Public Services Properties Share Discussion Threads

[goliard] 20/9/2011 16:22

I think AGR is much safer. Lower yield, but increasing rentals and almost all let to UK government. I see PSPI as at least medium risk.

[osirisra] 20/9/2011 11:02

Point taken that nothing in this world has a "solid" income. How about "A dividend policy that is at the top of the piority list, sound management and an expanding business area" ie more old people in the world.

Better than investing in banking shares I'd say. Of course you need a balanced portfolio and I have PSPI as one of my safer shares, at the other end of the scale I have CEY!

Regards
Osi'.
P.S. Now where are those results?

[goliard] 20/9/2011 10:43

I think it is you assumption around the word 'solid' that some people doubt.

[osirisra] 16/9/2011 09:39

Quite unbelievable how quiet this board is given PSPI's yield. Sure it's not a 5bagger etc, etc but I thought there would be more input due to the solid income stream?

[osirisra] 15/9/2011 08:30

Showing a mid price of 65p and I just managed to buy £2000 worth at,,,, 65p. That doesn't happen very often.
According to the PSPI site their half yearly results will be out in September. Last year the half yearly results were out on the 20th. The 20th is next Tuesday so I's expect the results out next Monday the 19th.
I think I may well be grinning this time next week.
Osi'.

[stemis] 07/9/2011 08:45

Yes, my SIPP and ISAs are largely invested in high yield investments which (touch wood) seem to have shown less volatility than some of the so called 'blue chips'. PSPI is slightly disappointing in that respect but its sectoral more than anything else. I'd expect Elliott to be keeping a close eye on and contact with the company owing to their large investment and they seemed happy to stump up more money last year.

[davidosh] 06/9/2011 17:04

I tend to agree with SteMis on Aviva and I treat them like a big bank where I have no clue what lies lurking in the accounts nor investments made that can collapse. At least with PSPI I can see what the assets are even if the sector is under pressure...there does need to be long term care provision in the UK and it will have to be paid for.

Anyway I take the point with one main contractor in EC but there are also significant holders in this stock and I sense they will cover the bases if temporary support is needed.

My desire is to have about 15 very high yielding stocks and prefs in various sectors to see me through the volatility and cover my very high living expenses so that I can sit tight and it worked in 2008/2009 so hopefully will this time. They are equal weighted so and disaster at one which halves or suspends the divi can be coped with.

[woodcot] 06/9/2011 16:08

My personal view is to stick with PSPI and take a good dividend yield and I was hoping to see some modest growth in the SP, but this is a hard market right now and I believe will be for quite sometime.

If the interims look okay and they pay 7p for year I believe that will support the SP, as to the long term future I'm unsure and will leave that to the more experienced on the BB to speculate.

[stemis] 06/9/2011 15:56

Aviva looks tempting with a 9.0% yield but who the hell understands their accounts?

[scburbs] 06/9/2011 15:30

Davidosh,

The dividend yield is great, but the dividend yield is too dependant on European Care for my liking. The key stat is European Care's EBIDTAR to rent ratio. In 2009 it was already lower than ideal (extract below from prospectus for fundraising). With the current status of the care home market I don't think the dividend yield could be considered to not be at risk.

"In each case we have considered these performance figures in the light of our industry benchmarks and our historic knowledge of the portfolio. We have noted that the current portfolio rent cover is 1.23, which in the current market falls below the level acceptable to investors who prefer to see a rent cover
of at least 1.50. If head office and maintenance cap ex costs are deducted, the rent cover reduces to 1.04. There are a number of units performing at negative rent cover and others delivering significantly over peer group performance, with the range of actual rent covers for the trading period analysed ranging from -1.14 (Dunollie) to 7.15 (Beechwood)." [P61]



Against this EC was forecasting EBITDAR growth, albeit this is just a forecast. If they meet this forecast then everything should be great.

"EC's turnover for 2011 is expected to total approximately £140 million (2010 - £124 million) with an expected EBITDAR, before central overheads, of approximately £40 million (2010 - £34 million). EC is focused on growth in occupancy and cost control in very challenging markets."

The QED AGM reported yesterday that their care homes fund was under pressure and it isn't that exposed to SCHE so other operators clearly under pressure too.

With PSPI having done very little to sell the US and Swiss assets (and the US assets are now not worth very much) they have limited headroom and a refinancing looming. They have the support of Elliot, but if they had to call on it again then Elliot would be a bit too large a shareholder given recent difficulties I seem to be having with group's with large shareholders.

If EC gets into trouble then the PSPI NAV and dividend will be gone in a flash (i.e. the risk of 100% loss is not negligible) and alternative operators would probably come in at a massive haircut to rent (as is currently happening to SHCE homes).

If EC performs well and it meets its targets all those with the nerve to hold will make out like bandits. From a risk perspective it is just too reliant on a company which is at best struggling through EC.

If you are comfortable with EC then it is a strong buy and the yield is safe, but EC is rather private and the volume of information available is insufficient for me to conclude that I am comfortable with EC. For those reasons I'm out.

[kimboy2] 06/9/2011 15:01

I have switched some PSPI into AV. There is a 3% loss on yield but I think that there is more upside from these levels in AV.

I think PSPI is pretty safe but I think it will take some time for the care market to reover and the share price will be undervalued while it is.

[osirisra] 06/9/2011 14:48

davidosh, I'm with you all the way. PSPI got knocked out of it's 70/80p channel that it had been in for 18 months due to the Southern Cross effect. As the chart shows, a quick recovery from low 60's to mid 70's was derailled by the "Italy is going bust" effect at the end of July.

The Management of Southern Cross were of a completely different class to PSPI's and there is little reason to think we are going the same way. PSPI is a very boring yet steady ship which has been knocked due to the wider market. At this level it turns a very tidy dividend yield and there is a potential 20% upside to realise when the dust settles (66 + 13.2 = 79.2).

I'm a holder.
Osi'.

[davidosh] 06/9/2011 13:57

scburbs....Just out of interest where do you see the risk/reward as better ? For me 12% dividend yield is great so long as they can continue to pay it and they do have a stated progressive dividend policy. Do you see it coming under stress as there have been no trading updates to create concern and the results are due within a couple of weeks ?

If the yield is not at risk and the results are sound with reasonable outlook I can see a good few buyers moving back in to take it up to at least 80p again

[scburbs] 06/9/2011 13:35

I am no longer holding here (risk/reward better elsewhere), but it is disappointing that PSPI didn't manage to take advantage of the ultra high Swiss Franc. It's still pretty high so they should still go ahead, but c.8% of potential value lost in an instant.

"The Swiss National Bank (SNB) has set a minimum exchange rate of 1.20 francs to the euro, saying the current value of the franc is a threat to the economy.

The SNB said it would enforce the minimum rate by buying foreign currency in unlimited quantities.

The move had an immediate effect, with the euro rising from about 1.10 francs before the announcement to 1.21 francs.

...

Jeremy Cook, chief economist at World First, said the resulting currency movement was "the single largest foreign exchange move I have ever seen".

Against the franc, the euro climbed 9%, the dollar rose 7.7% and sterling gained 7.8% within minutes of the announcment."

[grahamburn] 06/9/2011 10:16

Think the company itself may well be ahead of the curve on this news. The refinancing of the US debt announced on 15 August indicates that the company is probably already looking at options to exit this investment. In that announcement it stated "The new financing, in contrast to the old facility, is non-recourse to PSPI and leaves the Group with maximum flexibility as to the longer term strategy for these assets."

[labatie] 06/9/2011 09:16

Although the US Post is only a small part of PSPI, the situation described in the link needs some watching.

[a0148009] 18/8/2011 09:42

Apologies if it has been mentioned recently, there was a Trading Update for half year 30th June 2010 on 31st August last year with Report in September would expect the same this year.

AO

[grahamburn] 17/8/2011 15:30

Thank you Kimboy2. Maybe I was psychic! Seems to confirm my earlier post, even if one accepts that their own newsletter is inevitably going to be as upbeat as possible! Significant new appointments as well which bodes well for European Care.

[kimboy2] 17/8/2011 15:25

EC Group newsletter;



I am happy to report that our Group financial performance is improving...

Also says the PSPI refurbishment and extension program is progressing well.

[grahamburn] 17/8/2011 14:47

Kenny. Really don't follow your logic. davidosh is right.

The RNS states from the very beginning that the refinancing is in connection with the debt associated with the US properties - it has nothing to do with the UK properties. The bridging loan from the main shareholder is just that - a BRIDGING loan - which has a very short term (ie end of the calendar year) so they must be confident of paying that back on time. The financing cost has been improved for the bulk of the debt.

There may be some doubts about European Care, but nothing is in the public domain - yet. On the evidence available - or rather lack of contradictory evidence - one has to assume that the refurbishment/extension programme at the various properties is proceeding without any hitches and, more importantly, the rights issue monies are being used for the exact purpose for which they were raised.

So, in short, nothing untoward to worry about. Until, perhaps, the results.....

[kramch] 17/8/2011 14:30

DD,

I would be interested in a presentation, I got out a couple of months ago but looking to re-enter when there's a bit more clarity on income levels for the care-home operators. K

[davidosh] 17/8/2011 14:18

I take the opposite view that this loan from the main shareholder is very specific to the US assets so that the cash available to PSPI is not diverted away from developing their property assets in accordance with plans.

What evidence do you have regarding European Care ? I see they have just appointed a new CEO btw.

[kenny] 17/8/2011 13:56

In relation to the recent announcement:

1. This seems to confirm all the rights issue money has been exhausted. It seems to have been mainly used on debt repayment with only a small part used for property extension/refurbishment.
2. Cashflow is so bad that PSPI had to take a loan from the main shareholder. So my question is, where is the cash to come from to maintain the high dividends. Surly the dividend will be slashed?
3. Perhaps the only reason cashflow can be that bad is that European Care is falling behind with its rent payments?

I hope all of my worries prove incorrect but, as I posted some weeks ago, I am going to await the interims, which should clear up most questions one way or another, before considering whether to reinvest.

[gnnmartin] 17/8/2011 09:32

Davidosh, I would like to meet the PSPI directors too.
Nigel Martin

[a0148009] 16/8/2011 12:51

davidosh

This came on my radar screen recently and have been buying.
Like you with such a high yield I wonder what is wrong and have combed through the Accounting Principles,there does not seem to be anything untoward. The market cap is small and liquidity is poor which may put off smaller company investment institutions,also I believe there has been a seller recently and a few larger trades of 25k and 50k at 65 have gone through.

With regard to the USA I think the implication is that they have manoeuvred themselves into a flexible position with a view to exit at some stage.

"Public Service Properties Investments Limited (AIM: PSPI) is pleased to announce that the $23 million senior guaranteed debt associated with the Group's holding of 140 US Post Offices has been successfully refinanced with a new $19 million senior debt facility (a loan to value ratio of 80 per cent.) for a term of 10 years at an initial interest rate of 4.875 % per annum. The new financing, in contrast to the old facility, is non-recourse to PSPI and leaves the Group with maximum flexibility as to the longer term strategy for these assets."

Initial 4.875% pa is not a fixed rate, something to keep in mind.

Following extracted from Note 14 of the Accounts :-

"Investment properties in the United States of America are leased to the United States Postal Service under a master lease executed in March 1997 and amended on 29 January 1999. The lease expires on 28 February 2022. The rent under the lease is fixed for the entire period of the lease. The lessee has the right to unilaterally relinquish use of up to 25 of the post office properties provided that the resultant reduction in annual rent payable under the lease does not exceed a maximum of $300,000 (GBP193,911) per annum or 13% of the annual rental. Management have factored this into their analysis of minimum lease payments, and have no reason to believe that this right will be exercised in the foreseeable future."

If I read right there does not appear to be any uplift in rent over the entire period of the lease, which seems unusal.
However, I would suggest that these properties would be in strategic locations
and at some time in the future valuations would improve.
Also there could be a steady drip of up to 25 offices or total representing 13% of the rental reliquished which may then be sold to reduce debt.

I certainly would like to join you on 19th Sept if that is possible, meeting could be held at Arbuthnot's. edit Annual Report below.



AO