Mckay Securities Share Discussion Threads

[jimbo3352] 06/2/2014 15:14

Adopting a rational approach, I think I would rather stick with MCKS a share which has done very well for me over the last few years. The rise in recent months is underpinned by both the improving commercial property market in the SE and by the reduction in the interest rate swap liability. The share price is still some 10p below NAV and 45p below EPRA NAV. Contrast with PCTN (a company comparable to MCKS in which I also had a holding until I thought it overvalued) where the share price is north of NAV/EPRA NAV.

In the short to medium term, EPS is likely be hit by the delay before investing in property redevelopment translates into rents. MCKS has a good record in not overpaying for development opportunities. Getting the share offer away to institutional investors for a negligible discount seems a bit of a result to me and worth the £4m+ costs.

[skyship] 02/2/2014 10:49

Shareholders have had a great run; but all good things come to an end. Seems to be little reason to BUY at this level and after the equity issue, where are the new buyers going to come from in any event?

If it is at best just going to trade sideways - then why HOLD.

A TOP formation seems to have been developed, so a sell-off to 180p and then 160p may be on the cards...

[coolen] 31/1/2014 19:39

How do we reconcile a "progressive" dividend policy to a decline in rental income per share ?

[stevie blunder] 31/1/2014 07:30

The word "dividend" appears 151 times in the prospectus, but they don't make any explicit promises. eg:

"The Board further anticipates that it
will enable the Group to benefit from economies of scale, enhance
the Group's earnings and support its progressive dividend policy."

Obviously the rental income per share will decline, but so should the net interest. Hopefully it has been calibrated such that the dividend can be maintained.

[sleepy] 31/1/2014 02:26

What do they say about future dividends?

[coolen] 30/1/2014 19:57

The increase in equity ought to mean improved re-financing terms.

In turn, that might result in better P&L dividend cover, yes/no ?

[linhur] 30/1/2014 17:14

The capital raising surprised me. I increased my shareholding considerably last year.
The rational for raising the funds is as follows per announcement


"Assuming that 45,879,174 New Ordinary Shares are issued pursuant to the Capital Raising, to raise gross proceeds of approximately £86.7 million, it is anticipated that approximately £45 million will be used to fund the current portfolio projects and refurbishment and redevelopment opportunities noted above (made up of £10 million for the current portfolio projects and £35 million for the Redhill and Lombard Street projects).



The remainder of the net proceeds may be used by the Group to, where appropriate and in line with its strategy, fund property acquisitions, to strengthen the Group's financial position and for the general corporate purposes of the Group.



Use of the proceeds from the Capital Raising for these purposes would increase the size of the portfolio, bringing with it inherent diversification advantages. The Board further anticipates that it will enable the Group to benefit from economies of scale, enhance the Group's earnings and support its progressive dividend policy.

Further, by increasing the market capitalisation of the Company, the Board considers that the Capital Raising will make the Group a more attractive investment prospect going forward, and promote increased liquidity in the Company's shares.

The Capital Raising will also reduce the Group's gearing ratio, which will in turn increase the available headroom under the Group's financial covenants. As a result, the Group will be able to access the favourable terms provided by the Group's existing bank facilities. The additional availability of funds under these facilities will further support the Group's strategy of strengthening the scale and quality of the Group's portfolio.

Until the net proceeds are utilised as set out above, they will be applied to reduce the amount drawn on the Group's four banking facilities (which can be redrawn)."

Looks as though they are coming out of deep slumber and are proposing to double size of the Company presumably to put predators off. It will be a pretty big development schedule at £45m.
Looks as though there will be better terms for the current bank facilities and perhaps an extension to 2018/19.I guess £37m is earmarked for a deal on swaps and/or further acquisition.

It is certainly a big move and might end in an exit for management in 3/4 years time. Big problem for me is how much to put in bearing in mind that original family shareholders are not contributing.

regards
Linhur

[ursus] 30/1/2014 14:20

well - they want 45m of the net 82m to be raised (bankers and other leeches take 4.5m from the gross) to develop properties they already own and to buy one they've got their eyes on in EC3. so what's the extra 37m for? it cd be used to reduce current borrowings but that only reduces interest payments by abt 1.8m annually (cost of funds is a tolerably impressive 5% at present). do they have in mind a deal with the swaps counterparty who has given notice of break for 30m in the next couple of years? the 30 sep 13 valuation of that liability is abt 21m by my reckoning. what might they get out for today?

or do they want the extra 37m to punt on new property buys that are as yet unidentified (or at least not disclosed)?

[topvest] 30/1/2014 10:53

Yes, an interesting capital raise. Took me by surprise a bit. I'd already doubled up in the 150s, so will not take up my full allocation. I think it's a very positive development for the company though! Not much dilution versus the NNNAV. This has to be good news though as gives them significant firpower and will undoubtedly sort any debt issues.

[stevie blunder] 30/1/2014 09:15

Just doubling the number of shares in issue.
Going through the prospectus now.

Obviously there is dilution issue, and I wonder about the dividend.

[housemartin2] 13/1/2014 08:09

Yes stonking yield. Never really understand these. Whats the risk that requires such a high reward ? Is it driven by multi-occupation and admin costs or age of the building ( refurbed air-con could be indicative of other major costs needed ??)
I could imagine a situation where existing leases are short and we are talking about re-development before new lets (after the 'short term' in the announcement). This is very much McKay's bag but probably not the sellers. - am I warm do you think ? That said still looks a bargain to me !

[janeann] 13/1/2014 07:33

Nice aquisition this morning yielding 9%;

McKay Securities PLC, the Real Estate Investment Trust (REIT) specialising in South East and central London office and industrial property, is pleased to announce the freehold acquisition of 1 Crown Square, Woking from Cordea Savills for £6.0 million.

This acquisition is in line with McKay's strategy to seek out and invest in commercial property in its core market area with the potential to generate income and capital growth from active management, refurbishment and development.

1 Crown Square is multi-let, with net contracted rents totalling £588,169 pa. This represents a low average rent of £11.60 psf overall and provides an attractive initial yield of 9.3%. Occupiers in the building include tenants such as Proctor and Gamble, Royal Bank of Scotland and Petrofac, who together pay 63% of contracted rents.
The building is situated in a prominent position in the heart of Woking town centre. It totals 51,500 sqft, consisting of 45,280 sqft of offices over ground and seven upper floors and 6,720 sqft of ground floor retail. Recent improvements have been made to the building, including replacement of central air conditioning systems. The town has proved a popular location for occupiers, and is set to improve with upgrades planned by a pro-active local Council.

Commenting on the purchase, Simon Perkins, Managing Director of McKay said:

"1 Crown Square provides an attractive income yield off low rents. In the short term, our active approach to building management will improve amenity for existing occupiers, and enhance income and capital returns with improved rents and savings on running costs.

Returns will be further enhanced by improving rental levels in the town, as evidenced in recent lettings. The vacancy rate of good quality floor space in Woking is only 4%, which is similar to many town centres in the South East of England where recovering occupier demand has an increasingly limited choice of buildings.

The low purchase cost provides the potential to generate future gains from comprehensive refurbishment or redevelopment either on a standalone basis or as part of a site assembly."

[smicker] 11/1/2014 21:51

Just noticed the reference to ISAs. I hold my BLand in an ISA but my MCKS is in a normal dealing account. I'll have to check the different treatment as that is obviously the difference

[jrr774] 11/1/2014 20:33

Maybe as I hold in an ISA I've never had any problems receiving the full amount. I use Barclays Stockbrokers and would recommend - always prompt to rectify any issues. I used to be with idealing but with the bargain brokers you get what you pay for when things go wrong.

Hope Halifax credit you the lost divis.

[smicker] 11/1/2014 19:13

JRR774,
No i havent and i didnt get the difference last year either as far as i can tell looking at the various tabs within the Halifax account. alter ego, yes i'll have to talk to them on Monday to see what is going on.

[alter ego] 11/1/2014 17:27

well I received 2.16p but as I said before the tax is reclaimed in full in an ISA.

Smicker, suggest you speak to Hfax about it , they should reclaim for you without you needing to ask.

[jrr774] 11/1/2014 14:44

Smicker - do you not get 2.7p per share as a divi?

[smicker] 11/1/2014 12:14

Alter ego,
That seems to happen with selftrade but i cant see any sign of the tax reclaim with halifax when i look back at last years divis

[alter ego] 11/1/2014 09:09

smicker, yes. initially the divi is paid net of tax but this is claimed back subsequently. Should happen automatically but give it a month or two.

[smicker] 11/1/2014 00:20

I've just got the divi via halifax account but it is short of the amount expected. I always assumed it was corrected some time later as Selftrade do with B Land for me but i cant find the extra payment. Anyone else experienced this?

[patviera] 29/11/2013 21:01

what did it say skyship?

[skyship] 29/11/2013 09:16

UP on a BUY tip in the IC

[nil desperandum] 20/11/2013 00:02

scburbs - they can't have exercised the break since the next date to do so was as stated Jan16 (£25m) and Dec17 (£5m) - I had that confirmed by the FD quite a while ago. But i can understand the confusion given the sentence you highlighted and the length of the notice.

[scburbs] 19/11/2013 23:24

Still seems unlikely. If the counter party bank had given notice that based on current market conditions they intend to break then that would make sense (perhaps to aid the MCKS's accounting given it was always likely they would break).

It seems unlikely the notice period is really that long and that they have actually exercised the break.