Residential Sec Share Price (RESI)

Still nervousness about the ability to complete on the local housing stuff….and the lost income.

Just looking at RESI first time, which looks set for v good income and/or gains, and wondering if I am missing anything?

- 1.2x covered divi of 4.12p >8% at todays price, which is not under pressure after rebase

- v good long term debt majority at 3.5% fixed with >19 years to go, most of the remainder already peaked at 1.1% +RPI capped at 5.5%, with >20 years to go

- Record demand, turning people away, nearly 100% occupancy and rent collection

- Rents increasing 9% this year

- Sticky tenants with demand not cyclical due to shared ownership & retirement units focus, unlike warehouse/retail/office

- Plan to remove the smaller FLR component of debt in early 24 by sale of social housing, under offer and already over 1/4 of units exchanged. Concerns over FLR if they are paramount seem overblown.

- Further margin improvement by reducing mtce costs and revised fees calc

- LTV still at 50% even with reduced NAV calculated Dec 23 and further mitigated by v. good loan terms

- Refurbs are organised to be accretive to income by justifying improved rents

In a year or two 50p could look cheap in the rear view mirror. Yet even with no SP increase the compounded dividends are nearly 50% gain in 5 years at todays price.

Is it just the smaller REIT size putting this under the investment radar or still recovering from a shock of temporary divi reduction?

The company still has a high level of debt, which they are trying to address, but the dividend cut and interest rates 'higher for longer' means resi sp is under pressure despite rising rents.

This will turn around once they can pay off the floating rate debt and stabilise the dividend. Sub 50p is probably a good entry point and I will be reinvesting the dividend to average down.

Towards the end of last year they announced they were going to cut the dividend. Then yesterday they made the official dividend declaration, and some people apparently got the news of the dividend cut for the first time, so the share price fell. I think many people invest in this sort of share for a regular income, and if the dividend is cut they get cold feet and sell, regardless of the fundamentals.

The headwinds that eventually led to the dividend cut are old news now. Since then there's been some good news. At the same time they originally announced the dividend cut, they also announced that they'd agreed the sale of the last of the local authority housing (good) which will let them pay off the remaining variable rate debt (very good). I was still a bit concerned about whether the sale would go through. But yesterday they announced that they'd exchanged contracts on one sale and the rest were proceeding satisfactorily. I'm more optimistic now, so the fall in share price suited me. I took the opportunity to buy more shares.

Decent results today.Optimistic outlook.Share price dropped 20% in January.Somebody know something we don’t?