Member Info for tenobas

Four directors sold 12 days ago at £2.96

I am glad they are not qualified pilots!

Or have we had significant developments

Mole Man:

I disagree with nearly everything which you say.

Never comment on sentiment especially in a price crash.

Savills :

"At 7.5%, this is the lowest Central London vacancy rate in four years, although the vacancy rate remains 160 bps above the long-term average (5.9%).

So vacancies are clearly falling (look at the graph).

Management are so great that they let valuations get so high that CBRE had to bring them back down to earth.

IMO the problem with Workspace is the age of its properties.

Tenants demand higher and higher standards.

Planning restrictions and contributions are a bigger and bigger problem and I agree that their valuations are not going to rise much in the next five years.

That said WKP have a trading profit after interest of about £70m (a sort of P/E of 12)

They are on a discount to asset value of 45% so we don't need the valuations to rise.

This looks to be a growth share.

Given all of the above I say that this is not a bargain at the current price but I would buy at £4.

Since this is a REIT with circa £1100m of debt it will be inversely correlated with interest rates and with 10 year bonds testing new highs the downward forces are quite strong. The operational cash flow is however at five times the interest bill and this offers buoyancy.

In the short term these forces are balanced but this is no short term play.

The long term prospects are for growth in the sector with some barriers to entry.

The only black swan event is a crash in warehouse prices and I just cannot see that happening because warehouses will never be distress sales.

The interims are out on 10th June and will be very important.

The collapse of the Warehouse REIT bid will also be having some influence but its price is well above the pre bid situation.

The discount to NAV is one third.

Taking yield as 5% the yield to property value is 7.5%

Bearing in mind that tax is only 7.5% then an EBITDA multiple of 11 corresponds to a P/E of about 14.

Bearing in mind that the UK self storage market per capita is one tenth the US one whilst the UK has more rentals then there is no way that these property values can fall (see below) and this business must grow.

For a growth business at a discount of 33% to NAV then an EBITDA multiple of 11 is a fantastic bargain.

I think you are forgetting that if you ignore investing in bricks and mortar than this is a low capex business and the only threat is that real interest rates rise so much that there are distress sales of self storage properties. I rate this risk as very low.

I worry that this company often adopts strategies that go against the long term trends.

They did not sell when second hand vehicle values reached a peak in 2023 but instead invested in maintenance capacity both for themselves and others at a time when the EV fleet increased the perception and reality that less could and should be spent on maintenance.

This operation is now close to a car dealership model at just the time when that sector is in trouble.

And 6.6% owned by Amati AIM VCT plc

Given that this is probably a people business we have to ask if it would be possible to buy it?

It is just conceivable that the share price is more influenced by the personal circumstances of 10 individuals than the profit prospects.

As if this was not bad enough:

>> Investors in AIM shares may need to reconsider their IHT planning following the announced changes to business relief. Assets which they thought were free of IHT will become subject to IHT from April 2026, when relief on qualifying AIM shares and portfolios will be cut from 100% to 50%. Although this measure was not as bad as many expected, it will affect both existing and future investors and needs to be factored into advice.

>> This means that, on death, estates holding AIM shares could pay 20% IHT on these assets. Clearly there is still an IHT incentive for investors, but clients will need to decide if the smaller incentive is enough to invest in AIM, given the higher investment risk associated with this market.

Worrying is that they are resorting to a "Supply Only" model:

>> In FY24, we introduced a new “Supply Only” model, enabled by

our strengthened relationships with key foundries and outsourcing

partners. In this model, customers design a significant portion of

the chip, while EnSilica typically provides design support during the final stages.

Why would they dilute their business model like this. (It also makes them more of a people business).

The only value I could see in this share would be that the business model would force them to invest in future revenues but with "Supply only" and chips only lasting about three years I cannot see this happening.

This might be a cheap share for ISA investors but I would only buy at a discount to NAV.

When a company boasts a high ROCE but has high goodwill and debt I am not interested.

(There is aways the concern that the IP is aging faster than the accounts allow for.)

My other concern is that this seems to resemble a people business.

A big part of this story I think is the share options:

2023 Report:

The total estimated IFRS 2 charge for the GSP of £33.7m over the life of the scheme will be adjusted by the estimate of Directors expected to remain in service and spread over the performance period of five years. £10,633,000 of the total charge has been expensed in the year ended 31 December 2023 (2022: £5,769,000).

The holders of the A Shares have the right to exchange their A Shares into shares in

the Company should certain share price criteria be met, subject to the continued employment of the holders.

I hold this but I look at DB pensions in various results and as time goes on the sizes of these funds is falling.

Does this imply that LGEN is in a shrinking market?

Prices up 0.4% yoy

Occupancy up 1.4 ppt (2%) yoy

In the US, there are around 7 square feet of self-storage per person.

In the UK, there are around 0.89 square feet of self-storage per person.

What is not to like?

I am concerned that the size of DB pension liabilities is falling quite fast.

Is this a shrinking market for LGEN?

?

Have the quants got this heavily correlated with interest rates?

I am thinking of selling SHUR and buying SAFE:

Sentiment wise this seems to be the best time.

P/E sg=3.09/.173 # 17.9

Tax Rate sgtax=53.3/481 # 0.1108108

P/Asset sgass=3.09/3.02# 1.0231788

P/E ss=1.34/.136 # 9.85

Tax Rate sstax=26.3/399 # 0.0659147

P/Asset ssass=1.34/2.23# 0.6008968

The problem here is obviously sector wide because Big Yellow Box closely tracks the Safestore share price and the ratios are close.

So what is the story here? What are the threats?

1) Small threat from house prices continuing to fall?

2) This seems to be ex growth. Is it? (Ancilliaries?)

3) Increasing interest rates: SAFE has £824m borrowings covered only by a £500m RCF.

The interest rate being paid might be as low as 4%.

IMO this share would benefit a lot if bonds were issued. They would certainly make analysis easier.

This might benefit from a rights issue.

4) Regulatory risk? No.

Is the main factor here high levels of disinvestments in UK REITS?

I do not understand this situation.

If we disregard property valuations then we are buying at a 40% discount to net asset value on a P/E of around 10.

How can this be for a business growing at 8.7% per year?

Also, surely storage is recession proof?

I would make my final exit here at a P/E of 22 but I have tax considerations

What is the threat of restrictions of USA de minimis to this share?

(Very big I would think)

The trading update was essentially steady ahead as she goes.

A very forthright update with the only qualification being around the question "What were internal expectations?"

I was expecting profits to be slightly down.

What strikes me about this business is that it is now amazingly stable.

The energy shock was a once off occurring because there were no price hike clauses.

There are however some negatives in the trading update:

It demonstrates that contract manufacturing serves only to cover admin and depreciation charges and presumably generates trivial profit.

This leaves us with growth of 2.4% which is by no means trivial for brands.

However has the pack size increased?

So the story with this is slow but steady growth combined with significant improvements in financing and pension liabilities. I think that the P/E should be at least 10 indicating a share price of 230p.

congratulations mallard on a truly comprehensive analysis.

i am concerned that we are not able to see the wood for the trees.

the issue here is that we have a business on a p/e of 5.4 which has barriers to entry and which is stable albeit operating on a margin of only 3%.

the macro economic threat is often mentioned but i think this is a red herring because economic pressures will stimulate economy brand sales.

over the last eight years growth has been almost exactly the same as inflation. any switch to dosage packaging has not improved margins.

there are however other prospects:

1) ultimately the pension scheme will end as will top-ups (£4m) and actuarial losses (£4m).

over eight years there has been no improvement here; the deficit remains the same ~£30m.

there is an additional threat here from virgin media versus ntl which will impact

2016 obligations of £150m. there is no estimate of this so say 5%?

whilst the pension situation is at best unchanged the turnover is up by a third.

2) the debt shows no obvious trend at around £130m.

the outstanding position here is that in y/e 2022 there was a massive hit to profits

because the energy crisis was not covered by provisions to increase prices.

long term finance costs of about £6m shot up to around £20m.

the problem looking forward is that finance costs will be impacted by rising interest rates.

(interest rate increases hit highly geared businesses such as this.)

overall the finance situation is positive because

expectations are worse than the likely worst outcome.

3) y/e 2024 showed a massive rise in gross profit which had been steady at around £240m but

which shot up to £347.9m.

the probable main cause of this was that energy costs fell back again not offset by contract prices.

on the other hand the 2024 report was very bullish in its prospects and this indicates

that there is also a long term improvement.

the november trading update had y/e 2025 expectations of adjusted operating profit down by 7.4m

presumably it is possible to predict the figure so accurately because

all contracts run six months in advance.

this would suggest an earnings figure of £25m giving a forward p/e of 7.2.

so the 2024 jump in profits of £21m might be say:

£10 energy cost fallback + £7m finance improvement + £4m operational growth.

overall this is positive.

the question remains:

why is such a good business so cheap? why is the share price falling?

what are the possible threats?

the risks and uncertainties listed in the annual report look pretty bull****ty to me!

do you have any other ideas?