

Thanks SKYSHIP

[skyship] 01/2/2010 13:22

ammons -

1. the imminence of the IMS

2. the fall in the share price provides a small turn made on the covered bear tack - sold @ 160p, bt @ 150p

3. the possible bounce off the 145p support line

4. 40% CASH - so an itchy finger....

[ammons] 30/1/2010 05:53

Hello SKYSHIP.

This is what you wrote about MCKS on 14 January,

"Personally I'm out of them all other than PSPI & one-third of my former holding in MCKS. Property will be great again sometime; but for the moment the rises have been completed & the momentum has gone."

We are now two weeks on without much change in the MCKS share price and you've decided to buy MCKS again.

What has happened in the last two weeks to make you change your mind so quickly?

[skyship] 28/1/2010 10:26

Also bt back some of my topsliced MCKS at a smidgeon under 150p

Last year the Finals were on 4th June & the IMS was on 12th Feb - so perhaps only a fortnight away from an update...

Also, as the chart shows, we may well be supported by the rising 200day MA; so I'm playing for a 10% rise back to the top of the prolonged trading range:

[skyship] 28/1/2010 10:13

LG - personally I've bt back into IFD today on the better than expected NAV increase - see below. At 43p the yield = 8.2%



Is there a trend developing here after the similar advance in IRP's NAV?

[lord gnome] 27/1/2010 18:55

Thanks for your replies. I'll let you know what I do.

[skyship] 27/1/2010 18:33

LG - Take PSPI off your watchlist and place them into your portfolio, even after today's rise...

As for RUSP - yes, buying into Kleptocracy Russia goes against the grain; but I urge you to take time out and have a good long look at RUS. Also look at the director holdings - esp. the recent buys of the prefs.