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Porsche - they have already been squeezed, at the end of the day they can’t control property prices but they can get a grip and control rents
Think you’re being a bit dramatic on prices, people always need a roof over their head and the interest rate seems to have topped
Terminal, the “ assets “ this owns will be crushed in upcoming recession. Another quality U.K. dividend stock😂🤡😂🤡
Will be in the 40's by mid January
Redistributed some cash and decide to add more. Looks like the move up might be starting 🤞
Will be interesting to see if we break your 33.5p broomtree this week.
Would be nice, but seems we still need to get through some selling pressure.
If it’s still in the low 30p zone by early Jan may use it as opportunity to top up further.
I’m happy the bottom is in but we need to break that recent high at circa 33.5p and sustain it.
Goldman Sachs has urged investors to stop betting against UK property stocks as the market shows signs of recovery.
Economists at the Wall Street bank are predicting a rebound in the real estate sector as interest rate pressures ease.
This marks a reversal as Goldman had previously warned clients against investing in commercial real estate companies as valuations plummeted.
Sharon Bell of Goldman Sachs said:
The real estate market is holding up: housing prices edged up last month amid encouraging signs that mortgage rates are starting to come down.
Goldman struck an optimistic tone as its economists also revealed forecasts showing interest rates will fall to 3pc by mid-2025.
In a memo to investors on Sunday, the bank said Governor Andrew Bailey is likely to announce a cut to interest rates in August before further reductions in consecutive quarters.
Ms Bell said:
UK consumer confidence also rose sharply, outperforming expectations and raising hopes of higher spending on the festive season.
Her comments came as new data from Rightmove showed that sellers were still slashing asking prices in December, indicating that the market’s upturn is yet to filter through.
The average selling price of houses fell by 1.9pc in December to £355,177.
Added 10K shares @30p.
Lots of churn around 29/31 zone.
Hopefully the views on interest rates in UK are stabilising with next move being a cut. Not sure if BoE statement on holding current rates for a while is bravado or not. But see housebuilders are steadily moving up.
Pricing today all over the place so will see where it opens
Agree broomtree, that another cut is likely with the rent collection plus loss of revenue from sold properties. Hoping, as you say 1p per quarter is lower than we actually need to cut.
Seems still a bit of selling into a rise above 30p, but feels more stable.
I’m expecting one more cut and certainly no more than your estimate. At this price that still leaves it over 13%
Re-bought a small position today 20K Shares. (Sold out around 38-40p range)
Any views on next financial year dividend outlook?
Have taken the view of 4p (4x1p) for the year. Mainly as a precautionary measure on my part.
Will drip feed in more as funds allow. Does feel as though this has bottomed.
Having got out close to the top I started getting back in when it dipped into 20’s, added but unfortunately the last add was over 33 but I’m still up slightly
Looking forward I see this getting back to mid 40’s, two issues for me will be debt management and rental income improvement; the wider issue of property values is outside their control but could given a changed macro picture give further uplift in due course
I’ve been buying down improving my average price whilst it’s been so low. I held from buying whilst it dropped and have only increased my position once we hit 27p and have bought consistently since then. My average price is now 32.5p. Where do people think the price will be in 12 months, and what are their best case recovery forecasts to get back closer to NAV?
I don't know why i lost the faith, still believe in regional offices. But squarestone deal was a mistake. Have moved onto today and crystalised a massive loss. Will try and reinvest 6 to 8 months time if appropriate
Thanks very much for your explanations. You have answered my underlying questions. I was being rather dense and doubting the NAV calculation.
I now understand the pricing - as ever markets get it right. There’s a lot of upside if covenants aren’t broken and rates come down in time to refinance, but if lenders force liquidation shareholders will be treated very badly.
Thanks again
Jimbob,
I believe you need to look at the accounts more closely.
In broad terms (using IFRS numbers, which I prefer), the situation at June 30, 2023 was:
Net Assets £374m
Number of shares 516m
NAV per share 72.5p
The current share price of 30p is at a discount of 59% to NAV per share.
I believe that this discount factors in the near certainty of several catastrophic events, none of which do I consider likely to happen.
By the way, how do you get from your “Real net asset value £300m” to the “share price of assets is approximately 40p”? What is the “share price of assets”? There are 516 million shares.
Property is in a serious state of flux and there’s not much can be done about that for now. The key will be the income (and its quality) and how they manage the debt. I do think the worst is over but there’s a serious lack of confidence
Market Cap. £154.72m
If Real net asset value £300m , share price is 50% of net assets.
My thoughts on RGL valuation:
Total property portfolio £750m
Total debt £450m
Real net asset value £300m
Therefore share price of assets is approximately 40p
But considering possible over valuation, inflation and interest rates maybe sticky, and bank covenants getting close a price of around 30 is understandable.
Admittedly a simple equation
Appreciate your thoughts
Thanks
@TheTrotsky: You can definitely trade RGL1 online with HL. That's how I bought it. I've had to use the phone service for some other securites, but not RGL1.
I don't currently hold any gilts, but yes, some require a phone order. I don't know why that is. I have a threshold of ~7% before I become interested in fixed income and I mostly prefer closed-ended funds (e.g. SMIF) than single bond holdings, due to the complexity of the credit analysis. RGL1 caught my attention, because I already knew a bit about the company, having previously been an equity holder. And it appears simpler than others.
Unfortunately, the LSE Order Book for Retail bonds (ORB) is very limited. You need to know what you're looking for. HL do have a list of bonds/gilts etc, but it's small. Most of the prefs that I hold are US ones that I research through Seeking Alpha and various fixed income sites such as 'The Preferred Stock Channel'.
For prefs, you get a good idea by dividing the annual coupon by the price, but for bonds of finite duration, you might need to look elsewhere or calculate it yourself using the Excel/Google YIELD() macro or Seeking Alpha for the US names. The more sophisticated platforms (e.g. Bloomberg) already show this stuff.
Some excellent discus here on the bond. Thanks.
There's commentary in Shares mag about British Land/office. Positive to BL it noted it's (quality) ilks' 40% discount compared to RGL's approaching 60%. Of note to me was the writer's deceleration that he held RGL
@CaneToad, thanks for the response. If I did buy the corportae debt or gilts, I'd be plan to hold them to maturity. Had a quick look on AJ Bell; the debt instrument doesn't automatically appear in the buy/sell list and only appears if you type in the ticker (so if you don't know the ticker you're a bit stuffed). Also, it's unavilable to buy online with AJ Bell. Don't know whether that's the same with HL.
If one wanted to look at and compare corporate debts and gilts and their current prices to buy/sell, where would one look? For example, if I wanted to compare and contrast trusts I'd look at trustnet. It would appear that you can add RGL1 to your LSE watchlists but again it seems a bit of a chicken and egg scenario; you can find it if you know it exists but if your don't know it exists you can't find it!
@Trotsky: I bought the bond with Hargreaves Lansdown (online/ticker RGL1). The spread is prohibitive if you plan to trade it. Unless something drastic happens, I will hold until the maturity in August next year.
I try to keep it simple when analysing credit risk. Gross portfolio value: £752.9m, cash: £32.6m and debt: £428.5m ==> net value: £357m and LTV: 52.6%. It seems to me that the gross portfolio value would have to fall by 50% before the retail bond was at risk.
I don't know the latest LTV on the Santander portfolio, but clearly they need to quickly sell some of those properties before the covenant drops to 50% next year. At £62m, the Santander loan is not that big. And with some of them being voids, maybe they don't need to sell many of the income-producing ones - but I'm just speculating.
Regarding your other comment on the bond. Almost all fixed income has dropped over the past year and this one doesn't look that unusual. UK prefs with investment grade companies (e.g. Aviva) are yielding 7%. Some of the US prefs with high quality names are yielding 8-9%. The RGL bond is unrated/unsecured, so clearly it needs to yield well north of 10%.
I could be wrong. DYOR.
CaneToad, I acknowlegde there is a risk but, as I said when we first saw the original RNS, it's very difficult to draw firm conclusions one way or the other about the LTV figure quoted in the Q3 update without seeing the balance sheet, P&L and cash flow. Obviously it goes without saying that having an up to date valuation of the properties would also help, albeit that some posters would disagree with the valuation methodology adopted by RGL and its surveyors.
The fact that the Glasgow property was sold for 26% more than its June valuation is a positive but a sample size of one does not really persuade one way or the other (the same could have been said if it had been sold for less than valuation but that would have been more difficult ot "sell').
Out of interest, where and how did you buy RGL's loan note? I've got a SIPP with AJ Bell and an ISA with ii and trying to buy gilts and corporate bonds is more "problematic" than buying/selling stocks and shares. It would appear that you have to ring the brokers to place the order, rather than do the transaction online.
Also, is the discount on RGL's bond in line with what you'd have expected? As I implied in my earlier post, it appears a bit "lite". Obviously there are several factors that affect the bond's price e.g. the coupon rate vs the BofE base rate (or similar), the default risk and the time remaining to maturity. I'm struggling to evaluate the latter two; one would assume that if the default risk was rising then the discount would rise and vice versa and, likewise, the discount rate would start to fall the closer the bond gets to maturity. Should one just stand back and look at the overall yield, regardless of how the market has managed to evaluate at that figure? In which event, is a yield of ~10% more than BofE base rate about par for the course for an unsecured corporate bond with circa 9 months remaining to maturity? Assuming that the bond was not discounted at issue (the accounting treatment would suggest that), then that would appear to imply that the market thought the default risk at that time was neglible whereas now it appears the market thinks the default risk is no loner negligible (if it did, one would have thought that the overall yield would have been much closer to 5.25%) despite the asset cover that you've made reference to. Thoughts?