Tim Watts, CFO at Shield Therapeutics #STX presenting at our Life Sciences Investor Briefing Watch Now
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I wouldn't argue with your view on this, but it is another area in which, I would say, our respective approaches differ....
Putting aside all external matters, and just taking into account underlying performance together with the price one has to pay to buy into that, Bellway's shares are cheap on any long term historical basis - but what the short/medium term price movements will be from here I have no idea - and, as ever, that old b*st*rd the Captain is never around when you need him...!
So, for my part, I am pretty committed to a buy and hold approach - but that's buy and hold the sector as a whole and I have no allegiance to any one share, as we have discussed in the past on TEF chat.
As long as the companies themselves are doing fine, and even better if there's price volatility between them to provide opportunity, I'm pretty happy with that and don't much care what the price does for the time being...
Anyway, we might be debating this somewhat ad nauseam, but I don't suppose that, when it comes down to it, our respective notions of what a good investment prospect looks like differs that much..?
BTY, James has now had his name up in lights for quite a few posts that haven't involved him... :-)
The point I am making is that sometimes its OK to take a breather. If you had stepped of the bus in 2007 from Bellway it wasn't until 2014 that the SP regained that lost ground Not saying that will be the case today Trees don't grow to heaven All the signs at the street fighting end are leading me to a point of caution.
If you dig under the initial number a little, at the time Bellway was priced 1,690p pre-crash, it was sitting on a PBV of around 1.95.
Today, the PBV is much lower, at 1.17.
Bring that up to 1.95 (because, if you're a long term holder, the price on any day doesn't really matter too much, does it..? What matters is the underlying value, and its trajectory, and history says that, if we're patient, the PBV will wend its weary way back to 1.95 at some point... and down again..... but that would be a further episode...) and that makes the price 4,710p...
And that would mean price growth of just under 180% from the pre-crunch peak at 1,690p as you've quoted....
Hardly a disaster...... is it..?
Difficult to disagree.The numbers are compelling.Just as they were in April 2007 when the SP was 1690.Within 15 months down to 419.The Housing market disasembled quickly. Too many red flags with incentives at the Gate certainly enough to indicate cash is king for the time being .
"Still trying g to get to grips With Bellway as have no knowledge of those who run the ship and unfamiliar with their individual developments That really is my first port of call Keeping my powder dry."
Therein you have probably encapsulated the difference between the way that you and I approach investing - and that's not to say that we therefore necessarily come to different conclusions.
I'm not religious, but I'm a great believer in Mathew.7.16.
By their fruits, shall ye know them, and all that.
The "fruits" being the numbers.
Because, for example, IMO, it was the numbers that were giving the truth to what was really happening at Telford before the announcement, and it's the numbers not the narrative that I've been debating James on in respect of UANC.
And by the way, James, your comment "I am conscious of the need not to turn this into a UANC site", do bear in mind that, from time to time, the Telford chat periodically became a den of iniquity as a horse race gambling forum for half the regulars there - so I'm confident that, as this chat lately has been all from TEF ex-pats, I'm confident they won't mind us going a bit off piste!
And finally, on this theme, we've got some numbers due from the bad boys of the building sector tomorrow...
And they might be interesting...?
Terrace Hill were mainly commercial and retail developers Almost accidental residential developers when there was a lull in those sectors Like Strictly I was invested myself prior to the reverse takeover
Like James know some of the personalities at UANC .Again mainly commercial and retail.Elliott Bernerd of Chelsfield the breeding ground for UANC used to be my boss some years back He was like a human tornado weaving deals feeding the machine. He has mentored both the individuals who are the driving force of UANC who certainly have picked some fairy dust from him
Robin Butler arrived at Chelsfield from what is now CBRE ironically the company that has bought TEF
Not invested but what is evident from this diversion like Steve Morgan at Redrow is the importance of leadership at the top
Still trying g to get to grips With Bellway as have no knowledge of those who run the ship and unfamiliar with their individual developments That really is my first port of call Keeping my powder dry.
I am conscious of the need not to turn this into a UANC site, but the Sunday papers are pretty useless today, so here is my response from the pub (literally).
Terrace Hill was a shell and the business now (Master developer) is entirely different. The crew in charge largely hails from Chelsfield, who I knew reasonably well and who had a decent reputation.
They are geared with development loans, but have a self imposed limit on those loans of around 30%. That is very low for a development company. It is cheap money, largely from Government, with interest rolled up and repaid on disposals. Most devcos come a cropper because they are much more highly geared and they are zapped by cost overruns and inevitable delays. Canary Wharf Mark 1 was a prime example which I am aware of from personal and painful experience. Canary Wharf Mark2/3 (which I also know pretty well) have been happier experiences. Essentially, these schemes work well after they reach critical mass. UANC has the added benefit that it has a portfolio of strategic sites. It is a very interesting play, in my view, but I am aware of the possibility of confirmation bias. I feel a drink coming on...
I've just taken a quick butchers at UANC's company reports on their website...
I hadn't appreciated that they're in some way the continuation/takeover/evolution(?) of Terrace Hill - a company I had held some shares in with mixed results back around 2010 and 2011.
I didn't spend long enough there to learn how one became the other but, overall, my remaining impression of Terrace Hill at the time (rightly or wrongly, memory being what it is these days) is that it was something of a Vicky Pollard company, but I may have remembered it wrong...?
Of more concern to me though, even if the other indicators were good (and for me, they aren't) is that the balance sheet has grown at four times the rate of the net assets.
The other three quarters of balance sheet growth has been financed by debt rather than raising capital, and the upshot is that the total liabilities have grown tenfold from around £15m to £150m..
So, whereas four years ago, the total liabilities were under 5% of net assets, now they're nearly 40%.
And before anyone comes in with the fact that that is second only to Bellway in terms or balance sheet strength - yes, that may be correct, but the direction of travel is the opposite way as Bellway and Redrow, etc., are tightening not loosening.
And, as a nation, we are surely heading into very uncertain waters and, even now, probably we have no true understanding how choppy they will become..?
And it may well be that UANC can easily raise more borrowings at cheap rates, but if, like Barratt and Taylor Wimps, they get into cash flow/financing difficulties due to circumstances beyond their control, or even, like the true Vicky Pollard of the sector, Galliford Try, it is entirely self inflicted then, as we have seen, a rights issue to save the business, rather than issuing more shares at market price to support the sales pitch of sunny future uplands, is very punishing for the share holders - the long term holders of Barratt and Taylor Wimps could tell you all about that..!
BTY, I'm kind of writing this stuff on the hoof, as thinking about it is more engaging than the Sunday paper today, so there may well be one or two holes in my argument here...
However, having recently paid quite a price personally for not calling Telford on their direction of travel quick enough to have acted on it before their post-bombshell announcement price dive recently but also unfortunately compounding that by selling too soon to miss the buyout offer (ouch - and that wasn't in the air until it happened, was it?), and given that, it seems to me, some of their pain is around funding requirements for the longer term game they now find themselves in, cash flow considerations IMO are, or should be, to the forefront from here...
Anyway - let's see what lap 8, Strictly Wacky Races, brings..?
Just a couple of comments:-
1. The 2018 EPS figure was distorted by some fairly large commercial space (i.e non-core) disposals. The strategic site core licence fee payments are only just starting to ramp up, because this is a very young company. I don’t think that the forecasts that you refer to are that daunting, but we are/ I am crystal ball gazing, so time will tell.
2. I completely agree that the investment case for RDW is more proven and easier to assess. As my next Strictly Wacky Races return will show, a materially larger part of my builder portfolio is invested in RDW etc than in UANC. However, I am happy for UANC to be in the overall mix. It is a very different play to the rest and it will take time to mature. You could regard it as a self-imposed handicap for the purposes of SWR this year!
Thanks for your long and lucid reply and I think I have some understanding of your (& Sain's) take on UANC now....
But me being me, I have to put some numbers on it - which go as follows...
If you were to be taking a ten year view from here, i.e. up to 2029, then what would it take to get UANC up to the equivalent P/E of Redrow by then..?
My forward EPS numbers for Redrow for the next three years are a tad ahead of the scribblers - who traditionally under-forecast on Redrow, perhaps because Steve Morgan has never been big on trading updates - but, from 2022 onward, I have them provisionally penciled in for 5% EPS growth a year which, give or take a percent or so, is the same as I have for the other builders.
Assuming one third paid in div, this takes their ROE down to 12.8%, so hardly excessively optimistic barring some sort of meltdown, or Jezza taking the helm, or something, in the interim...
And that takes their 2029 P/E down to 3.57 at the current price.
To achieve the same, UANC firstly have to make the scribblers' EPS forecasts of 4.5p, 6.3p and 8.5p for 2019, 2020 and 2021.
This looks like good EPS growth until you consider that their 2018 EPS was 12.9p, i.e. significantly above that forecast for three years later.
Anyway, from there, i.e. from 2022 to 2029 and assuming one third dividend, UANC need to increase EPS by 34% a year...
Knowing nothing about UANC, I have absolutely no view on whether that's achievable or not....
But it IS a big number..!!
And in the meantime I'm happy to sit on the sidelines and see how it goes - as this is pretty much of an academic issue for me driven mainly by a curiosity about what others see in UANC that I don't...
So, anyway, thanks once again for your indulgence & patience on that James...
Herein lies the rub.The options on strategic planning plays on mini villages in the Home Counties which might be 10 years from cradle to grave wont be showing in book values.They operate at a different level to just shoving a road in and working through the phases
These guys are deal makers out of the top drawer
I completely get the fact that a company like UANC is not going to be for you, but I think that there is a case on the numbers - just not on EPS/ROE at present. As with any growth company (and UANC is only about 5 years old), it involves taking a view on progression over the next few years, based upon what has been going on to date. So, the company has a bunch of consented and very large strategic sites, plus a number of others at a fairly early stage for which planning and other consents will be needed. The latter are in for free but represent hope value. They should not gobble up material cash whilst they are being progressed.
The sites which are consented and have been recently valued (mostly externally)result in an EPRA NAV per share of 340.6p. That figure has been increasing over the last few years as the major sites have progressed and more builders have signed up on licence terms which involve commitments to build minimum levels of houses and pay minimum contracted amounts. The minimum committed payments have risen substantially over the last 3 years.Minimum contracted receipts were circa £10.8m p.a.in September 2016 and had reached £26.8m p.a. by March this year. Aggregate contracted minimum receipts have also more or less doubled - £95.9m by March 2019. So that is a royalty type payment stream over approx the next 4 years, with a number of key builders (including Bellway, to keep this minimally on topic)doing repeat business.
Looked at on the basis of PBV, it is around 1.11. However, the valuers discount the plot values materially to reflect the strategic size of the sites held by UANC. That discount has been decreasing as deals with builders provide better comparable. UANC estimate the latest value of that discount at 139p per share. So by no means guaranteed, but a pool of potential value. For reasons I will not bore people with (but based on readily available information), I expect the next valuations to increase the EPRA NAV figure and further decrease the large site discount.
Finally, UANC is currently ploughing all its cash back into the sites and only pays a lowish, but progressive, dividend. It expects to have to look at that again in about two years. The share price has fallen a bit over the last few months, probably affected by the malaise over the whole sector. I don't think that you are being thick (and I only hold UANC as a relatively small part of my builder portfolio) but nor do I think that the emperor is in danger of being up on an indecency charge.
But none of that puts any numbers on it and, from the numbers we do have, the scribblers clearly can't see anything magic happening within the next three years - by which time, Redrow should be on a PBV of around 0.9 at the current price, having also paid out around five times as much dividend yield as UANC in the meantime during the three years..
So, as I say, I really don't get it - and I have tried to get James to explain it to me outside of LSE share chats, and I'm still in the dark..
Maybe I'm just being thick, or maybe UANC is the emperor's clothes..?
Very difficult to value as they have negotiated some very clever options .Led by very successful well connected individuals as evidenced by the blue chip companies they have struck deals with
Perhaps I'm looking at the wrong company, then..?
UANC scribblers' forecasts:
2019 EPS 4.5p, so ROE 1.7%
2020 EPS 6.3p, so ROE 2.3%
2021 EPS 8.5p, so ROE 3.1%
Outside of liquidating two and a half quid's worth of assets a share, so assuming an ongoing business, I wouldn't pay even 50p a share for this yet it's priced at over three quid...
So, assuming we ARE talking about the same share, what is it that the two of you can see in this company that I clearly cannot..?
And do you know something big about it that the scribblers don't..?
Have to agree with James UANC are a class act .Wouldn't be surprised if Sheffy rolls up there to spearhead a BTR division .Content to be sitting back and watching for the forseeable future with the majors Just feeling a bit nervy