Member Info for james188

It is anecdotal rather than a reliable stat, but there is a story in The Times Business section today about a very small Maidenhead company called Big Wipes, which apparently sells to the trade across Europe. It is apparently a basic cleaning product, but with no evidence (or claim) that it has any impact on the virus. The report goes on to say that the company's distributors have run out of stock in Scandinavia, France and Germany. I am expecting many more similar stories. Of course, TSTL mainly targets hospitals, where standards(and so barriers to entry) are much higher. And TSTL's global footprint is considerably larger. What is happening is going to pose some real challenges for TSTL, but I think that the company will inevitably need to gear up.

I am assuming that in the next few weeks (and maybe even sooner) TSTL will issue a trading update. If that happens, I cannot see that it will say other than that they have had to materially ramp up production across the board. We were told at the last presentation (I asked the obvious question), that they could increase production at least three-fold. Why would they not be flat out at the moment?

Grim times, but at least they have a range of products that do good and protect people. That is paramount.

Yes; I agree that webinars are very useful, but they tend to be the preserve of the larger listed companies, rather than fairly small companies on AIM.It may be down to cost. The only small AIM co I know that does this sort of thing (there may be others) is Judges Scientific (JDG) in relation to their briefing to analysts. TSTL is much more user friendly than most - morning and evening briefing sessions for shareholders of interim and final results, plus a well attended shareholder day at their Snailwell HQ each July. On top of that, Finncap (house broker) is one of the few brokers who give wide access to their briefing notes, the latest of which came out yesterday.

The Chinese order for surface cleaning disinfectant - apparently shipped last week and significant because it required a special exemption as the Chinese regulators have yet to formally approve this product - was mentioned at the investor briefing last night, as was increased ordering by NHS hospitals. The Chinese order was also mentioned in the lead article this morning in The Times Business section (Market report) "Virus provides opportunity for Tristel to clean up", picking up on briefings to the analysts. Unusual for such a small company to hit the headlines.

There are multiple opportunities for this company to grow much further, quite aside from the current focus relating to the Covid-19 virus. I think that we are still in the foothills.

Hello Nige.

If house builders deliver as a group in anything like the 2019 performances then I guess we will do well, whatever system we employ (within reason).

I am not a chartist, but a number of features are obviously relevant to other main stream investment strategies. It was through the LSE share chat site (for TEF, RIP), that I first started to look in more detail at the system that Strictly employs and with which he has had so much success over many years. That led me to sign up to his blog when I was invited to do so and I can thoroughly recommend it.

All the best for 2020,

James

Sain, I agree with the concept, but I think that INL do not have the firepower to execute in the same way as UANC (who delivered pretty decent results today). Bottom line, I regard INL as a successful fee developer who have done very well, but not a master builder, because they are way too small and do not have the required financial backing.

I have been investing in CLIG for a number of years. As you say, it is a completely different type of investment to housebuilders. I hold it because it has an excellent track record over many years as a fund manager and it is a proxy for an exposure to emerging markets - and now increasingly developed markets as it diversifies its offerings. Note that the founder and major shareholder - Barry Olliff - retires at the end of this year.

Strictly,

It seems that Job Curtis, the fund manager at City of London (CTN) - one of the most respected fund managers in the game, although I agree that that is not a high hurdle - agrees. He is reported to be piling into UK house builders. Slightly more puzzling (but CTN is all about the yield, so I guess that is a large part of the answer) he favours Persimmon, Taylor Wimps and Berkeley Homes. I have a fondness for BKG, but not the other two.

Hello Nige.

Yes; I agree with the thrust of your points and the impact of the supply/demand imbalance in particular. That was a key reason that I liked the TEF relative low cost London housing thrust, despite continuing comments that the London market is dead. I think we are all generally agreed that the market has a different take, resulting in depressed prices. Good news if you are a net buyer of shares.

Terrace,

I think that it is a combination of factors. First, a lot of people still remember the complete meltdown after the financial crash that started in 2007when, as you know, a number of house builders were heavily leveraged. Add to that a general view that house builders are heavily cyclical and that we may be heading for another recession, exacerbated by Brexit issues. Top that off with worries as to what will happen if Help to Buy is withdrawn in a few years.

Although I invest in lots of other stuff (unlike Strictly), I think that house builders are a compelling proposition at present (and were a complete steal at the turn of the year). So, I have invested much more in this sector than anything else over the last year so. Latterly, that was in TEF (and I share your pain and some), but more recently those proceeds reinvested mainly in RDW, which is now my second largest holding in any share in my overall portfolio. It is always dangerous to say that this time is different from the last, but I think that it is. Even if HTB is phased out, I suspect that any Government will have to promote builder friendly initiatives. They always have (think back to MIRAS etc).

Given the miserable interest rates on offer, the logic for staying in cash surely has to be that shares are still overpriced and that there will be much better buying opportunities in the future. Who really knows, but the market is currently trashed. Staying in cash is a bigger gamble than investing in the market for long term solid performers, in my view. Cash in itself does not deliver a decent return. It is only useful if it is used to buy in at bargain basement prices. Assuming that you are not day trading or borrowing heavily to acquire shares, why else would you hold off in a bombed out market?

This sort of derisking exercise is one of the reasons that I have reinvested a good chunk of TEF proceeds in BWY rather than other builder stocks, although it isn't currently a huge part of RDW's housing stock. I suspect some others will be less taken with this focus.

Strictly,

Yes, I rather prefer RDW and BWY, although rather less convinced about CRST. As you have accurately observed, the market is not always rational, so the price dip for BDEV today on the back of very good results persuaded me to diversify with some of my TEF proceeds, although it may be more of a trading position, compared to my other builder holdings.

Strictly,

Just out of interest (but real rather than academic, as I did initiate a position in BDEV earlier today as a live comparison with other builders I hold), is your MAIN problem with BDEV the true PBV, once you strip out the large chunk of goodwill which still loiters on the balance sheet?

Strictly,

I am conscious of the need not to turn this into a UANC site, but the Sunday papers are pretty useless today, so here is my response from the pub (literally).

Terrace Hill was a shell and the business now (Master developer) is entirely different. The crew in charge largely hails from Chelsfield, who I knew reasonably well and who had a decent reputation.

They are geared with development loans, but have a self imposed limit on those loans of around 30%. That is very low for a development company. It is cheap money, largely from Government, with interest rolled up and repaid on disposals. Most devcos come a cropper because they are much more highly geared and they are zapped by cost overruns and inevitable delays. Canary Wharf Mark 1 was a prime example which I am aware of from personal and painful experience. Canary Wharf Mark2/3 (which I also know pretty well) have been happier experiences. Essentially, these schemes work well after they reach critical mass. UANC has the added benefit that it has a portfolio of strategic sites. It is a very interesting play, in my view, but I am aware of the possibility of confirmation bias. I feel a drink coming on...

Thanks Strictly.

Just a couple of comments:-

1. The 2018 EPS figure was distorted by some fairly large commercial space (i.e non-core) disposals. The strategic site core licence fee payments are only just starting to ramp up, because this is a very young company. I don’t think that the forecasts that you refer to are that daunting, but we are/ I am crystal ball gazing, so time will tell.

2. I completely agree that the investment case for RDW is more proven and easier to assess. As my next Strictly Wacky Races return will show, a materially larger part of my builder portfolio is invested in RDW etc than in UANC. However, I am happy for UANC to be in the overall mix. It is a very different play to the rest and it will take time to mature. You could regard it as a self-imposed handicap for the purposes of SWR this year!

Strictly,

I completely get the fact that a company like UANC is not going to be for you, but I think that there is a case on the numbers - just not on EPS/ROE at present. As with any growth company (and UANC is only about 5 years old), it involves taking a view on progression over the next few years, based upon what has been going on to date. So, the company has a bunch of consented and very large strategic sites, plus a number of others at a fairly early stage for which planning and other consents will be needed. The latter are in for free but represent hope value. They should not gobble up material cash whilst they are being progressed.

The sites which are consented and have been recently valued (mostly externally)result in an EPRA NAV per share of 340.6p. That figure has been increasing over the last few years as the major sites have progressed and more builders have signed up on licence terms which involve commitments to build minimum levels of houses and pay minimum contracted amounts. The minimum committed payments have risen substantially over the last 3 years.Minimum contracted receipts were circa £10.8m p.a.in September 2016 and had reached £26.8m p.a. by March this year. Aggregate contracted minimum receipts have also more or less doubled - £95.9m by March 2019. So that is a royalty type payment stream over approx the next 4 years, with a number of key builders (including Bellway, to keep this minimally on topic)doing repeat business.

Looked at on the basis of PBV, it is around 1.11. However, the valuers discount the plot values materially to reflect the strategic size of the sites held by UANC. That discount has been decreasing as deals with builders provide better comparable. UANC estimate the latest value of that discount at 139p per share. So by no means guaranteed, but a pool of potential value. For reasons I will not bore people with (but based on readily available information), I expect the next valuations to increase the EPRA NAV figure and further decrease the large site discount.

Finally, UANC is currently ploughing all its cash back into the sites and only pays a lowish, but progressive, dividend. It expects to have to look at that again in about two years. The share price has fallen a bit over the last few months, probably affected by the malaise over the whole sector. I don't think that you are being thick (and I only hold UANC as a relatively small part of my builder portfolio) but nor do I think that the emperor is in danger of being up on an indecency charge.

I very true, Terrace, but look at his results over a lengthy period in both FGT and Lindsell Train Global Equity.

I have just read an interview with Nick Train (manager of Finsbury Growth and Income), who usually talks good sense - fairly rare for fund managers. Referring to current volatile conditions and whether to stay in cash, his response was that he has never known a time when people were not worried about any number of macro issues. As such, he argues that the rational response (although it might not work out, at least short term), is to invest in fine businesses in order to protect/grow wealth. I tend to share that view.

Specifically on builders, Strictly, I accept that investing in UANC is slightly off piste and that the current P&L is not pretty. However, it is very much in growth mode and has a dominant market position, with what I consider to be very undervalued assets (large site discount). Anyway, this is slightly off topic, so I might explore this slightly more fully on your blog.

Just to chuck my two pennyworth in. PSN are uninvestable for me, because they have royally p****d off Government and are in real danger of losing accreditation for HTB, which is really important for them - more so than pretty much any of the other key market players. I agree that they are working hard to sort out past sins, but I worry that mud sticks. I happen to still like BKG, although the price is top. They are a very smart operator and now have significant holdings outside London - e.g. Birmingham. As a TEF refugee, I am looking for other sensible housebuilding plays, not least when CBRE eventually pays up. RDW and BWY are obvious picks and that is where I have been investing recently, but I also like UANC on an asset basis (obviously not a house builder, but a counterpart)y and I am also looking at the likes of Grainger, although not yet convinced.