Picton Property Income Ld Share Discussion Threads

[envirovision] 27/10/2011 15:46

Noted a willing buyer appeared though. 300K taken at 41p at the end of the day. I would be surprised to see the price remain at these silly levels for much longer.

[skyship] 27/10/2011 13:52

Thnx again - I've added...

Also bought a few TEIF today; I would expect a rally there as we begin to hear news of Scandinavian disposals.

[simon gordon] 27/10/2011 13:08

Hi Guys,

More info from the Fairfax note:

Picton Property Income (PCTN) announced an end September NAV yesterday of 64p per share on an EPRA basis, up 1.6% over the period. At a property level, the portfolio was up 0.5% on a like for like basis.

• Although rental value growth was flat during the quarter, the company also announced a third quarter dividend of 1p per share and we believe that the 9.8% running yield on offer is as attractive as any in the UK property sub-sector.

• The shares are trading at a -36% discount and as the Z-Score of -2.3% indicates, look relatively good value at this level.

• The management team have been occupied recently, not least with the internalisation of the management function, the cost benefits of which should feed through in next year, but also on the Offer for Invista Foundation Property Trust.

• However, the ongoing developments should not deflect from what has been accomplished in asset management terms during this quarter, as the team have completed 16 lettings and six rent renewals as well as implementing four active management initiatives, achieving headline rental value of £1.5m per annum.

• Two floors of the Farringdon office building, the largest void in the portfolio, were let, as well as the largest retail void and the largest industrial void. The occupancy rate improved from 90% to 91% and the average lease length is now 7.5 years.

• As at 30 September 2011 the portfolio had a net initial yield of 6.9% comparing favourably against the IPD All Property Initial Yield of 6.2%, and a net reversionary yield of 7.7%. Based on a portfolio of £425m, a move towards the reversionary level has the potential to add around £3m onto the underlying profit.

• Refinancing the debt due in October 2012 and January 2013 is the main issue facing PCTN. The ZDPs mature in October 2012 requiring capital of £31m, and the remaining bank debt amounting to approximately £202m is repayable in January 2013.

• Notwithstanding this, the Company has been reducing its debt with funds generated through its strategic asset disposal programme, and excluding the ZDP requirement, the net LTV on the bank debt is now in the region of 40%, well ahead of its weighted average covenant of circa 59%. The covenant ratio drops to circa 54% from January 2012.

A reduction in debt naturally leads to reduced finance costs which is positive in terms of improving dividend cover from rental income, although based on the half year numbers, and making assumptions on recent developments, we estimate that the current year's dividend cover will fall marginally short at about 0.94x.

• However, the scope to improve occupancy and the implied potential from the reversionary yield suggests a higher future return, and more tangibly, the reduction in costs expected from the internalisation of the management contract, which we expect to be in the region of approximately £0.4m per annum, should mean that future dividends are fully covered.

[alanji] 27/10/2011 12:18

Thanks for the figures, Simon. Made me have a detailed look at the interims. Looking much healthier than when I last checked.
Not sure why Fairfax have reduced the estimated interest by 1 million but it does look as though the dividend cover is currently better than IFD.
I have switched half my IFD investment (my largest holding) into PCTN.

[horndean eagle] 27/10/2011 12:14

Baring knocked out 1.2m yesterday. 4m left to clear. Market strength means they might bide their time rather than press the issue as they have been.

[skyship] 27/10/2011 09:48

Likewise - thnx Simon

I'm pretty certain Michael Morris wouldn't wish to cut the divi; and that 2011 Pro-forma suggests now not really necessary.

[sleepy] 26/10/2011 20:29

Thanks Simon

[simon gordon] 26/10/2011 20:17

Fairfax - 26/10/11:

Pro-forma revenue account full year 2011

Gross rental income - £32.7m
Other income - £1.1m
= Gross Income - £33.8m

Property operating costs - £4.3m
= Net rental income - £29.5m

Management fees - £3.3m
Other Expenses - £2.1m
Finance Costs - £10.6m
Tax - £0.5m
= Underlying profit - £13.0m

Shares in issue (m) - 345.3

Underlying profit per share - 3.8p
Dividends - 4.0p
Dividend cover times - 0.94

[envirovision] 26/10/2011 13:38

40.5 seems to be the price

[skyship] 26/10/2011 13:02

A 1m trade @ 40.5p - could clear Barings sooner than you think!

[skyship] 26/10/2011 12:19

Bought a few this morning @ 40.375p...

[horndean eagle] 26/10/2011 10:31

I think PCTN is more attractive on a stand alone basis than IFD. Historically PCTN has traded around 20% higher than IFD. That gap has narrowed down to 10%. It looks as though Baring Asset Management are responsible for the overhang in PCTN. They have been shifting stock and knocked out 350k or so yesterday. Unfortunately they still have over 5m shares left to go. Once cleared though I would expect the re-rating to kick in. Don't see why it shouldn't go back to the 50p level over the next few months.

[envirovision] 25/10/2011 15:39

Cracking value though, concur HE.

[envirovision] 25/10/2011 13:17

An update of the IFD deal/rational would not have gone amiss.

[horndean eagle] 25/10/2011 11:28

PCTN NAV out today. NAV up to 64p. Underlying portfolio performance was pretty solid. They seem to be making good progress on the void side. Dividend cover can't be far off being 100%. Small non-core disposals continuing at small premium to NAV. Hopefully they should be able to re-finance on attractive terms next year. 250bp above libor shouldn't be out of the question. With 5 year swaps around 1.5% that should bring borrowing costs in around 4%. With that dividend should definitely be covered. I think recent weakness is IFD bid related. Once cleared up one way or the other it should rally. A 10% yield in the meantime provides comfort.

[skyship] 05/10/2011 18:11

Offered @ 39.5p - yield now @ 10.1%...

[bolador] 22/9/2011 07:47

Skyship,

Interesting note. I suppose that shareholders have to be worrying that the percentage of voids and rent arrears will build up in the current environment and thus put pressure on the dividend . In any event such times as the present
always provide an excuse for a dividend reduction. I have gone from a confident holder to a concerned ditherer of and about this share in the last few weeks. Certainly the discount to nav will start to support the share price but then a dicount of 31% in property shares is about the norm in hard times. In the 90s recession property majors had a discount of this level and more. Land Securities looked to be beyond hope at that time. In other words I think we are stuck for a good while !

[skyship] 21/9/2011 12:03

One month since the approach to IFD and the PCTN share price has slumped from 48p to 43.5p.

Personally I expect the approach to come to naught as PCTN presumably can't fund a cash offer; and a straight merger offers nothing to IFD shareholders; and crucially nothing to the the Board and the investment managers. With no major IFD shareholder existing to call the shots, the end result will be what is best for the Board, not what is best for shareholders!

So, when PCTN admit there to be no way forward, they will grumble at the lack of IFD co-operation, then get on with life. So, at 43.5p, is PCTN a BUY, HOLD or SELL?

Well, I still believe there to be some doubt as to the dividend cover as I haven't heard an adequate response to the not insubstantial £4m non-recurring lease surrender payment we received last year!

Nevertheless, if the quarterly 1p dividend is to be retained then @ 43.5p the yield is once again a very attractive 9.2% and the EPRA NAV discount = 30.9%. Surely suggests value once again...almost as much value as IFD!!!

[skyship] 19/8/2011 06:57

PCTN approaching IFD:

[skyship] 30/7/2011 17:19

Seems as though things are on the mend. Hope it continues that way. Best wishes.

[badtime] 30/7/2011 17:17

hi sky..thnx for asking..nt too sure if u knew...but had a op on one finger week ago last wednesday...the othr thy think the padding on the tip wil grow bak in time (how long?)..but ring finger needed surgery...i started doing som work on monday ...ironically lawn mowing! ...som work i hav delayed..but my contract stuff is harder to put off...daughter helped all day yesterday which was nice....but everything is taking much longer and i'm having to do a lot on my right side (uninjured)....had dressings changed this week..back again this coming week and to c the doctor ..the nurse i saw this week sed it all looked ''nice and pink''..which is good! i think i might need some physio on my hand as well as movemnt is restricted...the staff at the Queen Victoria at East Grinstead hav been excellant

[skyship] 30/7/2011 16:55

How is the hand - are you able to work?

[badtime] 30/7/2011 16:53

Yes i saw yur post re GHE i did put in a limit buy yesterday but hooked nothing

[skyship] 30/7/2011 16:34

Badtime - yes, add both IFD & MERE to that list!

Have also bought GHE after Meadows post on the SL thread.

[flying pig] 28/7/2011 09:56

Dividend 1p and generally positive report - price still at discount to asset value which remains steady.