Sdic Power Discussion Threads

[scburbs] 17/4/2010 14:45

Afternoon Lagosboy,

I think the share price will strongly rebound if the covenant breach is addressed, perhaps back up to around 25-30c. However, for an initial bounce to be part of a more sustainable recovery they need to focus on those strategic priorities of vacancy, rent increases, cost cutting and disposals.

You are quite right that NAV is the carrot, but the realisation of the inherent value will come from those strategic priorities which are being pursued vigourously by most of the peer group. Unfortunately both cost cutting and disposals sit squarely within the conflict of interest box hence my desire for the SDIC board to step up to the plate and actually meet their responsibilities. If they are not going to do that then there is a danger that it will remain undervalued and could get stuck in the c.50-60% discount to NAV type range. After all, NAV without cashflow or profits is only a value opportunity if there is an ability to access that value.

It is worth remembering that this was floated in 2006 (i.e. the time the management contract was signed and the fees set) with an intention of aiming for a 6% dividend yield. On a 100cent float price this was 6c per year! This target fell to 5% with the 2007 placing. Fair to say that it has not done what was said on the tin (albeit probably still ahead of a GS CDO fund) and appropriate that the management fee should be renegotiated for underperformance of that target and in line with other groups who have reduced their management costs.

It is also worth reflecting on the current market standard terms for management contracts. New funds having launched include Max Property and LXB. Max Property charges 1.75% of net asset value and LXB Retail Properties is also at 1.75% of net asset so some consistent pricing emerging there (in other words LXB copying Max or being forced to by investors). If the board of SDIC renegotiated the SDIC contract from 0.85% of gross assets to 1.75% of net assets then the management fee would fall by well over €5m p.a.

The switch to net asset value based fees is to stop the clear conflict over portfolio size and gearing which is caused by a gross asset fee basis (i.e. manager is incentivised to advise the company to hold too large a portfolio). Existing companies like IERE have also moved to a net asset based fee. They moved from 0.95% of gross assets (a high fee compared to the previous standard of around 0.6%) to 2% of net assets.

[lagosboy] 17/4/2010 12:34

Scburbs

Thanks for the excellent analysis as always.

Getting down to the SP, do you expect a strong rebound if the covenant breach is successfully addressed or do you see it as just a manifestation of further structural problems at SDIC.

The discount to NAV is of course the carrot, but I do want to get suckered in on that alone.

The lack of news on the covenant is also a concern. I guess you will hopefully have a better idea at the end of the month.

[scburbs] 17/4/2010 09:05

I thought it would be useful to assess performance in 2009 of the main players on the my key strategic priorities: vacancy, rent increases, cost cutting and disposals for those with high leverage.

In general most of the others are doing much better at vacancy reduction (except Colonia who have done much better on costs and disposals), cost cutting and disposals. The rental increase information is not really available to compare.

SDIC does include this useful monthly monitor on which these companies are covered. Per this presentation (looking at those with over €500m of property) discounts to NAV range from 77% for SDIC to 5% for Deutsche Wohnen. The second worst being IMV (2009 results not available) at 50% and Colonia at 45% discount.



TAG Immobilien - Vacancy down 40%, disposals of around 9% of the portfolio, significant reductions in personnel and non-property related costs. Rent increases unknown.



Deutsche Wohnen - Vacancy down 30%, rent increases 5%, Disposals €85m, Corporate expenses down 32% over 2 years.



GAGFAH - Disposals €520m, Rental growth 1.3%, manangement cost per unit down 3.9%, vacancy at year end 4.9%.



Colonia - Disposals around 8%, admin expenses down 44%, vacancy from 13.7% to 13.6% (1%), rent increases unknown.



Conwert - Disposals €116m, vacancies down, rent increases/expenses unknown



SDIC - Disposals €22m (2%), vacancies down from 14.9% to 14.3% (4%), costs down 1%, rent increases unknown

[kramch] 17/4/2010 08:53

not been to this show before but t1ps.com say they are sending me a ticket,
so hope to join the sick-SDIC-shareholders group. K.

[rightnice] 16/4/2010 23:52

it's nice... rightnice that is

[strollingmolby] 16/4/2010 22:02

Hi Mark,

Galahad Gold was Jim Slater's company and not that of his son, Mark Slater, as detailed here

That's not to say however that they don't co-invest in companies though, such as in Education Development (EDI) and Norseman Gold (NGL).

I'll also be at the MI show and will be interested to hear whether Mellon is still plugging German property, or whether his focus is now on uranium/solar/REE etc...

SM

[marben100] 16/4/2010 20:28

Just to add my few p's worth...

Firstly, I attended last year's MI show and found it rather interesting, well worth my time.

Secondly, re Uramin - Mellon had much less than 1/3 IIRC. I believe his fortune has been built up over time. Regent Pacific is a significant element.

Thirdly, not all his companies have proven to be disastrous for shareholders - as long as you chose the right point to get in (and don't just buy on the strength of his reputation). I am very pleased with the hefty cash payout confirmed today from his vehicle, Emerging Metals (EML), which had been trading at a big discount to pretty liquid assets for quite some time.

Fourthly, a lot of the successes I've observed him have recently have been made together with "his partner" (Mellon's own words, at last year's MI show), Stephen Dattels (including Uramin). BTW the Mark Slater company, Galahad Gold, did very nicely on the back of the Uramin deal too.

Fifthly, it appears that the Mellon/Dattels combo (and Dattels' associate, Mike Beck) are putting a venture together with an even more powerful "master of the universe": J.C. Gandur (Swiss based, worth a multiple of Mellon's fortune, sold Addax Petroleum to the Chinese for around US$7.5bn). Interestingly, a tiny AIM vehicle that seems to give a "seat in the game" is AfNat (AFNR, trading around NTAV at present), a Mike Beck company, which is being merged with a small vehicle of Gandur's called AXMIN. The connections are pretty complex but you'll find all the necessary details/clues here:

Mellon has his fingers in a LOT of pies and, undoubtedly will look after #1 as his first, second and third priorities. ;0)

I look forward to joining DD at this year's MI show.

Regards,

Mark

[lagosboy] 16/4/2010 17:19

After today's bombshell from Goldman I need more than a few tickets.

I don't know I am surprised.

[davidosh] 16/4/2010 15:36

LOL.....no I do not twitter !

I have a large number of free tickets for the Master Investor Show if anyone needs them.

[jeffian] 16/4/2010 15:26

Well he certainly seems to have a few dogs!

[lagosboy] 16/4/2010 15:12

davidosh

I don't know if you Twitter ( I don't have time with chatting to you guys and trying to make money whilst keeping she who must be obeyed happy ) but I believe Mr Mellon does and often gives a run down of his daily trades and thoughts on the all the markets.currencies, commodities, stocks, bonds....you name it, he trades it.

I understand from a piece I read about him that he is very much a day trader, always on his Blackberry, so getting his attention must be a challenge.

His passion are his dogs, which I also gather from the article he flys around on his private jet.!!!! We can only dream.

[lagosboy] 16/4/2010 13:46

That's around a trade every 15 to 25 minutes of a long working day.

Given the value of his current investments and the sale of Uramin for $ 2.5 billion (£1.6 billion 'ish)& assuming ( and a big assumption) he had a third share, that would have been £ 500 million 20 years ago.

Where has all his money gone.....???

[davidosh] 16/4/2010 13:16

kibes.....My thoughts entirely when I read that piece a few weeks ago. Not to mention all the directorships he has. Focus is required here and not least from JM.

[kibes] 16/4/2010 13:04

A write up on Jim Mellon in the Master Investor Show handout:

'Jim Mellon - the entrepreneur and former fund manager, worth an estimated £500 million, made his fortune investing in emerging markets in the 1990s, and notched up the AIM market's greatest ever success when he co-founded Uramin in 2005 with $100,000 and sold it in 2007 to Areva for $2.5 billion. Now mainly involved in the property and alternative energy markets, he makes 20 to 50 trades a a day in 'just about everything'. Jim made some strikingly accurate predictions last year, so find out where he sees opportunities - and pitfalls both now and for the next 10years'.


Is poor lame and downtrodden SDIC the new Uramin I wonder? Personally I think not! I am surprised to read how many trades he does, that number is what I would expect from a spread better glued to the screen rather than a long term investor. Does he have any time to take an interest in SDIC whilst doing all that? Anyway I shall see what he says at the show, he is on for half an hour after lunch.

[envirovision] 15/4/2010 23:25

I suspect when sdic have tried to enable cutting edge models they have been unable to revolutionise compelling solutions and this may be the reason for failure to reinvent user-centric models. In many ways efforts to streamline intuitive supply-chains are good but clearly there is failure to benchmark turn-key communities leading to a loss of empowered value-added infrastructures. It may be left to advisers to incentivise robust and leading action-items.

[lagosboy] 15/4/2010 22:26

Davidosh

On Bill

Your guess is as good as mine, on the face of it, most small Aim Listed companies would love to have a Master of The Universe of the calibre of Mr Mellon on their Board.

Clearly agenda's are in play. My view is that a power struggle for the company will ensue, rare for such stand offs to happen unless there is considerable future potentail for financial gain......but who knows.

I would love to attand an investor dinner at some time, right now I am overseas in Bermuda but hope to return to the UK later this year if everything goes to plan. Might take you up on it then.

Good luck at the meeting, hope you get some answers on SDIC and of course good luck on LNG, after I close my short of course !

[davidosh] 15/4/2010 22:03

I will be at the Master Investor Show/ Conference if that is the one you mean.

I will certainly be engaging further with SDIC over the coming weeks. You should come along to one of our investor dinners. The next one is this monday if you are near to London and we have two company directors attending....NWT and JDG both are on very low p/e ratings with 20% growth in their earnings and little or no debt. Their charts look pretty healthy too.

Why are the BILL board not allowing JM a seat btw ?

Incidentally I do not think LNG is quite the wreckage that you suggest but lets see how it fares over the next few months with a world cup year and the poker still growing. Their earnings are actually growing just not as fast as some would like or had expected maybe.

[lagosboy] 15/4/2010 19:06

davidosh

I think BILL has great potential and retain a decent sized holding. Certainly 100x more potential than LNG, what a train wreck that turned out to be.

Management will not give Mr mellon a board seat despite his 30% holding....ummm.


My favourites are the ones that make me money and Yell, Citi are doing that.

I agree with your view and SDIC unfortunately is the biggest train wreck of all.

Are you attending the Conference ?

[davidosh] 15/4/2010 18:26

lagosboy....I thought BILL was your favourite company. At present everything I see JM touch has turned to dust not gold recently !!

[w1ndjammer] 15/4/2010 18:23

well sentiment on this BB is a rollercoaster ride
at least SYG put out a positive trading statement
so i am happy to stay invested over there.

back to this one, if we see 10 cents i will make my first purchase
an then hold on for the ride.

WJ.

[lagosboy] 15/4/2010 17:50

Simon Cawkwell, another member of the team showed recent dissent over SDIC criticsing the B/S. I posted it a while back.

He also tipped BILL. No downside at 25 p (now 18.5P) and target £1.

It may well turn, and maybe be correct. Perhaps their views on whether, BILL, SDIC, SYG are solid investments can be eeked out.

At the end of day he is worth £500m or whatever, so the usual rules apply.

These guys are great at selling tickets. TW tips just about every mining stock that arrives on AIM. Just the law of averages will produce some winners.

TW must have lost retail punters as much money as the IC and other tipsters combined,got off to a flying start with his Channel 4,Show Me The Money Days. I just watched in disbeleif at some of his over hyped analysis, no doubt the inner circle profited nicely as the show moved the stocks and had to be pulled.

Zak Mir, only one worth following in my view.

Given these guys make so much money as professional investors, I have to say I always wondered why they bother with this stuff, I can think of better ways to spend my time.!

[envirovision] 15/4/2010 17:29

oh dear he is starting to sound like one of the buffons who is running the show, tom winfrith as everything he touches seems to turn to sh%t. Maybe i would be wasting my time going?