Member Info for AdamAnt

In his reply to you, Matthew Earl provides a screen shot showing the shifts in major holdings that took place up to 7-Oct - 3 weeks ago - which was the day after the SP bottomed, hitting an intraday low of 85.2. The price action since 7-Oct suggests to me that (1) there have been no further significant institutional disposals in the past 3 weeks; (2) it was the PIs who were selling at and around the 7-Oct bottom; and (3) one or more of the bigger players may now be adding.

I haven’t read the Tom Winnifrith article (too mean to stump up a subscription) but if he is saying, as the headline implies, that a senior member of the RSH is “working with” SF, that is probably libelous!

The trading update is obviously not at all good, but a 30% drop in the share price seems a bit overdone to me. The market is currently very harsh on businesses that face supply chain and cost inflation headwinds. I will continue to hold in the hope of long term recovery and might consider adding at around these levels.

Lucy

On your point about discount rates, it is worth noting what is said about this in CSH’s annual report (page 114-115):

https://www.civitassocialhousing.com/media/1928/csh_annual-report_mar-21_web.pdf

"Key factors in determining the discount rates applied (to rental flows) include the regulated social housing sector and the demand for each SSH property owned by the Group, costs of acquisition and refurbishment of each property, the anticipated future underlying cash flows for each property, benchmarking of each underlying rent for each property (passing rent)and the fact that all of the properties within the Group’s portfolio have the benefit of full repairing and insurance leases entered into by an Approved Provider.

"The average discount rate used by the valuer in the Group’s property valuation is 6% (2020: 5.3%). The range of discount rates used by the valuer in the Group’s property valuation is from 4.7% to 10.7% (2020: 4.9% to 10.7%)".

The note goes on (page 115) to discuss the methodology behind assessing the range of discounts (too long to reproduce here).

From this we can see that (1) several key factors are taken into consideration in determining the discount rate; and (2) different discount rates are applied to different properties. I don’t think the statement by the Deputy CEO of the RSH, which is general in nature, would have a significant impact on the discount rate applied to properties covered by an existing lease agreement (and of course there is no legal basis for these agreements, that were freely entered into, to be broken).

The other point to make, of course, is that all of this is essentially reheated rice, spiced up with a generous helping of chilli sauce supplied by ShadowFall. In April 2019 the RSH published a paper that was critical of the lease-based model:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file792650/Lease-based_providers_of_specialised_supported_housing_-_April_2019.pdf

Publication of this report contributed to a 20% decline in the CSH share price, rather like what we have seen this time. But the share price duly recovered, as I expect it will do again, in due course, once sentiment settles down.

On your point about LTV and CSH’s banking covenants, details are provided on pages 117-19 of the Annual Report. There is an LTV cap of 40% on one of the loan facilities (Scottish Widows) but the LTV caps applied to the others (HSBC, Lloyds, NatWest and M&G) are 55%-60%. Loans are of course secured on different properties so a change in the valuation of certain properties, if that were to occur, would most likely have only a marginal effect on overall LTV.

Following on from Matt’s points: The number of public sector beds for people with a learning disability or mental illness has fallen by 80% over the last 30 years. Mencap estimates (2018) that there are 22,000–30,000 SSH units in England. However, that is clearly insufficient given that there are currently 250,000–300,000 adults in the UK with a moderate or severe learning disability. The government needs the input of the private sector to help to meet a requirement which cannot be met from public resources alone.

The IC article quotes the Deputy Chief Executive of the RSH, Jonathan Walters, as saying that the only way to remedy concerns around tenants’ capital strength and liability management is “through a better sharing of risk and reward between freeholder and leaseholder”. This could include “lower lease payments and more provider expertise on the lease size”.

I think this is likely to be the shape of things to come over the medium to long term. I see this as a gradual and steady process of strengthening the system, not radically and abruptly changing it. Putting the relationship between freeholder and leaseholder on a firmer long-term footing would ensure that the sustainability and durability of the business model. It would be in the long-term interests of shareholders who are seeking an investment that is (1) uncorrelated with economic cycles, or arguably even the broader property market; and (2) provides an opportunity for defensive, inflation linked income.

Yet the IC concludes “For all the demand in this sector, bad news is never far off. Avoid.” Having been an enthusiastic advocate of CSH and SOHO, the IC now needs to cover its back. It errs on the side of caution and provides no analysis to evaluate the risk of further “bad news”. But most if not all the “bad news” is already in the public domain and (IMHO) probably mostly already reflected in the share price. Efforts to construct a bear case based on, for example, the future direction of interest rates are (with all due respect to Lucy) like trying to squeeze juice out of a lemon that is already dry. For me, therefore, the risk reward balance favours holding the share and I am ready to accumulate on any further weakness.

60p (conservative estimate). Perhaps as much as 70, as has been suggested. Once sentiment turns, the SP will overshoot these levels, of course.

I bought a tranche at 45 on 13-Oct and am ready to dive in again at 40 or below if there is an opportunity to do so. Time will tell. The recent performance of BOO shows that sentiment about a share can change very quickly and I believe it will be BWNG's turn one day.

That’s not a bad effort, if I may say so, Lucy . I’m glad you picked up the gauntlet. When you say that the valuation is capped at 108, are you referring to the NAV, which is currently just over 108, or do you mean the level at which the share price is unlikely to progress? If you mean the share price, I would have thought that 20% upside from here is an unattractive prospect for a PI considering shorting the share using, for example, the IG platform. That could mean carrying a significant financial loss, not to mention the costs and charges IG impose on any open position.

Some people would agree with you the NAV is marked aggressively, which is no doubt why the share price currently stands at a 19.28% discount to that NAV. Others might disagree, which is why we could see the discount narrowing. Given that all the issues relating to Auckland and Falcon and other aspects are now in the open, it is difficult to see what additional information could emerge which would further enlarge the discount.

And you yourself acknowledge this, when you mention “the lack of a clear, near-term catalyst”. This is another way of saying that all the adverse news is already in the price.

I suppose organizations like ShadowFall have the resources and tenacity to sit it out for some time. But I see this situation as somewhat akin to a medieval siege. CSH are secure within their ramparts, while SF are camped outside, having failed to breach the walls: their attempt to so was repulsed and they have no new means of attack at their disposal. Moreover, the siege is costly for SF and the longer it continues, the greater the cost. Given the law of diminishing returns, they would be well advised to saddle up and gallop off into the sunset, along with the booty they have already collected. (This is of course exactly the point Redtom made earlier, but a lot more economically that me!)

It’s noticeable that the normally chatty and sociable “Lucy” has suddenly gone quiet. The well-judged question by Redtom posed a bit of a dilemma: s(h)e could not credibly advise “go short,” given that this is obviously highly risky now that the tide appears to be turning; but s(he) could not advise “don’t go short” without undermining SF’s objectives and biting the hand that pays her/him to post here.

Essex Dog

I must hand it to you – you are the best de-ramper on this site, and I hope you are well rewarded. Very well disguised and operating at a subliminal level, which fools most readers. The main give away is the disconnect between some of your “idiot boy” naïve questions (which helped the - patently obvious deramper - Lucy gain credibility and some popularity) and the somewhat more “sophisticated” and "insightful" comments, of which “Directors” is an example. Your posts elsewhere on LSE, on shares other than CSH, when you are “in” another character, are also revealing.

On the face of it, your posts represent the view of the “ordinary bloke”, struggling to make sense of it all – a character with which a lot of us can identify. But embedded in your comments are words and phrases designed to work at a subliminal level in the minds of wavering PIs. Examples are “go to jail”, “Dodgy Directors”, “questionable ethics” and “immoral”. It’s very subtly (and if I may say so) professionally done.

If your talents, and the collective efforts of SF and its associates, result in a short-term fall in the CSH share price, that would be OK for me, since would give me the option to accumulate an even deeper discount.

For the avoidance of doubt, I am not saying that CSH has conducted its affairs in an utterly pristine way; nor am I saying that an investment in CSH, even at these levels, is risk free. Far from it. At the end of the day, investors must shoulder the risk, so as to reap the rewards.

I appreciate that it will be necessary for you find some way to deny the “deramper crown” that I am offering to you . And you may well be able to convince those who are looking for a reason to believe. But rest assured: I see you.

Arnold

If you are leveraged short on Nasdaq, you are betting that, in response to inflation, the FED will raise interest rates sooner rather than later, leading to a correction in tech stocks. I would love to see the Nasdaq fall, because I have had a buy order for QQQM since June; and waiting for the correction has been like waiting for Godot!

But the FED has limited room to increase interest rates, given the impact that this would have on the finances of the US government. Therefore, we are probably going to see more inflation. If you are working in natgas trading then you are well placed to observe the impact on price of supply imbalances. The oil & gas shares are unlikely to participate in the “massive correction”!

Assuming that inflation will be more that “transitory”, it remains to be seen what impact this has on stocks. Arguably, the overall impact on stocks, as an inflation hedge, could be positive. I understand your point that inflation could affect retail and supply chain dependent companies disproportionately, but as I said before much of this risk has perhaps already been factored into the price.

Lucy

The claim by Shadowfall, repeated in their second letter published on 13th October, is that Auckland “appears between Civitas (as landlord) and Specialist Healthcare Operations (SHO), the latter being the ultimate tenant to numerous Civitas properties” and that “Auckland is a convenient ‘middleman’ in these rental arrangements”.

It may therefore be the case that the relevant local authorities pay SHO and the rent is transferred to CSH via Auckland. This would explain the FOI responses you have received from Torridge Council and North Devon Council. I note that you are not suggesting that there would be anything wrong with any such middleman arrangement.

Lucy

If you submit a FOI request, the Council is legally required to provide the information requested within 20 working days. It seems you thought of this “question” regarding payment of housing benefit earlier this week, so it would be amazing if you have received a meaningful reply so soon. But if you are genuinely unsure, why not pick up the phone and call the FOI officer at the Torridge District Council (Telephone: 01237 428700)? Let us know how you get on.

As you probably know, the UK Care Act 2014 gave local authorities legal responsibility to provide vulnerable adults with long term, safe accommodation. For further information on this, please refer to the following link https://www.local.gov.uk/publications/specialised-supported-housing-guidance-local-government-and-nhs-commissioners If you are prepared to spend time studying this and following the links provided in the document, you should be able to find answers to this and any other “questions” you might have.

As has been stated many times, considering the overall cost of an individual requiring care and housing, SSH is the most cost-effective option for local authorities. The cost of rent / care is significantly less than the cost for a person in a registered care home or an in-patient facility.

Regarding the rent levels of SSH units, please refer to pp 19-20 of the CSH Market Update.

It seems to me that by repeating “questions” that have already been answered, you are trying to lead us down a cul-de-sac, but it is increasingly obvious to all that it is you who are (pardon my French) making a “cul” of yourself.

Arnold,
I have re-read your recent posts and entirely respect your point of view. If you are leveraged short on Nasdaq, it’s understandable that you are disposed to be gloomy. You have been right on BOO and ASOS, but perhaps the known macro headwinds are now priced into these and similar shares, like BWNG. Anyway, I am going to accumulate BWNG at 40-45, in the belief that the time to buy is when others are fearful. I may be proved wrong, but after the reasonably encouraging market update I am not expecting any seriously nasty surprises between now and year end.

Lucy, please refer to the chart on page 28 of CSH’s Market Update which shows that APs like Auckland are 100% funded by local authorities. We can infer from this that the rent on the property in SVP 135 is paid by the relevant local authority.

Chris. The Court decided in June that the trial originally scheduled for March 2022 would be cancelled. A trial will not take place until very late 2022 or possible early 2023. (Source: N Brown’s latest HY Results, page 39).

What makes you think that there will be a Court case in March?

Chris, Arnold: clearly most people share your cautious pessimism, which is reflected in the weak performance of the SP on Friday, despite goodish results. But I beg to differ because: (1) the worst-case scenario numbers have been / are being baked into the SP – and thus discounted by the market – so that the settlement, when it eventually comes, should actually have a positive impact; and (2) the matter may be settled through the ADR route before end 2022/ early 2023 (BWNG’s notes seem to me to hint at this possibility). So while uncertainty will continue to weigh on the shares, particularly if there is a general market correction in the coming months, the “risk” is on the upside, ie that unexpected good news will cause the shares to rise like a cork, never to return the levels that you hope to buy in at. That's why I will continue to "Hold" and be ready to Buy on further weakness.

The uncertainty around the potential liability arising from the Allianz case continues to bear down on the share price. Personally, I don’t think this will go to court: the two sides will use Alternative Dispute Resolution to settle the dispute. BWNG clearly want this, and I guess Allianz are playing hardball now, to maximize leverage in the negotiations. I have no doubt that the company will eventually pay Allianz a substantial sum, but I’d be amazed if it is anything close to the number that is currently being claimed by Allianz. Remember, Allianz have said it does not know how much this new group of customers might be owned but “it could be up to £ 36 million”. So it added this amount to the claim, erring on the maximalist side, I’m sure. This is a negotiation.

Frankly, after the positive statement this morning, I had expected the SP to soar: yet at the time of writing it is under 50. Like Unhooked and others, I am well under water but will look to accumulate around the 45 to 50 level, in the confident belief that the SP will improve steadily over the next 12-18 months.

Dripfeeder. I appreciate the message you conveyed from the CIM Board. I’d just add the following thought, if I may. As someone who has had some previous involvement in PR (at a government level, not corporate) I know that it’s much more difficult to regain the initiative once it has been ceded to the other side. Since late August, all the running has been made by Shadowfall. CSH/CIM have been on the defensive. Judging from a number of comments from genuine shareholders on this site and the other one, CSH may be losing the argument (and potentially the battle) because they are keeping their powder dry. They should engage and provide a full and detailed rebuttal as soon as possible. Since almost a month has elapsed since these issues began to emerge, I don’t think anyone could accuse them now of rushing their response.

Oh dear, Lucifer, you have been seething quietly since we pulled your leg on 16-Sep, waiting for a chance to get your own back! When the counter-poke (hardly a counterblow) finally came, it was a bit of a damp squib, I have to say. I get the impression that your heart is not really committed to this assignment...

Concerned Holder: Personally, I don’t believe that you are a board member of a Registered Provider who currently pays rent to Civitas under legacy arrangements. You are most likely the author, or one of the authors, of the Shadowfall report.
One of your contacts / informants is perhaps / perhaps a board member of a Registered Provider.

The reasons are (1) your first post on 26-Aug was clearly intended to highlight Shadowfall’s net short and for some reason you mentioned SF’s Boohoo report and provided a link, because at that stage the report on CSH was not ready but you wanted to advertise the “quality” of SF’s research. Perhaps you were also involved in that report and were active on the BOO chat room, though under a different pseudonym.

Reason (2) is that in your post of 13-Sep you listed the 8 TLC properties, owned by Civitas SPV 131, in exactly the same format as appears in the Shadowfall report. Yet you claim on 22-Sep that you have “ZERO involvement with Shadowfall and had never heard of them since this position appeared.” Yet by sheer coincidence part of post appears to have been copied and pasted into the SF report (or vice versa from an earlier draft of the report).

Obviously it’s important for you to appear to distance yourself from SF and pretend to connected with a Registered Provider because of SF’s unpopularity with many of CSH’s shareholders . To begin with, you posed as a “concerned holder” – ie a shareholder. But as it became clear that you were unusually well informed about CSH’s comings and goings, you needed to take on the identity of a board member of a Registered Provider in order to try give credibility the myth that you are not connected with SF.