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A lot is to do with Brexit and the uncertainty it creates as well as delays to projects.
There was several projects delayed which meant the results were lower than the forecasts. These delays though will come later and show in future results. Due to all this, the dividend was lowered too. I'd expect the dividend to increase in the future to compensate increased gains later on.
All in all, oversold. I'm adding on drops as some time in the next year or so this will rerate again.
i dont understand why this has been falling for the past year, ive read all the news, but cant find anything that negative to explain the fall.
Time for a big boy to take this out
Nav 3.00
Amazing bargain
Well, talk about freefall.
Any reason for £1? I see support at 115 and will add there if it does reach it.
£1 target ..... but added at 129 as you say ..... ;)
Not sure tbh. Not seen woodford as a holder.
Just added at £1.29. This is getting stupidly cheap. With a decent divi (ableit reduced special) and another divi due of 3.5p in August. Almost 50% below NAV!
The profits will come in time, just delayed, so with the dividend it's a bargain to buy at this price, hold, collect divi and sell later when the sp rises.
Broker target at 250p.
A Woodford holding as a forced seller is my guess...
No guarantee when investing but I think it will come good. Just put in an order in NT today. Can sell my whole holding but can not even buy £1k without it going to NT.
Chart wise, there is support at the current price, so good spot to buy at providing it holds which I think it will.
The nature of this company is, it makes money sporadically. The money it has failed to make this year, will still likely be made but just next year causing the drop in the share price and making this buying opportunity.
I bought into this at xmas time, because it is suppose to be steady and produces a nice divi.
Wtf has happened to the sp.
Just had a look today.
i used to work for this company, back when it used to be called Cathedral group based in london bridge,i started just as when richard sold the properties section of the company to development securities for around £30m. my point knowing richard, he will try and sell this company, thats what he usually does.
See-through gearing just above target
U+I’s financial gearing remained within its long-term target range, but its see-through gearing rose just above target through FY19.
U+I aims to maximise returns for its shareholders, hence excess capital is largely returned as it is created (through supplemental dividends) and the balance sheet is maintained to maximise efficiency. Inevitably this also
increases the group’s risk profile.
Financial gearing (net debt/net assets) is managed to a long-term target of 40- 50% on-balance sheet and 50-60% on a proportionate basis (including JVs).
However, gearing levels can vary around these targets subject to the cycle and the level of activity.
FY19 gearing remained just below target from an on-balance sheet perspective, but increased just above target on a see-through basis. We would expect management to seek to bring this back below target.
U+I's weighted average interest rate decreased -10bps to 4.6%. The weighted average maturity fell to 6.2 years (from 7 years). We believe there remains further opportunity within the group to lower cost of debt over time.
Low valuation
Despite lowering our forecasts, we still expect ~6% p.a. total returns, which are above the sector average, and are attractive when considered against the group's significant NAV discount (which is also prudently stated with development at cost). If U+I can hit its targeted development gains the shares are too cheap.
U+I also returns surplus capital back to shareholders in order to maintain the group’s size and the return potential of its pipeline.
Returns are delivered through an ordinary dividend with an additional more variable supplemental dividend dependent on the net free cash flow generated during each year. Five consecutive supplemental dividends have
now been declared / paid and we expect these to continue.
We model a 4.1p supplemental divided for the next three years of our forecast period (within 40-50% of free cash flow) which, together with a stable 5.9p base ordinary payment. This equates to a 3.7% ordinary dividend yield and
6.2% total yield including the supplemental dividend.
Improving investment returns
While the investment portfolio witnessed some value erosion through FY19 due to pressure on retail asset valuations, U+I is still confident in its ability to deliver value-added gains and management will continue to
reposition the portfolio to sustain returns and provide development potential.
U+I’s investment portfolio saw valuation weakness through FY19 with values - 4.9% on a LFL basis and total returns of -1%, below the group’s targeted 10%. Despite valuation pressure, assets acquired in the year positively held or
increased their value. The operational performance was also more resilient.
CVAs and administrations had a net 0.6% impact on rents. Voids were down from 7.9% to 7.3%.
U+I continue to target 10% total returns from the investment portfolio, albeit this may prove challenging in the near-term should retail weakness continue.
Returns remain supported by a 6.6% net initial yield focussed upon discount and convenience retailers, with significant reversionary potential to a 7.9% equivalent yield.
We would also expect U+I to continue to reposition the portfolio to sustain higher returns and provide development potential. The growing development portfolio aids this repositioning over the medium-term; allowing U+I to retain
assets which have the potential to deliver further value creation through maturation or asset management initiatives. Management has identified assets worth ~£250m from the development pipeline which would meet the investment portfolio criteria and could be transferred over the next five years.
U+I will also continue to acquire retail-led assets where they see potential for asset management gains to enhance values. In FY19, U+I acquired a mixeduse scheme in Bournemouth, Waterglade Retail Park in Clacton-on-Sea and a
Pure Gym unit in Finchley for a total consideration of £27.4m. This was partially balanced with £7.5m of non-core disposals. The portfolio also delivered £4.6m through asset management initiatives.
The group has removed targets for acquisitions and disposals in FY20, but we would still expect investment activity if the right opportunities arise. We forecast £20m of net additions in FY20.
Strong pipeline momentum
Strong progress was nevertheless made in FY19 growing the development pipeline, which now stands at £11bn and provides longterm profit potential.
The development pipeline now stands at >£11bn up from >£7bn at FY18. In FY19 U+I was confirmed as the partner of choice for a major PPP scheme at Cambridge Northern Fringe East.
The >£11bn development pipeline currently contains nine identified major PPP projects, with a total £6.7bn GDV, and six identified major trading projects with a total £0.5bn GDV. This leaves a further ~£4bn of undisclosed
schemes.
The principal win in the period was a £3.5bn GDV regeneration scheme in North Cambridge, which is expected to generate ~£20m-30m of development and trading gains to the business over 10-15 years. This involves the transformation of a water recycling centre in North Cambridge, over 120 acres, into a large mixed-use urban area with 5,200 homes, ~1m sqft of office space and a mix of retail, community and leisure space.
As well as additional longer term PPP projects U+I has also increased its focus on sourcing short term trading opportunities as investment market liquidity has reduced. U+I purchased three trading schemes through the year
(White Heather Industrial Estate in Dublin, the Arts Building in London and Newtown Works in Ashford), which helped restock its shorter term pipeline with asset management and planning initiatives. These are expected to £20-
30m of gains over the one to three years.
As the pipeline grows it also brings opportunity for U+I to secure a lower cost of capital, as the group extends its strategic platforms and capital partner relationships. In this respect, U+I has appointed advisors to identify partners
to help fund three major pipeline PPP projects and is now in the detailed stages of this process.
• Distributing excess returns – Excess returns are typically returned to shareholders through supplemental dividends to maintain returns relative to the company’s size. The group paid a 5.9p DPS in FY19 with an
additional 4.1p supplemental DPS.
CHALLENGING BACKDROP LIMITS GAINS
U+I’s full year results were below our forecast, with £42.8m of development and trading gains just below the group's £45-50m target. A valuation decline in the investment portfolio further weighed on returns with NAV -4% to 289p and 4% below our forecast. Guidance for FY20 has been lowered to reflect economic and political uncertainty. We lower our NAV forecasts by ~7%.
Key points from the figures:
• NAV -4%to 289p – This was 4% below our 301p forecast with the YoY reduction driven by the payment of the supplemental dividend, lower than expected development and trading gains and valuation weakness in the
investment portfolio.
• 10.0p total dividend – The group paid a 5.9p DPS in FY19 with an additional 4.1p supplemental DPS. This represents the fifth successive year of supplemental dividends.
• £42.8m of development & trading gains – Development and trading gains were £42.8m, just below the group's £45m-£50m target and below our £47.5m forecast. Despite missing guidance, we still think this was a creditable outturn, given the group experienced a higher level of planning delays, due to economic and political uncertainty. Development and trading gains are inherently lumpy but, over 5 years the group has
delivered an average £49m of gains p.a. in line with its long-term target.
• Investment portfolio -4.9% – The investment portfolio saw weakness from pressure on retail valuations with values down -4.9%. Positively assets acquired in the year held or increased their value. The operational performance was also more resilient. CVAs and administrations had a small net 0.6% impact on rents. Voids were down from 7.9% to 7.3%.
• Disciplined acquisition activity – U+I continued to reposition its investment portfolio with £27.4m of acquisitions and £7.5m of disposals. This was below U+I’s target of £50m of acquisitions and £25m disposals reflecting greater caution and discipline in respect of asset selection.
• Greater focus on short term trading opportunities – As a result of lower liquidity in the investment portfolio, U+I placed a greater focus on acquiring short term trading opportunities. Three new opportunities were acquired from which gains are expected to materialise from FY20.
• Increased debt and gearing – Reflecting net acquisition activity, net debt increased from £119m to £139m. Balance sheet gearing increased from 31.4% to 38.6% but remained below the group’s 40% to 50% target range. See-through gearing (inc. JVs) increased from 50.5% to 62.8% just above the group’s 50% to 60% target range.
REGENERATING LAND THROUGH PARTNERSHIP
U+I has a substantial pipeline of regeneration projects which could generate significant long-term development profits, as it transforms parts of towns and cities through a mix of commercial and residential real estate uses. U+I's partnership approach, in which its partners typically seed land into joint ventures, as well as the complex nature of
its projects provides the basis for high returns on capital and aligned incentives as planning and development are progressed.
• Regenerating land and adding value – U+I is a specialist regeneration developer and investor, that seeks to transform parts of towns and cities through a mix of commercial and residential real estate uses, revitalising
communities. The group creates value as it unlocks the potential of land and assets. Projects are targeted in the densely populated areas around the London City Region (within one hour's commute from Central London),
Manchester and Dublin.
• Growing long-term demand – Market growth is underpinned by increasing economic, political and social demand to better utilise the UK’s scarce space, of which a large proportion is owned by public bodies. U+I's
substantial development pipeline, partnership approach and the complex nature of its projects provides the basis for limited competition and a high level of future returns.
• Differentiated delivery – U+I serves a market with high barriers to entry and where it further differentiates its delivery with a focus on design and vision over value. U+I frequently utilises partnerships with public and
private bodies to leverage its equity and intellectual capital. For example, partners often seed land for U+I to apply its planning and development expertise. Partnerships also help to spread group risks. The majority of
projects are secured with limited competition or off-market and U+I has a high success rate in planning of over 90%.
• Significant visible growth potential – U+I has exposure to an £11bn gross development value (GDV) pipeline of schemes which underpins significant future return prospects. Projects are spread across large longterm schemes and short-term trading opportunities. While development activity is inherently higher risk and value creation lumpy, gains have averaged £49m p.a. over the past five years. The group targets 12% p.a.
total returns, albeit these are unlikely to be achieved in the near-term.
• Focused capital recycling – A portfolio of income-producing real estate assets and fee income from developments provides a recurring contribution to group overheads, before the delivery of capital gains.
However, U+I’s focus is on using its intellectual capital and relationships to generate superior returns through development. The investment portfolio is weighted towards retail, but the group is repositioning assets towards sites
where value can be driven through regeneration. The portfolio has good occupancy (~93%) and is valued off a high 7.9% equivalent
While the short-term planning backdrop has toughened, U+I made good progress expanding its regeneration pipeline and adding to its potential through FY19. We expect this to continue in FY20, with two large opportunities
pending. However, lower short-term trading gains and valuation pressure on the investment portfolio prompts a
7% NAV downgrade. We lower our target price from 280p to 250p. The shares trade on a CY19E P/NAV of 0.55x with a DPS yield of 6.2%.
FY19 gains just below target
• £42.8m of development gains just below £45-50m guidance
• NAV -4% to 289p
• 10p DPS inc. a 4.1p supplemental
• NAV forecasts reduced 7%
Improving investment returns
• Rebuilding investment portfolio to deliver double-digit returns
• Focus on cost efficiency
• Detailed stages of selecting capital partner funding Strong pipeline momentum
• Pipeline GDV >£7bn to >£11bn
• Future wins underpinned by GLA panel and £2bn of prospective partnership projects
• Three additional trading schemes secured in FY19
Low valuation
• ~6% forecast total returns p.a. from existing schemes
• 45% discount to CY19E NAV
• 10.6x P/E and 3.7% ord. dividend yield (6.2% inc. supplemental)
Strong pipeline momentum
• Pipeline GDV >£7bn to >£11bn
• Future wins underpinned by GLA panel and £2bn of prospective partnership projects
• Three additional trading schemes secured in FY19
Bull case
Significant £11bn GDV development pipeline
Growing long-term demand for regeneration
High barriers to entry given complexity
Partnership approach aids returns and spreads risk
Development assets held at cost
Notable valuation discount
Supplemental dividends from free cash flow
Bear case
Development returns geared to property values
Risk of slowdown in property market
Execution & planning risk on developments
Rising competition for large scale land
We lower our target price from 280p to 250p to reflect our forecast downgrade. This would equate to a CY19E P/NAV of 0.86x, a P/E of 17x and DPS yield of 4%. Should U+I sustain higher returns, in line with its 12% return target, we would see further upside to our target price.
We use a return on equity analysis to inform our target price. We compare our forecasts against a view of sustainable return on equity (in the absence of yield shift), cost of equity and long-term growth discounted back to a current value.
We build up individual company cost of equity, using specific risk profiles over a risk-free rate, benchmarked against CAPM.
If fifty million is hit
Divi inc. special should be three quarters of last year hopefully
After continual watching I held off buying here as I thought it may go lower. Bought to day in low 170's and got an alert set at 164p where I will add more, but not sure it will hit that low now.
Looking over sold on RSI and STOCH. Bounced off support this morning at 172p.
Approx. 60% under NAV.
Approx £320k of BOD buys in the last 6 months all above £2.
Special divi has been paid around may/june for the last 4 years. May see another soon?
P/E of just 8 almost half of industry average of 15.9.
Testing support at current level once again and looking like it may break down below it. I'm a buyer at 190 and 180 if it does.
A shame it couldn’t hold £2.51 today, i believe there is at least £2.80 in this in the near term, hopefully just a bit of profit taking and a better day tomorrow
There are some big delayed trades today I see.
How about today👍