Mj Gleeson Share Discussion Threads

[azalea] 24/2/2012 17:27

The IC gives a 'Hold':- "Trading at a third below NAV. That looks unlikely to change much before evidence clearly emerges that the new strategy is working properly".

[battlebus2] 24/2/2012 16:32

Some decent trades today then.

[battlebus2] 22/2/2012 18:26

Yes Des i'm very happy to hold these indefinitely, as expected we've had a slight retrace mainly brought about by the investors who bought on the tip in I.C. who weren't prepared to wait. That's something i've always hated about tips as they distort the shareprice for a time. Anyhow normality will be restored soon.

[deswalker] 22/2/2012 18:05

25% Gross Margin looks good to me. I need to look at some other builders to compare. But we're steadily chomping through all that written down land and then we get on to all the cheap stuff that we've been buying. Then watch the shares react ...

[deswalker] 22/2/2012 17:58

The IC has written a piece which has some useful info (my bold) ...



MJ Gleeson is in the final stages of its seven-year transition from jack of all property trades to housebuilder and planning specialist. Having sold three of its four remaining private finance initiative contracts in the second half of last year, it now has essentially two businesses: building budget homes on brownfield sites in the north of England, and getting planning permission for greenfield land in the south.

Unfortunately, however, the dominant housebuilding arm is loss-making and reported a deficit of £800,000 over the six-month period. That's because the company is still building on land it bought at bubbly prices in 2005-07; it wrote down the land to a nil margin in 2009, but house prices have failed to recover since then. Chief operating officer Alan Martin says this dynamic should change next year, when Gleeson starts to build on land bought cheaply after the crash. Gross margins should then be at least 25 per cent.

The company is still taking advantage of low prices to add to its land bank, though. It bought 478 plots over the period, with options over a further 1,657 plots. Gleeson also has the huge advantage of a net cash position, having had the good luck to sell most of its commercial property and construction businesses as part of a strategic review before the credit crunch.

[deswalker] 22/2/2012 08:34

Perhaps but they would be crazy IMO. The numbers are great, the Chairman's statement is one of optimism and their strategy is as clear as day.

They've nearly divested all assets beyond Gleeson Homes and Gleeson Strategic Land, with just one PFI project to be sold in the next few months. They've ploughed much of the money back into land within Gleeson Homes with a special divi for the rest. They're gearing up big time in the North which has to attract the larger players looking to add to their land bank. If not then they can just build it all out over time and return the proceeds to shareholders.

[battlebus2] 22/2/2012 08:25

We may see a temporary blip in the shareprice with small profit takers who don't fully understand the long term value but we should soon recover imv.

[deswalker] 22/2/2012 08:19

It's worth comparing the narrative here to that in Nov's IMS and last year's Finals. Things I've noted ....

- At 30 Jun last year they were selling from 11 sites. At 30 Jun this year they should be selling from 29. A very large increase in 12 months.

- Since the IMS in Nov they've agreed to buy a further six sites representing 277 plots above and beyond the large expansion already reported. If all 18 sites are finally bought they will be up to a land bank of 2800 plots. That's quite some expansion on a couple of years ago.

Reading between the lines they are gearing up big time. Hopefully any suitors are taking note.

[battlebus2] 22/2/2012 08:05

Yes very undervalued and although a return to a small profit the potential for next half looks much better.

[deswalker] 22/2/2012 07:59

NTAV per share = 183.75p
Current Assets minus All Liabilities per share = 162.26p
Net Cash per share = 28.7p

So at 130p we have an EV per share of 101p vs NTAV excl Cash of 155p. That's a 35% discount.

[battlebus2] 21/2/2012 18:26

Where did that spread go. Results in the morning chaps.

[battlebus2] 20/2/2012 10:02

Yes held Redhall since the old Booth days. don't understand how they let the vivergo situation happen in the first place but i'm giving them the benefit of the doubt. If they ever get the 14 million who knows what they might do with some of it.

[deswalker] 20/2/2012 09:48

I know nothing of Quarto but am much more aware about Redhall. If they can get the Vivergo thing sorted then they will be in a very good place, but right now I just don't understand what is going on with that case.

I held Chieftain that was taken over by Redhall and have watched it ever since. I've never held because I've always viewed its balance sheet as slightly on the weak side even before Vivergo.

It's a typical Chris Mills share. He seems to like good P&Ls, a growth or recovery story and some leverage on the balance sheet. Most of his shares are like that and GLE is unusual for him in being a pure Balance Sheet play.

[deswalker] 20/2/2012 09:41

One issue to think about is whether a takeover offer by a third party would fully reflect the cash on the balance sheet. Often the stock market stubbonly ignores cash-rich Balance Sheets, perhaps reflecting 50% of the cash balances in the stock valuation but very rarely 100%.

Hopefully a trade sale could be agreed to fully reflect the cash balances but if not I wonder whether more special dividends or capital distributions might be a sensible course to get the cash balance down and force any purchaser to pay a full price.

[battlebus2] 20/2/2012 09:35

I'm a fan of Chris Mills myself i think we have mentioned this before. Holding Redhall and Quarto group myself the latter is certainly always seeking add ons, their results for the year are on Wednesday so we will see.

Edit i see you've already been on the Quarto thread. Borrowed your link for there hope you don't mind. May add it till RHL as well.

[deswalker] 20/2/2012 09:28

Perhaps but I doubt it for now.

Over 50% of my total portfolio is either in NAS, OIG or certain portfolio constituents thereof such as GLE. It's fair to say I'm a bit of a Chris Mills buff and I stumbled on GLE by going through his listed portfolio looking for ideas.

The last big shareholding that they sold out of in a takeover was Castle Support Services about 18 mths ago. Since then they've taken over GTL themselves (alongside a Scandinavian Inv Co) but other than that they have been pretty quiet.

I'm hopeful of a few corporate transactions in the medium term at the latest. I just hope they are sales to third parties (like CSS) and not buyouts by Mills' funds (like GTL).

I think GLE is highly unlikely to be bought out by the funds due to the premium required by the other shareholders and the size of the transaction required. A sale to another housebuilder has to be the strong favourite IMO. The question is how close to NAV they are able to achieve or even whether they can get a premium to take into account the tax losses and the upside specifics of the land portfolio not reflected in the accounts due to accounting at the lower of cost and net-realisable-value.

[battlebus2] 20/2/2012 09:06

Very interesting Des! I'm holding three of those shares so my odds on corporate action are much greater than i thought. Thought i was catching you up by rounding my holding to 50k but i see not. Post 46 maybe not be that far wrong after all.

[deswalker] 20/2/2012 08:45

bb - worth taking a look at this statement from Oryx last Friday ...



GLE is their largest holding (7% of Net Assets) and they say ...

...the Manager believes that there is the potential for corporate activity to occur in the Fund's quoted portfolio ...

Now it doesn't take a rocket scientist to figure that GLE must be being prepared for some form of corporate action but it's nice to see it effectively implied by the Oryx management (who hold over 27% across three funds).

I own some GLE indirectly via both OIG and NAS in addition to my 100k direct holding.

[battlebus2] 20/2/2012 08:35

Slight mark down to 126/130 but it didn't last 5 mins with the buys sending us back to 132.

[battlebus2] 17/2/2012 16:33

Indeed indeed.

[aston girl] 17/2/2012 16:32

The spread continues as I can't better 1.31 on TD waterhouse.
Hence I'm standing on the sidelines and will aim to read up more over the weekend, AG

PS Hi Battlebus- looks like we may share an interest in more than just Mlin & Moni eh?

[battlebus2] 17/2/2012 15:24

Still 126/131 on my screen Retsuis. The 4p drop is only the last recorded AT trade not the true price. Cannot see much of a drop with results on the 28th ,they make shake a few sells but the path will be upwards markets allowing.

[retsius] 17/2/2012 14:43

bb
Thanks,price has dropped this pm

[battlebus2] 17/2/2012 09:45

Retsuis for larger companies with lots of buyers the spread is low as there are plenty of buyers for the sells but for smaller companies like GLE there are relatively few trades in a week. The mm's can offset their risk of being left with shares at a price no one wants buy at by increasing the spread. Lots of tricks up the sleeves of those mm's. Lower the spread to encourage you to buy or raise the spread to put off buyers here i think they are playing safe after such a rise.