Hi Tom, yes still slow going here just think Inland is a little under the radar. Patience will be rewarded here though as fundamentals are strong. Im confident this will be nearer 80p than 70p before xmas. Lets hope so as its definitely undervalued at present. ATB :)
Inland is also taking a 25 per cent stake in a newly-formed upmarket housebuilding firm, Troy Homes, and making a further £2m available to it through interest bearing loan notes. The company is being led by Richard Werth, the former chief executive of Banner Homes, a premium homebuilder which was taken over by Cala Homes in March last year. Potentially, this is a smart way of ramping up Inland's housebuilding activities. The final announcement concerns the disposal of 1.5m shares in Inland by its chief executive Stephen Wicks. I am not concerned by this announcement as Mr Wicks still retains 14.7m shares, or 7.27 per cent of the issued share capital, so has a significant financial interest in his company. The bottom line is that I would expect Inland to offload further land holdings as the financial year progresses in order to free up cash for its housebuilding activities and crystallise the hidden value in its land. In turn, I feel that there is upside to analysts current year profit estimates. Add to that the likelihood of significant valuation gains on its land holdings when it adopts EPRA accounting standards, and I have no reason whatsoever to alter my initial target price of 80p, and a potential break-up value of 100p a share. On a bid-offer spread of 69.5p to 70p, I would run profits.
I updated the case just over a fortnight ago when I highlighted the hidden value in the company's balance sheet and the imminent move to EPRA accounting standards in the valuation of its land holdings ('Tapping into hidden value', 9 November 2015). However, there have been some important announcements from the company worth commenting on since then. Firstly, Inland is selling off the major part of its former RAF Stanbridge site in Leighton Buzzard, Bedfordshire to Catalyst Housing Association for £14m. Completion is due by the end of the month. The site is being sold for "significantly above book value" and Inland is retaining half an acre of land where it has plans to build a 4,000 sq ft food store that has been pre-let for £68,000 a year. In addition, it is retaining a small parcel of land for its future development potential. The benefit of the land sale is that it not only underpins analysts full-year pre-tax profit estimates of £16m for the 12 months to end June 2016, but frees up cash to reduce the finance charge and provide working capital to support Inland's housebuilding activities. At the end of June 2015, the company had gross borrowings of £56.3m offset by cash on its balance sheet of £21.4m. Net debt of £34.9m equates to 39 per cent of shareholders funds. So the cash proceeds from the site sale are significant at a quarter of gross borrowings. In addition, the company has just signed a new revolving credit facility of £20m with Barclays for its housebuilding developments and on which it has an option to draw down a further £10m if required. This will result in significant interest cost savings.
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