Member Info for Guitarsolo

Theosus: I have not sought to "pour scorn on the "older generation"...." as you claim. I responded to Cereus who DID try to pour scorn on younger generations by saying ""This generation do nothing but bleat , and demand help , there was no help for me.", which I have proven is incorrect.

Not necessarily more representative Theo. Whichever way you want to cut and slice it, housing now is super expensive. My remark was about Cereus seeming to think that "this generation" (he means "young" people, probably anyone under 45!) have it easy and his generation had no help at all (his words), which is incorrect.

Theosus: "I don't believe you can back up those figures."
I posted a link to Schroder's report!
Which figures don't you believe?

88/88: I don't disagree about people over-extending themselves and, yes, interest rates could only have gone up from where they were. My comments were specifically about Cereus saying "This generation do nothing but bleat , and demand help , there was no help for me." The fact is, there was significant help back then that doesn't exist now (not just about housing costs), and the price of housing compared to income means "this generation" faces a much harder task to buy their own home.

Absolutely right Cereus.
Except that in 1980 house prices were typically x4 salary, and now are x8 (source: Schroders: https://www.schroders.com/en-gb/uk/individual/insights/what-174-years-of-data-tell-us-about-house-price-affordability-in-the-uk/). Even worse in the populous south of the country.
And of course, in 1980 you would have had mortgage income relief, which "this generation" don't get. "There was no help for me" you say.....there was!
And in 1980 you had high wage growth to go with the high inflation and high interest rates. "This generation" seem to be getting a rawer deal.
And if you went to university in 1980, it was free. You probably even got a grant for going there. Now "this generation" have to load up £50k of debt before they enter the working world.
And of course, in the 1980s you could rely upon having a nice final-salary pension scheme which "this generation" don't get.
And of course, in the 1980s we had national debt at around 50% of GDP, now it is 100%. The result? Well, we have the highest taxes for 70 years being paid by "this generation".....

Of course, none of this is your fault. But denegrating "this generation" without appreciating what you had, is.

My own thoughts are that tabacco stocks are typically strong in inflationary times, presumably because they can pass their rising costs on relatively easily (it is a frequently purchased product where consumers are used to seeing prices change). That makes it a good defensive share to hold. Add to that, I think I saw net debt down to £8.5bn (from £9.4bn?).... Well I remember when it was well over £12bn! So that's a good thing. There is the forthcoming £1bn share buyback which will bring demand for the shares (why signal it in advance?!). The dividend is at an affordable level now with the prospect of it rising gently, so attractive to income funds and investors.
The share price has responded nicely over the last couple of years. I've been invested here for nearly 10 years so I am about where I started! But dividends in that time probably exceed £15 in the aggregate.
I hold for income.

Afternoon Damien!
I agree with you about the lack of contrition. But I did miss the first few minutes so I could have missed the grand mea culpa!
I remain concerned that the F/X strategy persists. A strong dollar is not exactly an extraordinary event (especially as the ECB is always slower to raise rates than the Fed).
But I think what sits most uncomfortably for me is that they seemed to think this was part and parcel of the private equity business model. The nearly Euros 1 per share F/X loss equates to about 1.3 years of dividends! Ouch. I was expecting a rogue employee/ unauthorised contract explanation!
I will take some time to consider this and see if there are any further developments. I'm invested to have access to non-listed companies supposedly at attractive value. I'm not here to play the currency markets!
Guitarsolo

I listened to most of today’s presentation and jotted down a few notes (a bit random but I don’t have much time!):

- They suspended (well, let’s say cancelled now) the H2 dividend because otherwise they will be a forced seller in the market, and they don’t want to do that.
- Why hedge at all? To keep the NAV as stable as possible.
- EUR/USD drop of -8% in July/ August cost EUR 32m in hedging contracts (daily margin).
- Further -6% drop in Sept/Oct cost further EUR 28m. Couldn’t afford the November dividend (H2) with that.
- Note, +4% reversal since then.
- PEY has EUR 50m in cash and EUR 38m in credit available.
- No exposure to senior loans (so presumably no pressure from banks re debt ratios…..I recall there was a warranty about a minimum MCAP, presumably no more).
- THEY HAVEN’T CHANGED THE F/X STRATEGY! But it is under review (including why they need to hedge at all given geographical diversity).
- Might move to longer term hedge contracts. But this will have the same problem, just less frequently.
- I submitted a written question about how much of the EUR 28m loss from Sept/Oct is already calculated in the end-Sept NAV. They didn’t answer during the presentation!
- So much management waffle about “sub-verticals, client facing optimisations”!
- Priority is the reinstatement of the dividend over new investments. Does rely on normalisation of the exit market. So credit conditions could still affect this.
- H1 dividend for 2023 to follow 5% NAV (Dec 2022). So no change in policy.
- Felix wanted to highlight that PEY has been the biggest dividend payer of its peers!

My own thoughts:
- EUR 60m / 69m shares makes this a c.EUR 1 per share loss
- If 4% reversal is proportionate then c.EUR 18m coming back from margin contracts.
- But F/X exposure still there!
- 8 months until next dividend, so share price could go anywhere!
- End Sept NAV was EUR 14.27……….if EUR 28m Sept/Oct loss not included in that figure, expect a 40c reduction (could be mitigated by positive F/X since).

Regarding the dividend:
"It is important to note that Princess' liquidity position is solid following the dividend suspension
• Princess dividend objective to pay 5% of opening NAV remains in place. Absent of a further significant USD
appreciation and assuming somewhat normalized exit markets, we expect to pay the next dividend in June 2023
• Suspended 2H22 dividend will not be paid"

Full pre-presentation slides available on Princess' website: https://www.princess-privateequity.net/fileadmin/PG_Princess/documents/Presentations/Conf_Call_Presentation/Princess_conf_call_Q3_2022_VF.pdf

Not good! But also doesn't seem to be worse than we've previously heard (I hope!).

https://www.regionalreit.com/~/media/Files/R/Regional-Reit-V2/investor-docs/results-and-presentations/rr-hy22-web.pdf

Highly leveraged? Not massively so, imo. LTV at 43.2% is about normal (although I would like to see below 40% personally).

NAV: 99.5pps (at 30.06.2022). Like all REITs it is trading at a significant discount to reflect liquidity I guess. Don't want to be a forced seller in this market.

Dividend: They've openly stated they are targeting 6.6p for the year (4 x 1.65p). H1 income was 2.9p but is weighted towards H2. My guess is they will just cover it (just), this year.

Vacacies: Occupancy has been in the mid-80s% for as long as I can remember. I too thought that vacancy was a bit high but, being positive, it gives plenty of room to increase. Put it this way, if the dividend cover was only x1.0 with 96% occupancy I would be more worried than at 85%!

Cost of debt: 3.5% with average duration of 5 years. Again, about normal but is something to keep an eye on. If debt becomes more expensive to refinance (and it will), they need to be in a position to reduce that debt unless rent is increasing to cover it. That's what the management is paid for I guess!

Overall: It's a high-yielding REIT whose dividend is just about covered having been cut during the pandemic. I hold some for income.

True, SD, not much movement. But it's probably not the sort of deal that would move the needle much. I remember when they announced the Canterbury deal and that didn't either. Presuming that NRR has negotiated a reasonable fee for managing these assets it's the sort of thing that gives a nice guaranteed income for the company but doesn't expose it to the bigger wins/losses of being the landlord owner. What could be good though is that they will gain insightful knowledge during the management so that, if one of the assets becomes available to buy, they can cherry pick those where they see the best potential to exploit.
Besides that, it was just nice to have an announcement from NRR about anything!
Guitarsolo

What we need Damien is the shareholder equivalent to a freedom of information request to obtain details of all Mike's trades during a year! If that showed an unhealthy proportion of purchases in the say month before an ex-dividend date and/or sales soon after an ex-dividend date (possibly at a lower price), it would give substance to your fears. Until then, what we have is a top view that shows a decent HFEL dividend of 24ppy but a continually falling NAV.

Well I was just about to say it's been a week since the bombshell and nothing..... As you say, they are at least saying they're going to provide some detail so that is good (better than obfuscation!). By setting a date as well it perhaps suggests they feel they have got to the bottom of it (however good or bad it might be). I mean, you wouldn't line up a presentation to say you don't know how bad it is yet!
Oh well, we sit and wait.

Morgan Stanley cuts Direct Line target to 200 (210) pence - 'equal-weight'
Citigroup cuts Direct Line price target to 194 (204) pence - 'neutral'
Berenberg cuts Direct Line price target to 259 (266) pence - 'buy'
Bank of America cuts Direct Line price target to 170 (175) pence - 'underperform'
Deutsche Bank cuts Direct Line target to 225 (230) pence - 'hold'
JPMorgan cuts Direct Line price target to 220 (230) pence - 'neutral'

So we have a range of 170-259p......Don't worry analysts, you're only differing in value by £1,157,000,000 (or about 45%)!

The average of the other 4 is 209p which is probably a better guess. No timeframe of course.

Well I apologise Orac, but there are far too many inhabitants of these boards who make unfounded claims and attacks on people who are unable to defend themselves. History is littered with people who have done so before and, if unchallenged, with awful consequences. So sorry if you've wasted a couple of minutes of your life, but Montecristo needs to be called out.

Well I hope for both our sakes your pessimism is misplaced! But it is a natural reaction to poor communication by PEY (i.e. people think the worst), not to mention poor management to allow this.
Questions to ask too of the Nomad and whoever is providing the (independent) monthly NAV figures.

It's called a bulletin board, d***head!

It is a pretty appaling day. PEY need to come out with a clear explanation of the amount and dates of their hedged contracts. If they don't, the market will speculate for the worst.
Management's reputation is sorely damaged by this.
Did the end-Sept NAV (Eur 14.27, a 1% rise) include the cost of the hedging? Did it all go wrong in October only?

Hi Rivaldo, I hope you had a nice holiday!
Thanks for posting (and your posting in general). I agree that SCE is looking in good shape and after taking up some shares in the offer, I am still adding in nibbles where I can. On a 5-10 year horizon this looks a very promising company.
Guitarsolo

I am not sure we have enough detail Damien. I'm no expert about hedging but the principle is supposed to be to balance your performance. So if a currency movement is detrimental to you, you have a hedge that is beneficial, and vice-versa. The reference to liquidity being the issue (i.e. cash), and the movement largely in one direction of the dollar over the last 6 months, suggests they have had to put up the cash they would use for the divi to meet the hedge contracts. That could work the other way as well, which might be why they have suspended the dividend rather than scrapping it.

But I take your point (and agree) that there is a natural balanced hedge because of the geographical split. Has someone at Princess tried to be too clever? We will be left in the dark until the BoD give us some more details.

I'm ****** off as much as anyone as, whilst I was calculating the impact of a divi reduction based on 5% of falling NAV, I wasn't expecting this!

Guitarsolo