Public Services Properties Share Discussion Threads

[jbarker5555] 21/10/2011 19:56

Horndean Eagle - Yep put me off a bit, suggests to me they have cash flow problems. Probably a naive point of view but I`ll only invest in what I understand. If they had no issues with paying the dividend in cash as usual then why issue a scrip? AIMHO. Happy for the more experienced investors to correct me! :)

[horndean eagle] 21/10/2011 19:01

Anyone else see the scrip dividend as a negative. The fact they are so keen to get people to take it suggests they are pretty desperate to retain cash. If that is the case then they should really look at cutting the dividend.

[kimboy2] 21/10/2011 15:20

USI is quite interesting. Basically it is being skewered by falling valuations and a restless bank wittering about covenants and wanting their cash back.

I reckon the net assets in the last interims were about Euros 61m.

However I think this includes a valuation on their Leipzig propert which is Euros 15m more than the RBS puts on it.They also seem to be valuing their holding in PSPI at NAV rather than market value which is another Eu 14m of over valuation.

I can't quite see why anyone would want to merge with it, let alone a healthcare company, unless it was dirt cheap.

In any event it may mean that a 20% holding may be a bit more footloose than it was.

I would like to think that PSPI may be trying to buy the shares back. It would add an extra 20p on NAV. I don't suppose they are though.

[woodcot] 21/10/2011 12:32

Just noticed Arbuthnot Securities have moved from "Buy" to "Strong Buy"

Public Service Properties Investments * [Strong Buy from Buy] - Maturing gracefully

Public Service Properties Investments (PSPI) continues to reap the benefits of a fully-let portfolio, long-term leases, indexed rental income and conservative leverage. Furthermore, we believe the conclusion of the strategic review to address the disparity between the stock's market value and PSPI's NAV should act as a catalyst for the share price. The shares are trading on a 56% discount to adjusted NAV, with a prospective 2011E dividend yield of 11% adding a further investment incentive.

[woodcot] 21/10/2011 12:15

Apart from normal issues being discussed I would think the re-financing of the debt in 2012 could have an impact. I feel sure the management will be able to re-finance the debt but hopefully on favourable terms which will take some doing in this economic climate.

[davidosh] 21/10/2011 11:48

adam....Might be worth you posting that on the recent thread in the Pub



Incidentally I am currently trying to arrange a presentation for investors on PSPI which would involve RP&C

[adam] 21/10/2011 11:03

Have been doing some research and buying some shares - there seems to have been quite a bit of stock around. I would be grateful if anyone wants to add any details to the following.

USI, the original 100% owner, floated PSPI off at 150p (Elliot bought some then) and sold down to 25%. Subsequently, they have done an underwritten rights, where USI bought a few more, at 70p, but the bulk of the stock went to the underwriter, Elliott.

This leaves Elliott with 45%, USI with 20%. Elliott have given some undertakings, and would be required to make an offer if they bought more shares.

USI Group are a listed Swiss company. You can read their accounts here



They are under some financial stress.

[...]In addition, the Group's investment property asset is substantially financed by one senior debt facility, which is scheduled to be repaid by 31 October 2011.

If the term of the existing senior debt facility is not extended or if the financing cannot be substituted, there is a material uncertainty about the Group's ability to continue as a going concern with respect to liquidity . The Group will monitor the situation.





The interesting bit for me though is here

Earlier this year, the Board of USI Group Holdings AG ("USI") announced that it was considering various options relating to the future of the company. USI has now progressed discussions with a leading health care provider which could lead to a combination of their respective businesses in a jointly owned company that would be floated on the Alternative Investment Market in London. The shares of this jointly owned company would be distributed to the shareholders of USI once the combination is completed and USI shareholder approval is obtained. The Board expects to finalise documentation and announce plans for the Company within the next several weeks as negotiations continue to progress.

To complicate matters RP&C are a shareholder in USI and by dint of that a shareholder in PSPI. Additionally they have a 1.5% management fee (reduced from 2% subsequent to the cash call).

My thought is that the "leading healthcare company" would be "European Care". It would make sense for the Tenant to want to buy their freeholds especially as the rest of their portfolio is mostly freehold.

Critically, for minority shareholders, it is important that Elliott partners (an aggressive American hedge fund) are not in cahoots with any of the other parties. Elliott are well known to RP&C when I asked them, but I do not suspect any skulduggery.

If running yield 6.9% (on £266m), less 1.5% management fee = 5.4%, you have gross cash flows of £14.3m before interest and central costs

Dividend is 7p or 11% = £7m

Thus interest bill only just covered. Should be some uplift to yield with Capex done and leaseholds are long maturity, but surely better for shareholders to dispose at NAV to European Care?

A disposal of the US/German/Swiss assets at or near NAV makes sense, but is this likely in the current market?

[kimboy2] 19/10/2011 20:27

The shares are a share in the physical assets of the company. If they buy shares they are buying these assets at a discount that wouldn't be available by actually purchasing the asset direct.

I don't think it will happen though. The scrip dividend would suggest that is not the way they are thinking.

I don't think that the gap with NAV will be easy to eliminate till the industry is stronger and therefore a ready source of share should be available.

As for paying down debt I would have hoped that they would gear up ready for the valuation yield falling.

Perhaps that is old think though.

[grahamburn] 19/10/2011 19:45

davidosh. Take your point, though very confused by Kimboy2's reference to shares as being "physical assets". Personally still against buybacks at this stage (given, as noted previously, the rights issue last year), even though on the surface the difference between share/development yield seems to favour it. Long term value is much more likely to be achieved through extensions/upgrading physical income-producing assets rather reducing the share capital, especially if those shares are not cancelled, but simply, as you suggest, held in Treasury. In short, developing economic assets rather than financial engineering should win 9 times out of 10 for the long term investor.

But, think all are agreed, the rationalisation of the company's assets through disposals is a priority, as is the rolling over of (hopefully) a reducing debt figure at reasonable terms.

[davidosh] 19/10/2011 15:03

grahamburn....If they have raised funds for a purpose then they should not detract away from that strategy but I am not against using a small part of those funds to buyback shares at say a 20% discount to where the money was raised. As Kimboy2 has stated the return on capital is 13% and they can be put in treasury and sold back out at 80p when the market recovers if a little more equity is needed and without dilution from here.

A short buyback campaign can sometimes encourage outside investment too. Cash is king though and we need to sell other non core assets as a priority IMO.

[kimboy2] 19/10/2011 14:41

With buy backs they are buying physical assets. The only differnce is that through their shares they yield 13% rather than the 8% they get through new development.

[fangorn2] 19/10/2011 12:49

Proposed Scrip Dividend Alternative - Reference Share Price

[grahamburn] 19/10/2011 12:31

Buybacks? No thanks - the worst way forward. Rarely produces any visible return via share price. Far better to go down the route of improving the forward yield on the physical assets (ie the homes in the UK).

However, first they have to refinance the debt which comes up next year at a reasonable cost (hopefully partially through asset sales in the US), otherwise there could be a squeeze on their ratios.

EDIT Should have also said above that, as PSPI raised considerable funds last year through a Rights Issue, it would be rather strange to start buying those very shares back now.

[kimboy2] 19/10/2011 10:25

Well I think the report confirms that the strategic review will propose the sale of the US and Swiss assets.This might yield about £8m of equity.

The question then will be how best to use the cash to narrow the NAV gap. I expact some of it will be used to uprate further homes into specialist units. However I would like to see some buybacks which will in the end yield a better return.

[woodcot] 18/10/2011 21:36

Thanks for the Edison research report Graham, I'm happy to sit and take a good yield of over 10% and over the next 24 months I believe I will also be sitting on a good capital gain.

[fangorn2] 18/10/2011 17:02

Edison note on PSPI stockopedia side

[grahamburn] 18/10/2011 17:02

Worth a read:

[grahamburn] 14/10/2011 08:17

Might have some connection to going ex-dividend on Wednesday....

[woodcot] 13/10/2011 22:52

There been some high volume going through over 3 or 4 days with approx. 750k traded yesterday 12th Oct. and very little movement in the SP, has anyone got any thoughts on this.

[osirisra] 12/10/2011 12:48

Derr stupid me I had the record date in my head rather than ex div.

[davidosh] 12/10/2011 11:34

taylor20...spot on. That is the only reason for the markdown and buyers today miss out on the 2.5p divi that was available yesterday but of course buy in 2p cheaper!

[taylor20] 12/10/2011 11:12

Isn't it ex-divi 2.5p today?

Record date 14th, Ex-date 12th Oct, Pay date 29th Nov.

[osirisra] 12/10/2011 10:32

Couple of chunky sales late yesterday dropped us back to 65.5 from where we had been all day at 65.75.
Only four trades so far today, all buys.
08:14 20k @ 65
09:05 10k @ 64.5
09:47 5282 @ 64.25
09:58 5k @ 64.25

I'm thinking that a MM has got a few left over from yesterday and is offloading them at any price just to tie up loose ends. Hopefully when this manufactured blip is clear we will do an about turn to 65+ again. Lets see if my theory is correct?
Surely going to be a bit of buying in prior to divi?
Osi'.