Member Info for Agricore

0715 - first of all BCPT isn't RGL but one certainly can consider its office assets as a potential read across. By their own admission BCPT have no wish to be in the commercial office space. So if they're doing badly in an area these don't want to be in - not sure whether the read across is entirely fair. Their areas of focus registered a positive uplift in NAV didn't they?

More so, if you consider the YTD drop at BCPT (9 months to September) is 5.9% + 4.6% = 10.5%. So 3.5% a quarter on average. So next March would be far too soon. You'd need to extrapolate the same poor performance until 2025 and assume zero realisations for RGL to breach convenants. Is that realistic?

I'd also add this is 1 example where I've provided several others which don't fit this narrative, as well as examples which show a slowing decline in NAVs. (I appreciate the Q3 result is an accelerating decline of 5.9%)

I also point you to my calculations where a 19% decline is the tipping point. 17.5% isn't enough.

So your thesis that "RGL *will* breach covenants by March 2024" is a big stretch, but certainly it's the best example anyone's been able to provide of why I should worry about RGL falling below its current 26-28p range!

GLA

I believe the final 3 for 4 formula has come from a pre-arranged deal that they agreed they would re-align the swap ratio according to how the market had moved TMTA and BELL since 4th October.

If you do the maths between the arbitrage opportunity which existed at the merger announcement - which Hedgehog100 needs to take credit for spotting - and the final deal today, the difference in that arbitrage is very little - almost zero.

In this article:

https://theoakbloke.substack.com/p/bell-onging-together

"At today’s prices. Yes! Let’s say you hold £10,000 of BELL. That would be 31,250 shares at 32p bid. With the proceeds you could buy 50,000 shares in TMTA at 20p ask. When they convert (50000/27.5m)x(18.75m) you’ll be granted **£10,450 of BELL shares**.

The only risk to this 9% upside is the deal falls through and then you’re stuck with a holding without a purpose, or at least without your intended purpose of picking up BELL shares more cost effectively. I believe the deal will proceed because it makes sense for all parties. Bear in mind if/when the 32p vs 20p differential changes then the window to sell and rebuy closes too."

The 3 for 4 gives you £10,500 today vs £10,450 from the above article on 4th October.

The extra cashflow boost will give BELL that extra boost and I'm very excited for progress in 2024.

GLA

Bcpt overall dropped 1.7% in Q3 and offices by 5.9%

So no great double digit drop - the covenant breach for Rgl needs a much larger drop in valuations.

“The office portfolio also reported strong rental growth and strong levels of occupational activity.”

So once again suggests the problem is one of weak market sentiment and not weakness in the assets themselves - how much higher can the ROI grow to before people step in because of the opportunity in hoover up mispriced assets?

But even after today's "massive" price rise we are only back to where the price KDNC was when this article was written:

https://theoakbloke.substack.com/p/cadence-minerals.

Yet today's partnership news propels KDNC beyond Edison's note or other valuations.

Tapman you’ve misunderstood.

Imagine you own a time share that you can use once every 100 weeks and then there’s a buy back and now you can use the time share every 85 weeks. Your share in that timeshare has gone up.

Buy backs increase the Nav per share so are usually positive

Https://theoakbloke.substack.com/p/is-vsl-a-risky-bet

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

Https://theoakbloke.substack.com/p/sed-ition-part-1

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/