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I don't think that's the right way of looking at it. Look at where the shares of housebuilders were in March and November 2020 vs September 2019. Development land prices aren't just about house prices, they're about the willingness and ability lock up huge amounts of capital in a non-productive asset due to the hope of sales years into the future.
I don't even own these so don't want to spend much more time on this at the moment but the alternative valuation SHOULD start increasing now. If it doesn't I'll agree it's a sham. I also don't think it'll prop up the share price that much even though I can see the Tories being very keen on this type of redevelopment.
Just some back up on that alternative use, see below from sept 2019 results, pre covid and when NAV was 244p a share... sadly wasn't actually real given since then residential property has risen.
"The Company undertook an alternative use value review at the period end across its entire retail portfolio. This is a detailed internal assessment factoring in demolition costs, construction costs and a development profit to calculate the value of the next best alternative use for our retail assets. Due to our assets being predominantly located in town centres, the vast majority of the alternative use potential relates to residential development. At September 2019, the total alternative use valuation for our retail portfolio, at £848 million, was just 13% below our retail portfolio valuation of £973 million, which we consider to be an underpin to our valuations."
https://otp.investis.com/clients/uk/newriver_retail_ltd/rns/regulatory-story.aspx?cid=1683&newsid=1346358
Good analysis 34. One point I would add is a lot of us holders / traders who come in and out of this, don't pay much attention to that alternative use figure. Why? Well they have said it for years and the NAV has shot right through it on multiple occasions. The NAV shouldn't have dropped between March and Nov if that alternative use figure was real , as resi was the alternative use.. as well resi property has risen.
Johnpohn, there isn't a cash pile in the true sense of the word. As in it hasn't arisen through trading but merely additional borrowing and some asset sales. Given the LTV its sadly not distributable to shareholders hence why people are rightly talking about the possibility of a scrip divi
Good perspective there 34adsaddsa ... and what do you reckon on a special dividend of sorts given the mini 'cash pile' that has built up? Surely there must be a good one-off payment?
Well the NAV in November was 171p, that was down 8.2% from March 2020. They've said it has fallen again since but not as much as between March and November. Let's say it has fallen 4%. The NAV would be 164.16p. So at the current share price it's at just over 60% of NAV. Seem cheap. Unfortunately, NRR has lots of shopping centres and the market HATES shopping centres. Lots of people seem think they're pretty much doomed. The company says the valuations are supported by alternative uses for the land - that means housing - which I think is a real opportunity, but I can't see this getting much over 70% of NAV without some stability in shopping centre valuations.
They have lots of debt so they're very levered to really quite small valuation changes. I don't think they're selling the pubs because they really want to, I think it's a case of better safe than sorry. Having said that, I think the total return from these could still be good, but mostly due to yield rather than capital growth. These were a great covid recovery trade, but I think those looking for an easy 30% from here will be disappointed. There are certainly much less risky property companies with a fairly easy 20% in my view if you're bullish on the sector, which I think there are good reasons to be given monetary policy, covid recovery and NAV gap. NRR is a gamble on the market's view of shopping centres. BMO commercial is 33% below NAV and has much higher quality assets IMO.
hi - what level of NAV for NRR you reckon ... and hence what share price in your view?
I don't think there's anyway way they're getting that close to NAV any time soon. There are much higher quality property companies that are about 35% below NAV.
From Bloomberg “While the welcome prospect of opening after several months and pent-up demand (booking levels remain very healthy) will drive footfall, S&P Global Ratings expects operating prospects will remain tough over the medium term,” analysts including Raam Ratnam and Alex Roig wrote in a report published on Thursday.
Larger-managed pubs, they added, with a wider range of venues and better access to capital, are likely to fare well during the recovery phase, aided by greater earnings and cash flow per venue.
“Publican tenants, who are typically smaller or self-employed, often have limited access to capital markets and are more affected by economic downturns,” the S&P analysts wrote.
Analysts at Berenberg share a similarly upbeat view on large operators, arguing that the equity of U.K. pub and restaurant companies should be worth more than before the pandemic hit.
“They have less debt (having raised equity), and earnings should be higher due to less competition, pent-up demand, permanent cost savings, and a supportive short- and medium-term tax outlook,” they wrote in a note on Friday.
Marston’s Plc, which has about 1,500 sites across the U.K. including the Pitcher & Piano chain, has kick-started its debt-reduction plan following the sale of its brewing assets, according to Berenberg analysts.
The company’s 200 million pounds of notes due 2032 are trading above par after a bumpy year, according to data compiled by Bloomberg. Notes of TDR Capital-owned Stonegate Pub Co, which runs chains including Walkabout and Slug & Lettuce, have also been surging since the first Covid-19 vaccines results were announced in November and are now trading above par.
I like it for a few reasons: 1. Sometimes the best way to crystallize value is to separate distinct part s of the business and list them separately (loads of examples of this ... the immediate one that spring to mind is Volkswagen at the moment wanting to list Porsche separately, where they feel they are not getting full value of Porsche reflected in the Group share price) 2. The pubs are going to be very hot commodities ... already seen some private equity firms (e.g. TDR) buying up listed pub businesses ... the thesis is that there will be less competition post pandemic, and that the players that have emerged strongly will be able to act as consolidators (ie buy up a bunch of struggling pubs) ... in fact, analysis from Berenberg suggests the leading pub groups will be worth more post pandemic than pre-pandemic. So going forward, it's important to get to scale, and be a big player ... I think NRR's plan to carve this out, and focus on getting to scale on pubs (as a distinct strategy) is absolutely correct.
what do you think of the sale of all the pubs? ( proposed anyway)
agreed..... by 17th they must be taking full rent collection.? I think its just frustrating me not hearing anything for awhile now....
(but yes, the flatline is frustrating) ... i think the situation would be MUCH improved if we could get the management team to do some investor relations activity ... like speak to the press, do some interviews, inform us of your progress!
They HAVE to come out shortly with some definitive news on the mini cash pile they're sitting on ... per the 14 April update, they are sitting on £150mn of cash ... they have to get (at least) some of this out of the door. Second, all their pubs must be opened, and by 17 May will be ramping up further. Just thinking about broader environment, we're entering the fastest growing economy since 2nd world war ... and consumer spending will be strong. Come on NRR!
Hi, what would those signs be? share price seems pretty flat, I hope your right!
So many signs pointing to a massive uplift here shortly ... 1.20-1.4 shortly is my own target