Member Info for VladamirPokrov

Frustrating and painful to see the price drop, but when I assess the valuation I am very reassured. A fall in half year profits was inevitable due to the energy costs and a lower average Cu price relative to the previous half year. But the all important net equity number for Atalaya still grew strongly and the Russian madness has given huge additional momentum to renewable development, which will inevitably drive up the Cu price.

These H1 results were never going to be pretty, but the divi remains intact and the substantial buy backs continue. Of course it is rough out there for Abrdn and timing of a recovery in revenues is uncertain, but that is the case for most businesses today. I do think that all of these challenges do not justify the extent of Abrdn's price falls over the past 15 months.

Svend, when I look back to two of my best ever holdings, Barratt from 2011/12 and Dart Group (now Jet 2 from 2013). Barratt had made a duff acquisition just before the financial crisis, had a lot of debt, big share issuing c2009/10 just to survive. But from 2010, Barratt was tentatively moving back to profit, self sufficient on cash flow, c50% discount to TBV. Similar valuation to Abrdn now, but actually still in a much weaker position then than Abrdn is now and Abrdn has not encountered anything like the problems that Barratt was recovering from back in 2011. The price move for Barratt from there was amazing, I sold a little too soon, but still my first 6 figure gain. Dart, quirky business, part airline running planes averaging nearly 20 years old then, part holiday company, airline very seasonal as linked to the holiday business, hence the old air fleet, cheaper to park up older assets mid winter etc. So quirkly but very profitable growing, dirt cheap, big cash pile, industry struggled to shake of negativity, then reality hit, a solid business selling for a third of a fair price, the rest was history in terms of price move. I think the shorts on Abrdn are likely closing now, we are almost at a 2 month price high, it all could happen very quickly from here.

Svend, when I look back to two of my best ever holdings, Barratt from 2011/12 and Dart Group (now Jet 2 from 2013). Barratt had made a duff acquisition just before the financial crisis, had a lot of debt, big share issuing c2009/10 just to survive. But from 2010, Barratt was tentatively moving back to profit, self sufficient on cash flow, c50% discount to TBV. Similar valuation to Abrdn now, but actually still in a much weaker position then than Abrdn is now and Abrdn has not encountered anything like the problems that Barratt was recovering from back in 2011. The price move for Barratt from there was amazing, I sold a little too soon, but still my first 6 figure gain. Dart, quirky business, part airline running planes averaging nearly 20 years old then, part holiday company, airline very seasonal as linked to the holiday business, hence the old air fleet, cheaper to park up older assets mid winter etc. So quirkly but very profitable growing, dirt cheap, big cash pile, industry struggled to shake of negativity, then reality hit, a solid business selling for a third of a fair price, the rest was history in terms of price move. I think the shorts on Abrdn are likely closing now, we are almost at a 2 month price high, it all could happen very quickly from here.

I assess UK stocks as well as S&P 500 stocks and S&P 600 mid cap stocks. Whilst US indices have generally done better over recent years, you have to allow for the fact that FTSE stocks, especially FTSE 100 stocks favour the dividend, S&P 500 stocks tend to split the payouts between the divi and share buy backs. UK investors can be a little suspicious of buy backs, simply becuas they are less commonplace over here. Personally, I prefer the typical US approach of a largely equaly split between divi and biy backs, perhaps 60/40 in favour of the divi is my preferred ratio and that is probably the S&P 500 average split.
So yes, all for Abrdn buy backs. Tomorrow's update won't necessarily be pretty, the negative campaign won't just impact the share price, it will impact money volume inder management, which will have fallen, but of course that we will be the case for all businesses managing money at the moment.
Lots of moving parts with Abdrn at the moment, which the short campaign has taken advantage of. This is no deep conspiracy campaign, short campaigns are distasteful, but commonplace, participants don't necessarily communicate with each other directly, they just look at the short build up, look at the excessively negative comment and jump on the band wagon, it happens all the time. Not sure why Abrdn was targetted as it is far too strong to be an obvious target in my view, perhaps all the change, the fuss over rhe rebrand, etc, I like the rebrand personally, so momentum built and the short campaign worked. If you look at IC's recent couple of write ups, it went from sell to hold a few months ago, despite the article being utterly negative, so why go to hold? To be able to get out another article of course, once they go to sell, they don't usually allow another article until the recommendation changes, so go to hold but incrediably negatively, then a few weeks ago, before the results bizarrely, go sell again and just rubbish the business utterly, very much under the guise of get out out now before it is too late! But look at the equity build, the divi, the tangible book value, the buy backs.
I have complained to IC, they won't answer of course, they stopped reader comment a few years ago, very thin skinned, interesting to see if they change the writer for Abrdn's H1 write up if there is one.
I should not complain really, this kind of scenario allows me to make major gains, I would stress that I have never shorted Abrdn and I have never supported the negative comment. Again, I do not suggest that anyone posting negatively here is necessarily playing the short game, negative Abrdn commnt has become infectious, every action they take tends to seen through the negative lens, you know, the unfortunate employee at work who everybody seems out to get, whatever they do is spun negatively. H1 won't necessarily be pretty, but in light of the pricing, which is now suggests imminent business collapse, Abrdn looks good to me and is my single largest holdi

Investing is what I do full time now. From 2009 to 2021 my SIPP returns were formally verified by the Telegraph at 1,600% returns without any additional inputs, one of the better UK private investor performances, so let's just assume that I know how to value a business.
I have become completely baffled by the negativity surrounding Abrdn. I have looked at Abrdn every which way. Decent divi, and, if you allow for the very agressive write down of of the intangible assets in c2017, which is the prudent thing to do, the net tangibles have actually grown strongly over recent years, Abrdn is a genuine wealth creating business.
Yes there will be net investment outflows with approaching H1 results, but you would expect that currently. I see no basis for the negativity in the numbers coming through so far or the current forecasts.
Obviously there has been a considerable short campaign to send the share price through the floor, Abrdn is one of the most shorted stocks in the FTSE, none of the other heavily shorted stocks possess anythig like Abrdn's financial strength.
Wherever I look or read comment about Abrdn, I hear another negative story, which, every time, when I check it out, has no foundation.
The last IC write up, just a week or two was appalling, another lengthy rant about about the rebrand and a desperate search for negatives, no discussion about the low single figure PE ratio, the large dividend, the fact that the business sells for c50% of the value of its net tangible assets. IC's writer does admit to being a former Abrdn employee, but his article is more than bitterness, it strongly suggests that there is coordination with the short sellers. I have now approached IC about this, I doubt that they will reply, they tend to desperately close ranks and circle the wagons in such situations.
Abrdn is no dog, it just goes to show how 95% of people go with an invented story without looking at the underlying facts for themselves - I should not complain, my returns are reliant on identifying investor ignorance. Many investors don't actually separate company failure from a fall in the share price and would never look closely to see if the share price fall has any basis, to them, a fall in the share price is company failure regardless of the underlying position.
Of course the short sellers know that they can only pull the wool for so long and will be looking to profit from the ride back up as well, which is likely to be dramatic.

Over the past 12+ years as I steadily transition from full time job and investing analysis when I could, to part time work and more investing and now to full time investing - well not really full time, a few hours and day and none if the sun is shining, the writings of Peter Lynch has been my primary influence, right from the beginning. It strikes me that ScS is the classic Lynch investment. A sector which is perceived as a bit flat and boring and where participants have traditionally struggled to make good profits - a good description of sofas and carpets I think, excatly where 99% of investors have not been looking over the past 2 years. Did you realise that, even though 2022 won't be quite as good as 2021 for ScS - quite a bounce in 2021 and supply chain issues will have some effect - but nevertheless, the combined tangible surplus for ScS for 2021 and 2022 - TS is the annual buiuld up in net tangible equity added to the dividend yield, i.e. the real wealth generated for shareholders - will be around 50% of the current MCap, putting ScS on a real PE ratio of about 4, i.e. an earnings yield of c25%. This is mind boggling, even compared to valuations back in 77, when Lynch found bargains everywhere, he would have fallen off his chait at ScS's current valuation!

Very interesting video, excellent in fact, thanks for directing me to that Dan. One addtional point is the rate of equity build up, while this year is expected to be a little quieter than last year due to the post lockdown boom, as explained in the video and in ScS statements, the cash/equity build up this year could easily exceed another £15m, i.e. around 20% of the current market cap. I certainly hope that we don't see a buy out. With all that cash you would hope for a buyout premium of at least 50%, but if ScS is left to its own devices we should make a lot more than that over the next 2 to 3 years.

I do think that some of the larger house builders were dragged into over paying their divis, post 2009, when they should have been acquiring cheap land, as Bellway were doing, by PSN. Of course when you don't replenish the land bank adequately, it is very easy to distort your declared profit figure, even within the rules most of the time. This is what PSN were doing and then we found out why. Jeff Fairburn needed to keep the shareholders grinning and the criminally incompetent non-execs well buttered on the way to short term profit maxmisation in order to collect hos £70m bonus.
Barratt and TW followed on with too much divi and plenty of bonus as well no doubt.
Of course ROE goes through the roof when the land bank is depleted as equity is the denominator and it shrinks with the land bank.
Bellway, 10 years ago, had a net tangible equity of c£1bn, today it is c£3bn, and rising, and the buying has been very heavy since early Covid when land could be bought very cheaply. This bizarre post 2016 holding back of the very best UK stocks will no doubt end abruptly in time. There are a handful of stand out businesses where your money should be, Bellway is certainly one of them, probably the current stand out opportunity within the entire UK stock market.

High Dan are you there

Yes I get the impression that ScS really know what they are doing, a good spot on your part, not previously on my radar at all. Very Peter Lynch this one, a very established, not up and coming sector, where many participants seem to struggle and have done for some time, but with one stand out performer that has been overlooked. Quite a contrast with the stocks held by the hot stock funds (see BGUK) and the value contrast is extreme.

You really don't want PE sniffing around, but yes, they could be very interested at this price. The tangible equity build up to year end 2021 was around 25% MCap, giving a 'real' PE of around 4. This year will be a little slower with supply constraints, but ScS is selling at about a third of a 'fair price' currently. Why? Well, UK facing, been a flat few years for UK facing businesses generally, smaller company, a little below the radar and sofas and carpets - nobody makes any money selling sofas and carpets these days do they! Well, yes, ScS is making a lot of money.
Are you there Daniel?

Decent results, the all important tangible equity figure went up just slightly under 10% for the year, which was just what I wanted to see.

Madikwe - Re the PPA's, I don't know the specifics of the arrangements. It is probably not fixed. i.e. if planning is likely to be obtained quickly and the percentage return is high for Boot, they may not collect the costs of the panning process costs up front and may not collect them at all if planning fails, if they deem failure as very unlikely. Conversely, where he cut is less and/or the risk higher, they may want the process costs sooner and guaranteed regardless of success. I don't know this to be the case, but that is how I would approach it and Boot tend to be logical and sensible about such things.
Getting deeper into the PPA arrangements would be difficult due to commercial sensitivity and issues with releasing info beyond what is formally put into the public domain. Suffice to say, Boot has generated a tangible surplus over the past 5 years - average annual build up in tangible equity added to the forward divi, the sum expressed as a percentage of the current market cap - of c9%. That is a very high figure and that while Boot has been building its land arrangements strongly. If Boot had been completing land sales at the rate that it had been acquiring its land deals, then the average tangible surplus would have been nearer 15%, which suggests Boot is selling for slightly over one third of a fair price. These are the metrics that ultimately matter most.

The pension deficit is c£36.5m, not £39m as I mentioned below.

RE how the PPA's work, etc etc. The tangible surplus generated by Boot - average annual tangible equity growth, added to the forward divi (I assume pre-covid divi going forward), the sum expressed as a percentage of current market, is a little under 9% pa. That is a compelling figure, highlighting Boot's quality and under valuation. Whether Boot recover the cost aspect of the PPA's before or after the sale priocess is best left to them in the sense that they clearly know what they are doing and are delivering for shareholders.

Interestingly, if Boot had been selling plots at the rate at which they have been acquiring them, albeit mostly on PPA's, their tangible surplus would have been an astonishing 15% or above assuming a very modest £3k per plot contribution to tangible equity.

As for the pension deficit. The total liability is not an iceberg as the pension is largely funded. The £39m deficit is within the balance sheet, which still shows a very high tangible surplus. Boot only employ around 400 staff. Their staff are very specialised in accordance with the nature of their work, they need to retain them, a defined benefit scheme can be very effective in retaining staff. The business can clearly afford the cost. With Boot you can be very sure that all costs are there and up front, look how they responded to my suggestion, my correct suggestion that their land holdings are ideally positioned for the current land price rises, i.e. midlands and Yorkshire, some South West, away from the South East, Boot are very cautious: Thanks for the follow up an the insight into your investment methodology, all very interesting.



We’ve seen some low single digit land price inflation over the years since the financial downturn, although pretty stable prices since Brexit and then Pandemic. Prices are still good and we get a decent return but I think we are probably more sceptical about land price inflation and therefore if we are going to grow the business we perhaps see it being more of a volume play, hence the growth in the land bank. That said I certainly think your view has merit and we will certainly watch closely the affect it has on pricing. On the planning promotion agreements we tend to receive 15-20% of the end sales price plus all of our costs back.

Madikwe - this is the information that I have:
Thanks for your enquiry and very pleasing to hear that you are looking to increase your investment in Henry Boot.
The nearly 90k plots is the entirety of the portfolio over which HLM has control and as such includes owned land, Options and Planning promotion agreements.
We have been trying to move away from the split amongst these as we have found it to confuse many investors but I appreciate some who are already used to this would benefit and I am looking to reintroduce this analysis albeit quite likely in the appendices to our investor presentation.
To answer you question about 12% of our portfolio is owned with the remainder in options or promotion agreements, the last published data on this can be found on page 24 of our investor presentation for the 2020 interim results available on our website and the split has not changed significantly since then.
Generally the options and promotion agreements work in the same way other than we buy the land at a discount under an option and then sell it on to achieve the return and both have similar returns which are normally around 15%-20%. As context, the business unit has achieved and average return on capital employed over the last 5 years of around 18%.
In terms of time they again both follow the same pattern with Options/planning agreements tending to last for 5-7 years with renewal clauses to extend by a further 5-7 which generally allows us two or three attempts to secure planning and all also having extension clauses following the achievement of outline planning to keep the agreements alive.
I hope this helps but always happy to have a call or answer any other questions you might have.
Thanks for the follow up an the insight into your investment methodology, all very interesting.
We’ve seen some low single digit land price inflation over the years since the financial downturn, although pretty stable prices since Brexit and then Pandemic. Prices are still good and we get a decent return but I think we are probably more sceptical about land price inflation and therefore if we are going to grow the business we perhaps see it being more of a volume play, hence the growth in the land bank. That said I certainly think your view has merit and we will certainly watch closely the affect it has on pricing.
On the planning promotion agreements we tend to receive 15-20% of the end sales price plus all of our costs back.

Strictly - let me do some work on some of the sites they've got (or previously sold) and come back to you. The problem with PPA's is that it's a fixed margin (because the land is valued in the present day, not at the point of agreeing and signing the Promotion agreement, with the owner). There are other nuances but let me have a deep delve and come back to you.

I'm guessing, at this stage, the Boot will flip/sell their sites in the majority of cases too. I'll have a look and confirm my thoughts in due course.
Strictly - I don't place Boot ahead of Bellway or LGEN for that matter, but is no 3 out of my 4 current holdings, meaning that I regard Boot as the third best current buying opportunity within the UK stock market. I was listening to Bellway's half year podcast from c6 months ago, in anticipation of their final results in 2 1/2 weeks time. Bellway were buying a lot of cheap land in H1, likely more in H2 and price increases, particularly away from the South East will also be very positive for Bellway.
I spoke to Boot's FD as part of my research, by e-mail, and he confirmed that for the Planning Promotional Agreements, they recover costs plus 15% to 20% of the land sales price to the market once planning obtained.
In terms of the balance sheet, the PPA's don't go onto the balance sheet, just the owned land which is only 12% of the land, plus the money paid to secure option agreements, as well as other operational assets. The PPA's don't go on the balance sheet although they account for the majority of Boot's land holdings, and yet Boot is still on a very attractive price to book, despite its primary resource being off the book. The returns for PPA arrangements may appear lower than for owned land holdings, but are they? PPA's are a fraction of the capital intensity of the owned land bank. Strictly, I can't understand why you cannot see this, Boot has very attractive price to book, but Boot's monster resource is off the balance sheet, you could take away the well over 50k PPA plots and Boot would still be well priced. Vlad

Strictly - I don't place Boot ahead of Bellway or LGEN for that matter, but is no 3 out of my 4 current holdings, meaning that I regard Boot as the third best current buying opportunity within the UK stock market. I was listening to Bellway's half year podcast from c6 months ago, in anticipation of their final results in 2 1/2 weeks time. Bellway were buying a lot of cheap land in H1, likely more in H2 and price increases, particularly away from the South East will also be very positive for Bellway.
I spoke to Boot's FD as part of my research, by e-mail, and he confirmed that for the Planning Promotional Agreements, they recover costs plus 15% to 20% of the land sales price to the market once planning obtained.
In terms of the balance sheet, the PPA's don't go onto the balance sheet, just the owned land which is only 12% of the land, plus the money paid to secure option agreements, as well as other operational assets. The PPA's don't go on the balance sheet although they account for the majority of Boot's land holdings, and yet Boot is still on a very attractive price to book, despite its primary resource being off the book. The returns for PPA arrangements may appear lower than for owned land holdings, but are they? PPA's are a fraction of the capital intensity of the owned land bank. Strictly, I can't understand why you cannot see this, Boot has very attractive price to book, but Boot's monster resource is off the balance sheet, you could take away the well over 50k PPA plots and Boot would still be well priced. Vlad

Just for clarity, the post immediately below this is part 2, part 1 is 2 posts below.