Member Info for Maddox

Quarterly valuation update on Unite's funds.

As at 31 Mar 2020 the two funds are:

USAF – Unite own 22% - like-for-like asset value decline of 2.2% for the year; and

LSAV – Unite own 50% - like-for-like asset value decline of 1.5% for the year.

The property valuations are directly linked to the rental income that they deliver. Obviously income has and will be hit by Covid-19 and the decisions that Unite have taken in response, specifically:

>> Free cancellation of rental contracts for the final term for students wishing to return home;

>> Significant reduction of income over the summer break period.

Unite's proactive early decision to forego rental income among other's will have been welcomed by their tenants. As Joe Lister says,

"our actions will ensure that we emerge from this uniquely challenging period with our reputation with students and Universities, not only protected but enhanced"

So, Unite are doing exactly the right things in response to Covid-19.

Hi Guys,

I'm having many more Covid-19 driven online conferences using a range of providers on-top of what I normally have - which is quite a few. The quality has deteriorated significantly - due I understand to bandwidth demand. It really has been difficult to communicate effectively on a number of these calls. If you listened to BBC R4 Today this morning - you'll have heard them having problems as well.

This bandwidth issue really plays to LoopUp's strengths, as uniquely,they route the voice channel over normal (PTSN) telephone lines - so are not competing for limited bandwidth.

Covid-19 presents a very timely opportunity for LoopUp - every 'cloud' as they say....

Regards, Maddox

Hi Guys,

In this market there is no knowing how low a shareprice might decline. However, the EPRA NAV at 31 Dec 2019 was 853p. Now this will be influenced by rental income and Covid-19 will have an impact. Now, their update on this on the 16th March stated that their sales for the next academic year remain at the same level as this time last year but there is going to be a negative impact on summer sales of otherwise vacant rooms. This is only 3% of revenue overall - so hardly significant in comparison with the sp collapse.

On the otherhand, we have greater clarity now on the exam situation for the A-level intake:

>> There will be no exams this year;

>> They will get their results in August 2020:

>> There will be an appeals process for students unhappy with what they are awarded.

My interpretation:

>> They award A-Levels based on predicted grades;

>> They will use external exam boards to deal with/oversee appeals.

>> A-level students will be able to go to University in the Autumn.

As always DYOR - good luck and hope you make the right decisions.

Regards Maddox

With the completion of the takeover of Liberty Living on 29 Nov an additional 72,6 million Unite shares were admitted to the stock market. This has thus lifted the market capitalisation significantly (Mkt cap ?on 16 Nov19 was £3.41bn (sp 1176p) on 7 Dec 19 mkt cap £4.49bn (sp 1234p).

???This together with the subsequent share price appreciation has led Unite's market capitalisation to rise to £4,84bn currently - where it is knocking on the door of the FT100 index.

The next quarterly review of the FT100 constituents will take place on the 11 March - so just three weeks away. As things currently stand Unite is larger than the bottom nine firms in the FT100 but ranks 6th from the top of the FTSE 250 index. So promotion is far from certain and Unite may just fall short and end up on the FT100 Reserve List.

On the other hand we may see a run-up in the share price as Financial Institutions position themselves to take advantage ahead of the Tracker Funds.

?Anyway nice to have a nag in this derby!

?Regards, Maddox

Excellent Q1 trading update today. This provides reassurance that the transformation is being successful and the investment is paying-off. Key points:

Recurring Revenue +10.7% - indicates that the SasS transition is proceeding at pace;

Total Organic Revenue +6.7% - better indicates the underlying growth rate (ignoring the switching of existing customers to SaaS contracts);

Sage Business Cloud +12.7% - indicating the strategic shift to a Cloud-based product offering is proceeding well. This is where SGE is 'perceived' to be weak and behind their competitors Xero and Intuit. In fact Sage are fast building a powerful Cloud business with an attractive offering of products built on a common platform (an IT service fabric as they describe it).

So, whilst we're conceding a slower growth in dividend returns whilst investment in the faster pace of transformation takes place - its working well and building future value.

We also have a return of capital once the SagePay disposal completes of c. £250m to come. We don't yet know how SGE intend to make this return however, if returned all in cash would equate to, I estimate, 22p/share (current div is 16.91p).

Regards, Maddox

ERGO's acquisition in US is a strategically significant move. Should allow ERGO to compete for larger contracts currently out of reach due to lack of US presence. Not cheap 1x rev but $10m affordable out of existing resources.
Regards Maddox

Mr Market and the majority of the brokers appear to dislike these results.

However, IMHO Sage are doing exactly the right thing and also exactly what they set out to do. Which is investing in sustainable long-term (high quality,high margin) revenue growth. This hits the margin in the short term. It costs roughly twice the annual revenue to recruit a new customer but you then get 10 years plus of that revenue from that customer. So it's a highly profitable investment but you pay for it in the first year - hitting the reported margin and slowing the growth in dividends.

Mr Market and the brokers analysts are being very myopic and short term. And there-in lies the opportunity for the patient far sighted personal investor. The shares are off 33p down to 708p as I post, and with a cash return in prospect from the sale of SagePay. So I'm buying.

Regards Maddox

Thought I’d check-out what the brokers’ recommendations are on Sage on the eve of a trading update – hmmm they are not great:

Strong Buy........2...(6)
Buy....................0...(1)
Neutral..............8...(9)
Sell....................2...(3)
Strong Sell........7...(3) Brackets are the scores of one month ago
........................19...(19)
Source: Share.com

So the brokers have are looking increasingly negatively at Sage. With expectations apparently set so low it will be interesting to see the reaction tomorrow.

Regards, Maddox

Sage have agreed the sale of their payments business SagePay to Elavon for £232m which looks like a good price. Based on the units figures for fy 30Sep18 of £41m revenue and £15m profit - sold at 5.66x revenue and p/e 15.47.

They will be booking a profit on disposal of c. £180m.

Whilst payment functionality is an important need for Sage's clients seamless accounting/payments integration with a range of payment service providers (PSPs)is the market need. Thus SagePay didn't fit strategically and will leave Sage a more focused business on its global ambitions and its fast growing Cloud SaaS business.

With Brexit in view it also de-risks the business by reducing the revenue mix away from the UK and £Sterling exposure.

Regards Maddox

I've been waiting for the CMA to sign-off on the takeover of Liberty Living. Now received, this is a huge step forward for Unite - the number one in the market taking over the number three. It consolidates Unite's position as the market leader and delivers a significant operational scale-up and with it the prospects of efficiency gains.

What I was somewhat surprised by was the quality of the Liberty Living property portfolio, focused similarly to Unite, on top-flight universities and how good the fit is with Unite's own portfolio. There is certainly no drop in quality as a result of this takeover.

One aspect where Liberty were performing better than Unite is half-term lets - filling vacant rooms when the students are at home or on holiday. So there may be a few learning points to be taken on board along with the portfolio.

The deal also brings Liberty's owner, Canada Pension Plan Investment Board ("CPPIB"), on-board as an investor. It is having deep-pocketed long-term strategic investors that gives Unite the fire-power for similar large deals. This is a huge differentiator from the other purpose-built student accommodation (PBSA)specialist developers and managers.

So a fantastic deal in a market that still exhibits positive demand and rental growth. This set against an increasingly worrying macro-economic back-drop. The un-correlated nature of this sector of the property market is a highly attractive characteristic. If, as seems possible, the Treasury feels the need to drop interest rates - our asset-backed cash machine will look ever more a safe haven for financial institutions' money.

Needless to say the share price has performed strongly up 40% for the year to date (1129p as I post). So congratulations to all holders and I'm looking forwards to see how the portfolio integration proceeds and additional value is generated.

Regards Maddox

Further info.
The Govt now is aiming to increase the number of International Students to 600k from the current 450k over the next 10 years.

https://www.theguardian.com/politics/2019/sep/11/uk-work-visas-for-foreign-students-all-you-need-to-know

On the basis that PBSA beds are being built at a rate of 25,000 per year - and UK demand is still rising - it appears that the under-supply that supports rental growth is likely to be maintained.

Regards, Maddox

Excellent news today for all UK Universities and Purpose-Built Student Accommodation (PBSA) providers. The Govt is to change the rules to now allow foreign students studying in the UK to work for a further two years unrestricted. There are currently 450k international students in the UK. This move will undoubtedly boost numbers as the UK has been far less attractive than other top destinations, specifically Australia and US, that already allow students to stay-on to work.

This thankfully reverses the disastrous bone-headed approach introduced by Theresa May as Home Secretary to require students to leave after 4 months. May saw students as a soft target to hit her hopeless immigration targets - despite the hard evidence that very few were over-stayers.

This move applies to all trusted higher education providers and will thus exclude the dodgy language schools that were flouting the immigration rules.

https://www.bbc.co.uk/news/uk-49655719

Regards, Maddox

Yes different, if the ramper truly believes in the merits of the share. No, if they are cynically telling lies to fool others into buying a crap share. The key difference with short attacks is the quantum of the destruction caused Muddy Waters has taken the value of BUR down at the lowest point about 75% for which they no doubt are very proud of themselves.

I find little merit in the argument that the minor miss-practice justifies the larger one. Curious, logic indeed: as if petty tax avoidance justified major corruption.
Regards Maddox

Hi Hereshopin,
I've a significant portion of my portfolio in BUR but haven't posted much. I've thus lost significant value in-line with the share price decline. My larger positions are strong conviction holdings that I do a considerable amount of research into - including meeting the management.

I am not opposed to shorting, but don't do so myself. However, these short attacks on genuine firms, using fictitious and misleading reports, are purely distructive. They serve no purpose, they will discourage less experienced investors from the market and have I know caused a lot of holders to sell their shares at a loss. And why, solely to enrich themselves. Hence, my request to bb readers to send in a complaint to the FCA.
Regards, Maddox

I've filed a market abuse report on Muddy Waters to the FCA; email address:

market.abuse@fca.org.uk

Muddy Waters Capita LLC short attack on Burford Capital

I want to report market abuse by Muddy Water Capital LLC. They manipulated the share price down of Burford Capital limited (BUR) by releasing a false and misleading report into the market in order to financially benefit by short selling Burford shares.

The Muddy Waters 'short report', available here http://d.muddywatersresearch.com/, was published on the 7 August at 9am. It contained fictitious accusations and misleading statements that were clearly intended to frighten investors. The issues raised were comprehensively answered by Burford in their RNS 'Response to Short Attack' on the 8 August 12:45. However, this gave adequate market time to take the price down from circa 1381p on 5 August to below 400p and closing at 605p from which Muddy Waters reportedly made a huge profit.

I have lost significant value as a result of Muddy Waters' profiteering from market manipulation and think the FCA should take regulatory action to prevent this sort of market abuse.

......................................................................

Feel free to follow suit its about time this blatant market manipulation was tackled by the FCA. They have suggested that they are moving to a more robust regulatory regime - so let's see if we can encourage them to act. Numbers of complaints will count so if you feel the same please send an email.

Cheers Maddox

I've filed a market abuse report on Muddy Waters to the FCA; email address:

market.abuse@fca.org.uk

Muddy Waters Capita LLC short attack on Burford Capital

I want to report market abuse by Muddy Water Capital LLC. They manipulated the share price down of Burford Capital limited (BUR) by releasing a false and misleading report into the market in order to financially benefit by short selling Burford shares.

The Muddy Waters 'short report', available here http://d.muddywatersresearch.com/, was published on the 7 August at 9am. It contained fictitious accusations and misleading statements that were clearly intended to frighten investors. The issues raised were comprehensively answered by Burford in their RNS 'Response to Short Attack' on the 8 August 12:45. However, this gave adequate market time to take the price down from circa 1381p on 5 August to below 400p and closing at 605p from which Muddy Waters reportedly made a huge profit.

I have lost significant value as a result of Muddy Waters' profiteering from market manipulation and think the FCA should take regulatory action to prevent this sort of market abuse.

......................................................................

Feel free to follow suit its about time this blatant market manipulation was tackled by the FCA. They have suggested that they are moving to a more robust regulatory regime - so let's see if we can encourage them to act. The number of complaints will count.

Cheers Maddox

A very robust rebuttal and rather than the typical 'company knows of no reason for the decline in the share price' statement they believe it to be as a result of market manipulation and will look to take legal action against the shorters.

The statement also accurately articulates the Short Attack Playbook.

It won't be too difficult to identify the perpetrators, the evidence will be fresh and will be self-identifying themselves at 8am.

Perfect response - looking forward to seeing this play-out.

Regards Maddox

Hi Guys,
This current dip has all the characteristics of a concerted short-attack. No one on here has mentioned the increase in declared short positions immediately prior to the press article. Firms in heavily regulated and sin sectors such as payments and gambling are obvious targets for this treatment. Typically its old stories recycled and given a new twist.

The good thing about shorters is that they'll have to buy back in to close their positions.....

Regards, Maddox

A few select quotes from the Guardian today.....

'Applications from Chinese students to study at UK universities have gone up 30% since last year'

'The Ucas figures also revealed an increase in the number of British 18-year-olds applying for places, up 1% on last year to 275,520 despite a 1.9% fall in the overall 18-year-old population of the UK. EU applicants have also risen 1%, to 50,650 despite the Brexit uncertainty, and Ucas reported a record number of applicants from outside the EU at 81,340, an increase of 8%.'

hTTps://www.theguardian.com/education/2019/jul/11/chinese-students-applications-to-uk-universities-up-by-30

Market fundamentals appear strong, and this also highlights the defensive nature of this sub-sector of the property market.

Regards Maddox

As I said in my post on the 3 June I thought a large deal was in prospect - I didn't however think it was going to be this big! The news that Unite is in the late stages of taking over Liberty Life for c. £1.4bn is clearly a very significant deal.
We don't know the details but a few points to reflect upon:
aa) The price paid will around LL NAV so no premium;
bb) This significantly scales up the student property management arm of Unite; and
cc) Unite's unique structure gives it substantial financial deal capacity.
On this last point Unite's structure of a property development and management company supported by two own managed property funds distinguishes it strategically from it's competitors, the funds are:
USAF £2.26bn – Unite own c.23%; and
LSAV £1.26bn – Unite own 50%.
The financial firepower that this structure provides is a key strategic advantage in what is likely to be a consolidating sector.
Regards, Maddox