Anyone with R-esearch tree worth looking at Akora today. The note from RAAS includes:
"Akora is well positioned to leverage the opportunity of continuing strength in iron ore demand and prices. Its project is within geographical proximity to the growing Indian iron and steel industry and to the Middle East where production in green Direct Reduced Iron pellets is growing. Leading US bank JP Morgan recently raised its iron ore price forecast for 2023-25, stating that the market has somewhat rebalanced over the medium term. JP Morgan is forecasting iron ore prices of US$117/t (+6% compared to its previous forecast) in 2023, US$110/t (+13%) in 2024 and US$105/t (+17%) in 2025. On tonnages, industry forecaster Wood McKenzie is forecasting that demand for +67% Fe concentrate is expected to increase five-fold by 2050, with demand reaching 758Mt but supply only stretching to 400Mt. AKORA looks well placed to deliver clean +68% Iron Ore Concentrate for the emerging "Green Steel" future."
In other news, Value And Indexed (VIP) the specialist trust investing directly in UK commercial property only a 5% NAV reduction from March 23 to September 23. Annual rent increases were completed at five properties over the six months, with an average uplift of +3.8%
Source: https://www.londonstockexchange.com/news-article/VIP/portfolio-update/16184476
@Toad,
You continue to repeat the same mantra the "vast majority of REITs in the US and UK are dropping at the moment."
So you're now just referring to RGL's current share price aren't you?
Because you've not provided any kind of systemic evidence where the sector's underlying NAV, rental/income levels, the occupancy levels are falling off a cliff en masse. That's what I'm interested in because the future share price will be driven by that.
Instead your evidence is the drop in share price where my entire thesis is that the drop in share price is OVERDONE and driven by SENTIMENT and not by fundamentals. You are simply affirming my own view.
You say I'm obsessed with tiny details. I say you're obsessed with the symptom and not the disease. The nature of the disease is in the tiny details. The symptom - the share price - is clear for all to see. It's my thesis that RGL looks sicker than it really is. I ask for evidence to the disease.
Meanwhile, further commercial office REIT GOOD NEWS. This time from Empire yesterday. Forward guidance for 2024 RAISED, office occupancy UP. NOI UP 8.8% year on year.
Source: https://investors.esrtreit.com/news/Press-Releases/news-details/2023/Empire-State-Realty-Trust-Announces-Third-Quarter-2023-Results/default.aspx
At an average Rental Per Square Foot at about 4.5X what RGL charges its customers..... nice work if you can get it!!
GLA
Oh yeah, and no one today is worried about Covid ending the world - and the economy is not shut down as it was back then. Today's worries about the Middle East and Ukraine seem much smaller problems than a worldwide pandemic which 100 years previous had killed off 100m (or 5% of the world). That 350m people today so the US population.
Should an economy in shut down, where the leader is saying YOU MUST STAY AT HOME (and mutters, while we have a party) be worth only 10% less than one which isn't?!
Remember the share price of Kazera isn't being driven by micro factors. It's macro. The AIM all market is 10% above the April 2020 covid lows.
Yet compared to April 2020 in October 2023:
UK GDP 2023 0.5%
Inflation latest 6.7% but falling
Interest rates 5.25% and steadying
Unemployment 4.3% and steady
Services PMI 49.2, Mfg 45.2 - so slightly below 50/expansion.
There's no logic for the current valuation. The Services PMI for example in April 2020 was 12 for example.
Remember from May 2020 to December 2020 the AIM market doubled.
Meanwhile here are some updated thoughts on Xinjian
https://open.substack.com/pub/theoakbloke/p/kazera-investments-kzg
There was no reaction by PDS shareholders yesterday so wasn't expecting any here as is the case as of 08:38. I think the PDS101 and other candidates are incredibly exciting. Avacta is up over 100% on its recent lows because of a similar prospective excitement about its ability to target chemotherapy. But NSCI (whose largest holding is PDS) and PDS are being overlooked right now. I think part of the problem is the news was circumstantial over a small dataset rather than a definitive "Phase 3" outcome.
@AceofClubs
You ask when has $4.66MMBTU or higher been achieved? At market rates very often. Look at commodity prices over the past 25 years. That price equates to just under $28/boe so $4.66/MMBtu isn't a particularly ambitious number, is it? Whilst 80%-85% of DEC's production is hedged 15%-20% isn't, and last year, for example, the average HH price was $6.64/MMbtu.
Slide 33 actually describes the 50 year portfolio value (and $8bn FCF), which if accurate, speaks to a $2bn excess where FURTHER DIVIDENDS beyond those already being paid would be available. If you strip those away and work on a $6bn FCF then a $3.6 average price works fine.
So to suggest slide 33 foreshadows something about the current dividend being under threat because further future dividends may not occur is not only in itself inaccurate but also it's not a helpful metric to explain the present.
Will natural gas, the world's chief transition fuel, remain at $28BOE long term?
Last year the TTF spiked at 350euros/MWH which, as I'm sure you know, is about $99BOE. Or $12.72/MMBtu.
Faced with the potential of future similar spikes a $4.66 rate average over the next 50 years starts to be very credible especially in a world where Natural Gas is a Baseload Fuel. Using just the current year, next year and the FY2025 hedge price just after Henry Hub has bounced off $2/MMBTU low isn't terribly reflective of the future is it? Especially as LNG export from the Gulf of Mexico properly kicks in after 2025. You are aware of the Henry Hub and Mont Belvieu prices being well under the TTF in Europe aren't you?
You also estimate 10% declines by end of 2023. Did you not read the recent RNS which gave a range of outputs achieved for Q3? Once you factor in recent non-core disposals, the declines are almost zero in Q3. So your estimate is that a 10% decline can occur solely in Q4 after a near zero decline in Q3? Such rapid levels of decline acceleration have never occurred before, it doesn't seem a reasonable estimate.
You end with "output and selling prices (are) guaranteed to fall in 2024".
Where's the evidence for that? Henry Hub is up 50% from the lows earlier this year. Is it realistic to think there's a guaranteed fall?
If you are reflective of the market, then the market clearly misunderstands DEC. And DEC is mispriced as a result.
What nonsense! As in what's written makes no sense.
"Management's compensation package will affect shareholders". No!
"extreme equity dilution may be set to continue in the coming months." No, the opposite is occuring via Buy Backs.
Is the Darwin award still going? For someone who claims to have a masters in Investment Management the writer should be ashamed to have written that garbage.
(LSE decided to truncate the post)
.....And "inability" is less than £30m of disposals at the same 19% discount to NAV. It's all documented here: https://theoakbloke.substack.com/p/hows-it-gonna-rgl-out-of-this-one
Last Q3 update was 10th November 22, so we'll get an update in a few weeks, and - good news - in the interest of not being EXCESSIVE - a few doesn't mean in 18 weeks! :)
Good luck to you too!
@Toad.
"A few months". Is 18 months a few months? AIRE moved from 84p in April 2022 to 57p in October 2023. Since July 2023 (3-4 months is usually a few months) it's down by about 4% (which was my point).
It's interesting to look at property funds actually. Where are those being "Smashed"? They are closed ended so "should" be suffering more than REITs, shouldn't they? Must hold a cash buffer to deal with realisations or dispose of assets at any cost to meet outflows. Big disadvantage to REITs. Yet L&G UK Property, for example, is steady over the past few months (and to define "few" I still mean 3-4 months). In fact it's up compared to January 2023!
https://fundcentres.lgim.com/en/uk/private-investors/fund-centre/Unit-Trust/UK-Property-Fund/
Everything smashed? Utterly Smashed? Hmmm
I note your new superlative. Property is no longer just being smashed, it's now being "Utterly Smashed". Despite only offering a single example of WP Carey whose Net Assets are $9.2bn (in their Q2 update) and their market cap as at 20/10/23 (after a 30% ish drop this year) is now $11.3bn. So what relevance is this example of an overpriced US REIT now being a bit less overpriced, compared to RGL which is at an over 50% discount to its NAV so arguably UNDERPRICED *if* the H1 2023 NAV is now reasonable.
You go on to say RGL has "Excessive leverage". You do seem to like using superlatives.... excessively. Comparing WP Carey and their near term refinancing requirements with RGL with its (mainly) 4 year fixed debt, again, no comparison. Glad I'm holding RGL and not them!
The reason a business engages in leverage is that it improves profitability. However one must remain within covenants. Juice the engine but don't flood the engine. RGL is a long way from breaching theirs and I've run numerous models where an EXCESSIVE amount of FURTHER declines COMBINED WITH an inability to sell assets would cause it to breach those. I ask the question yet again. Where's the evidence that is happening?
Let me define the model. "Excessive" is a more than 19% drop in NAV from the H1 2023 NAV. And "inability" is
PS I do appreciate some will poo poo and say how can you know..... I don't!
But did anyone appreicate the implication in yesterday's RNS about Longs Drugs stocking SaltMe!? That Longs Drugs is owned by CVS Health. It was also conjecture some weeks ago that Customer A in the same prospectus was them. So having been correct on Customer A it's now Pepsi for the Hat Trick!
I'd also point out the book value of Microsalt now almost covers the price of TEK share bought today. Depending on how the IPO goes next month, the book value to TEK holders could increase to 13.1p per TEK share. So potentially you get Microsalt at book, worth 4p a share more than you paid today, plus a share of BELL, LUCY, Guident AND ReVive chucked in for free.
It's nuts!
(Hazelnuts with added Microsalt maybe?)
Hi Topcatz
https://theoakbloke.substack.com/p/microsalt-part-of-tek
Halfway down this article is the conjecture that Customer B and C are parts of PepsiCo, and the reasons why. The text is taken from the Microsalt Prospectus.
Sodium Reduction is one of PepsiCo's highest ESG priorities:
"PepsiCo is committed to aligning its products with consumer preferences and responding to advice from global health authorities. Our goal to reduce sodium in our foods portfolio by 2025 means reformulating our products and introducing new lower sodium products."
"We’re making sure to offer nutritious options that consumers are seeking, while still providing the same great taste. Our nutrition goals align with two of the United Nations’ sustainable development goals — Good Health and Well-Being, and Zero Hunger — and we help to work towards a future without malnutrition, hunger or food insecurity.
As for our trusty favorites, we’ve reduced added sugars, sodium and saturated fat without changing the flavors people know and love (because we know you’d notice). The recipe may have changed, but the familiar crunch of Lay’s will still make you smile from ear to ear. "
https://www.pepsico.com/our-impact/esg-topics-a-z/sodium
https://www.weightlossresources.co.uk/food/low_fat/walkers_crisps.htm
https://www.pepsico.com/our-brands/creating-smiles/our-nutrition-story
@CM22
I wouldn't be at all surprised if Walkers Crisps are in talks with Microsalt. One of the customers in the IPO certainly fits the Pepsi profile. Pepsi own Walkers Crisps (just to be clear). And sodium reduction is a huge priority, even though Pepsi have also pursued Sodium replacement successfully. Combining Rosemary Extract with Microsalt would achieve something like a 70% reduction in sodium with no loss of flavour.
Refer to:
https://www.pepsico.co.uk/news/stories/walkers-45-less-salt-becomes-a-firm-favourite-with-uk-shoppers
Ingredients: (Rosemary Extract, Ascorbic Acid, Tocopherol Rich Extract, Citric Acid).
https://www.sainsburys.co.uk/gol-ui/product/walkers-less-salt-lightly-salted-crisps-45g
https://eu.news-journalonline.com/story/news/2012/01/25/rosemary-reduces-need-for-salt/30572235007/
@0715
maybe your experience of buying/selling property is radically different to mine but it usually takes time. Especially if you want to sell at market price. Remember there's no cashflow gun being held to RGL's head and it appears that the August 2024 bond will be refinanced at higher rates. It simply requires patience and trust.
Last year's Q3 trading update was 10th November so we can expect news in around 3 weeks.
@Toad "work from home 100% of the time, apart from a once a month trip". So not 100% of the time then. Loose language.
Thank you for your advice about considering other opinions. If I cared nothing for other opinions why would I be here? To espouse a soliloquay? It's an odd criticism to make as is "sitting on the sidelines". Forming an opinion is fundamental to successful investing.
Questioning other peoples' loose language and throwaway comments and the substance behind these is part of forming that opinion too.
For example, when you say "all reits (UK/US) are being smashed" - is that actually true in the present tense? For example NYC is up, AIRE is steady. I don't dispute prices have fallen over the past year including of course for RGL. If you look at REIT NAVs then the use of the word "Smashed" appears even more dubious - REITs appear to be reporting steady NAVs or gentle falls - even RGL. And achieving asset realisations at or above their book values (which would be the canary in the mine to future NAV falls). Where's your evidence that "Smashed" applies in the present - is there a single REIT you can quote which in their 2023 Q2 or Q3 results/update you can use the word "SMASHED"?
And "prices are in freefall" - I evidenced a 3% quarterly drop in the NAV of a similar office REIT to RGL yesterday. Is freefall an accurate description for a 3% drop? If it were 30% then you could use these words with justification. Or are you ignoring the NAVs and simply referring to share prices? Which returns to my point that sentiment and not fact is driving share prices right now - i.e. RGL is over sold.
I don't disagree more people work from home more of the time. And that it is more normal. Yet I also observe there is a counter pressure now to get teams collaborating face to face and also the realisation that junior staff cannot build their careers as effectively working remotely. Therefore where people speak (generally) to an ongoing decline in the use of an office it's just not what I see. Nor what I read. Nor what the experts say. For example Savills speak to a return towards pre covid levels in office occupancy levels.
(Source: https://www.savills.co.uk/research_articles/229130/347698-0)
As does LSH:
(https://www.lsh.co.uk/explore/research-and-views/research/2023/july/ukit-q2-2023?listing=true)
Hi Damofarl, FAIR is still going strong. In fact I would point you towards the September update of 2 days past. 1.4% NAV increase month on month. My partial exit and averaging down on DEC hasn't yet proven a wise move, to do the opposite that you did has been a better move. For example in their last update the increase in resilience at FAIR is striking "US loan default rate decreased from 1.55% to 1.27%". The discount to NAV, too, has narrowed from around 15% to 10%. All bodes well for the months ahead.
https://www.fairoaksincome.com/~/media/Files/F/Fair-Oaks-IF/Fair%20Oaks%20Income%20Fund%20-%20Sep-23.pdf
Toad,
Just don't think *much* higher interest rates are a possibility.
Why?
Indebtedness.
Both private and public. And across all major economies. All at once.
In other words the decelerative effect of current rates and even a further 0.25% interest rate will ratchet a dramatic change. Why? Because of the fiscal effect leading to deeper deficits and taxation to balance the books and/or a loss of confidence. Interest payments are 5.2% of government spending in the UK.
In my work life, I see many businesses whom I speak with on a daily basis pursuing hybrid workplace policies which mean 2 or 3 days out of 5 in an office. Does that mean reduced levels of office space (smaller offices) - yes. Does that mean less office working relative to say a year ago? No. Does it mean planning offices able to cope with variable and peak demand? Yes.
Combined with the corresponding reducing supply as new build levels of offices have also reduced and change of use increases, again I'm not seeing this "generational 'sea-change'" to the extent you're reading about.
0715
"17% over the year" using the comparable you would need to compare the 31/12/22 RGL valuation of 78.1p so arrives at a comparable valuation of 64.8p for RGL (78.1p*83%)
Meanwhile over at AEWU today: AEWU Office assets like for like valuation for the (July-September) quarter -3.34%
RGL share price movement over the same period -37%
Using RGL's IFRS NAV of 72.5p (as at 30/06/23) deflating that by an assumed 3.34% arrives at 70.1p. Comparing to the 27.5p share price puts RGL on a 60% discount to NAV.
Or using your Town Centres movement for 2023 arrives at 64.8p which extrapolating to RGL's NAV arrives at a 57.5% discount to NAV.
No matter how much "bad news" I read and that people share I can only see it's already priced in.
When I then also consider the "not so bad news" which is also appearing in the Commercial Office Real Estate sector and where I've shared example after example, it's not priced in..... at all.