Mountview Estates Share Discussion Threads

[eggbaconandbubble] 04/8/2015 12:44

Jonwig, thank you for the link. It answers all the questions. good one.
Brahms, my take on the current state on the Btl market especially in the SE is that everyone makes money except most likely the (new/recent/future)investor themselves.
Over the last 20 years the landlords have done well in both income return and capital appreciation but as of late the returns have dwindled to a level that it is hardly worth the effort and capital appreciation must soon start to grind to a halt as well (SE & London anyhow)if not go in reverse!
OK, loans are currently very cheap but can only and will start to rise. Rents are very toppy too.
Legislation is getting worse, more onerous and therefore more punitive.
Along with pensioners, BtL landlords are a sitting target for being squeezed by the Chancellor.
On top of all that I wonder how many potential investors realize that on top of income tax on rental income that they will finally have to pay CGT when they sell their investment. At present, that is at an uncomfortable level (a property sale is always going to be in the higher tax band) but just imagine in years to come when there is the likelihood of a Labour govt.! And possibly under Mr Corbyn to boot. CGT could well be over 50%
Now that the world and his wife are in the know and talking about BtL around the dinner table, I get the feeling that it is no longer an attractive investment.
That said if as you say you have had your properties for sometime they no doubt are showing a handsome appreciation and great annual return on the initial investment.
Under those circumstances maybe best to hold on rather than paying tax and then deciding what new investment to make! Especially if one has good long established tenants.

[brahmsnliszt] 03/8/2015 22:33

Still got my btl 4 be townhouse in Greenwich and holiday apt abroad.No intention of selling either.

[eggbaconandbubble] 03/8/2015 15:07

I'm now nearly out of all my BtLs after 20 years. Will elaborate later. Must fly!

[jonwig] 03/8/2015 14:48

eggs - since you are maybe potentially involved in BtL, 'never ending tenancy' doesn't seem to be the case; this should explain it, though it may not be the most up-to-date, considering all the recent legislation:



I'm looking at #2.4 on p17. It's actually quite encouraging for you.

[eggbaconandbubble] 03/8/2015 13:38

Who can then remarry presumably. The never ending tenancy.
I'm not intending to put the dampers on here. I actually have a situation that I am personally looking at.

[jonwig] 03/8/2015 12:13

Yes: spouse, civil partner, live-in lover.

I suppose you can't be a live-in friend for a few weeks before death and claim - or can you?

[eggbaconandbubble] 03/8/2015 11:35

If a protected/sitting tenant dies, does the tenancy transfer to the spouse until their demise?

[greatgiginthesky] 03/8/2015 10:40

Oops. I think the answer is that the company refurbs and sells properties when they become vacant and they have little control over when that will be.

[jonwig] 01/8/2015 12:04

I think it's just "stick to your knitting". they are good at buying regulated tenancies, and selling when the terms end, after refurbishing.
If they didn't sell, they'd just become another BtL investor - which might be their strategy. (Of course, their existing assured tenancies probably come into that category.)

I want to ask them at the AGM about future plans as assured tenancy opportunities decline.

I think their plans may have to change in view of the dividend tax!

[greatgiginthesky] 01/8/2015 10:36

Which brings me to my next question. What is the point of selling more properties in any one financial year than is necessary to fund the dividends, if the surplus is then simply reinvested into other similar type properties? It's a bit circular, isn't it?

[jonwig] 31/7/2015 14:53

greatgig - yes, absolutely!

I think I suggested £180 per sh after the interims. In any case, the new dividend policy will be paying out an increased part of the gains in future. I hope. So I'll shave that to my earlier figure.

If, of course, it really is a new policy. If opportunities to acquire regulated tenancies decline it's reasonable to expect the company will return more cash to shareholders. (Though some lucky ones will have a hefty tax bill next year ... how will the company deal with that?)

[greatgiginthesky] 31/7/2015 14:38

jonwig, I am not sure that extrapolating the NAV by reference to note 4 in the accounts will get us to the £200 figure. For example, sell only the longest held properties and you will get a much higher gross profit than if the newest properties are sold. In truth, the properties sold in any one financial year will be a blend of old and not so old, but the average will vary slightly from one year to the next.

[jonwig] 30/7/2015 11:23

Hi Mayn.

I hope the new chairman has been warned! He will have to field all the questions.

I intend going to the AGM, and we've booked a trip to London anyway.

[tmfmayn] 30/7/2015 09:57

AR 2015 -- I can imagine Graham Murphy is readying his long list of questions right now ahead of the AGM.

Last year the AR said the search for the next CEO was 'intensifying' -- now it seems the hunt has been indefinitely postponed. I must admit, when you look at how MTVW's dividend and NAV have grown since the present boss took charge, I bet few non-family shareholders can complain.

The AR 2015 reveals the boss received a 20% wage hike to £360k, a lovely £300k bonus and a hefty £99k pension contribution. No wonder he wants to stay put.

Mayn

[jonwig] 30/7/2015 09:15

And Papy, if you now look at Note 4, you'll see that a proportion of the trading properties were sold last year for three times their book cost (about 2.7x if you subtract costs), and apply a 20% tax rate you'll get a notional value of 2.4x book value, rather than 2x as in Note 15. That brings you a "true" NAV of almost £200 per share.

[jonwig] 30/7/2015 09:06

Another thing, which caused some annoyance at last year's AGM is the CEO succession. He's scotched this pretty firmly (page 5):

Our management teams continue to evolve and it may
become appropriate to appoint one or more of these
personnel to the Board ...

...

... I will be happy to step aside
when we have in position those of proven ability who are
capable of producing results at the level for which I have
been responsible for an extended period of years.

In other words, internal succession and his choice of who and when.
The golf buggy doesn't beckon.

[papy02] 29/7/2015 20:59

Copy of Note 15:

15. Inventories
Residential properties 2015 £000 323,020; 2014 £000 321,323

The Company’s freehold and long leasehold interests in its portfolio of properties which are held as Trading Stock were
valued on 30 September 2014 by an External Valuer, Martin Angel FRICS of Allsop LLP. The valuations are in accordance
with the requirements of the RICS Valuation – Professional Standards – Global and UK Edition, 2014.

The Market Values are on the basis that the properties would be sold subject to any existing leases and tenancies. The
valuer’s opinion of Market Value was primarily derived using comparable recent market transactions on arm’s length terms.

Allsop confirm that the aggregate Market Value of the Company’s interest in its trading properties was
Freehold £473,759,504
Long leasehold £192,106,762
Total £665,866,266

[jonwig] 29/7/2015 20:05

Annual Report now up:



Note 15 looks significant.

[greatgiginthesky] 14/7/2015 08:34

IMHO it hinders a potential bid by Grainger, who will be focussing on how to fend off the activists and I do not think that making an offer for MTVW aids that process. Nor do I think that Grainger would seek to attract a white knight offer from MTVW - it's beyond their financial capability to entertain such a thought.
However, if Grainger is taken private then that would leave MTVW as the only play on the stock market in this kind of business and some of those exGrainger shareholders may seek to redeploy their funds into MTVW in order to maintain an interest in the regulated tenancy market.
Just a thought.

Edit - Thinking about it a little more, if I were a Grainger shareholder I might well tuck some MTVW shares away in anticipation of the rush.

[jonwig] 08/7/2015 14:29

greatgig - I meant to respond just after your post, but forgot (!), sorry!

My thought was that Grainger was mentioned as a possible bidder for MTVW (by people at the AGM). I'm struggling to decide whether this actionist move helps or hinders that thought.

~~~~~~~~~~~~~~~~~~~~~~~~~~

The new Chairman (Antony Solway) has bought 300 shares straight after his appointemnt.

I note that Mhairi Lindsay Jarvis (appointed over a year ago) as non-exec hasn't bought any.

EDIT: Antony Solway - bought a further 200 shares.

[greatgiginthesky] 28/6/2015 14:02

Taken from the Sunday Times (for your interest)
Raider takes aim at Grainger

AN ACTIVIST investor has pounced on Grainger, the FTSE 250 landlord, and plans to push its management to squeeze more cash from its residential empire.

Crystal Amber has built a stake of about 3% in Grainger, which specialises in buying regulated tenancies at a discount and selling them on at a profit when tenants die or move out.

The activist fund is understood to be interested in realising £500m of future profits — known as the “reversionary surplus” — that are not yet factored into Grainger’s balance sheet.

Market sources said Crystal Amber’s appearance could also flush out a takeover bid.

Several suitors are believed to be circling Grainger, which is seen as vulnerable because of its sleepy market performance. Unlike those of many other property companies, its shares trade at a hefty discount to the value of its underlying assets.

Its chief executive, Andrew Cunningham, a 20-year veteran of the company, is set to step down next year. The board is thought to have identified a successor, who could be unveiled in the next few weeks.

Crystal Amber’s raid is the latest in a series by activist investors. Elliott Advisors, a US fund, won a messy fight against Alliance Trust in April, putting two non-executives on the board.

With 4,000 properties worth £1.3bn, Grainger has one of the biggest regulated-tenancy portfolios in Britain. These tenants have the right to live in the homes at sub-market rent for life.

Grainger buys the properties at an average discount of 30%, collecting rent. When it eventually sells, it collects the 30% profit, or reversionary surplus, and any house price inflation on top.

Crystal Amber is thought to be planning to push Grainger to sell the surplus to an insurer or another specialist at a discount for upfront cash. Richard Bernstein, the fund’s boss, said: “We think this is a highly undervalued asset.”

However, a source close to Grainger suggested it would resist the idea: “You can’t pick one part of the business and decide to unpick it — it doesn’t work like that.”

[gargleblaster] 28/6/2015 11:08

Thanks jonwig, will check out chronic blog. For the interest of others, here is the more comprehensive IC update;

After a relatively comprehensive interim statement, publicity shy Mountview Estates (MTVW) reverted to form with its full-year announcement which revealed virtually nothing about the landlord’s underlying performance, other than to reveal that trading remained positive over the year to March this year.

There was no repeat of the revaluation on its trading properties contained within the interim figures, which showed that trading stock was worth £666m against £318m presented on the books. However, given the strength of the residential property market, it would be fair to assume that trading stock is now worth considerably more.

Mountview owns a tenanted housing portfolio let on contracts signed before the rent reform laws in the 1980s. As a result, tenants cannot be moved out, and their rents are capped at sub-market rates. Significant gains on the value of the property are crystalised when the tenant dies or leaves. However, there have been no new regulated tenancies created for 27 years, so the portfolio is steadily contracting. No investment properties were bought or sold during the year.

The company's reported book value rose 8 per cent to £73.80, but add on the surplus value in the trading stock revealed at the interim stage, and this rises to £163.

MOUNTVIEW ESTATES (MTVW)
ORD PRICE: 12,000p MARKET VALUE: £468m
TOUCH: 12,001-12,300p 12-MONTH HIGH: 12,900p LOW: 7,501p
DIVIDEND YIELD: 2.3% TRADING PROPERTIES: £323m
PREMIUM TO NAV: 63%
INVESTMENT PROP: £29.4m NET DEBT: 21%

Year to 31 Mar Net asset value (p) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2011 5,510 23.6 435 165
2012 5,826 22.8 448 165
2013 6,260 28.9 568 175
2014 6,810 35.4 730 200
2015 7,380 40.0 816 275
% change +8 +13 +12 +38

Ex-div: 23 Jul

Payment: 24 Aug

IC VIEW:

Shares in Mountview were unmoved by the full-year figures but still trade on 26 per cent discount to historic adjusted net asset value. However, some of this is justified, as the shares are quite tightly held by the founding Sinclair family. For the long-term investor, there is still considerable upside potential. Buy.

Last IC view: Buy, 9,250p, 28 November 2014

[jonwig] 25/6/2015 18:55

gargle - an analysis on Stockopedia estimates £175/sh, but I don't think he's factored in any London inflation. You can read without registering:



I'm an IC subscriber, so I'll pick up anything said.

Their "Chronic Investor" blog was a bit scathing about MTVW a while back ... run like a private company and they don't talk to Investor's Chronicle!!

[jonwig] 25/6/2015 07:36

Very much a non-statement, in that it contains little that we really wanted to know, such as how they valued the trading stock to "way beyond" the book figure.

The CEO seems to have been dragged unwillingly to his Olivetti typewriter and hasn't even commented on his own tenure, which was to be the other big event.

Anyway, the trading properties show £323m, so net additions of £5m from the last statement. That suggests maybe a "true" value of £671m (crude basis), or £89/sh, and a revised "NAV" of £163/sh.

How much can we raise the H1 £666m over the 6 months?
The Daily Mail has just told us: "House prices in London surged up to 32 per cent last year" so being conservative, can we say 10%, or £67m, that is, £17/sh? Resulting guess is a "NAV" of £180/sh.

I suppose we'll have to wait for the annual report, which may have the information. This could mean some selling early doors today as short-term punters feel frustrated at the lack of raw meat.
The AGM should prove entertaining!