Fellow Income Monkey's that have been following the prospects of Mapeley are probably already aware of the fact that the recent talk over talks came to an end with the announcement on Friday morning. Unsurprisingly the market reacted by marking down the stock heavily from its closing price of £15.57 to £13.21.
Credit crunch
Both the Times and the FT reports that the collapse of the talks were down to the fact that Fortress Investment Group the majority shareholder with over 50% of the share capital were thwarted in their attempt by the conditions in the American money markets.
My reaction
Relief! The biggest risk to me as an income investor was that Mapeley was taken out cheaply as a result of an opportunist bid only successful because of the poor sentiment toward property companies. My reaction was to immediately go back into the market a buy shares. I had taken advantage of the bid to book some short term profits and unwind a significant CFD position. This enabled me to go back in and crank up my holding at a lower average price.
Focus on income generating fundamentals
The latest preliminary results for the year to the end of 2007 showed income investors just what they wanted to see. All the metrics relating to income were up:
Dividends up 11.9% to 188 pence per share (2006: 168 pence
- FFO up 23.4% to £56.4 million (2006: £45.7 million)
- EBITDA up 23.4% to £115.4 million (2006: £93.5 million)
- Revenue up 8.4% to £417.4 million (2006: £385.0 million)
This all means that dividends which were up 11.9% from 188 pence per share (2006: 168 pence). At the current share price this dividend equates to just over 14%.
The most important metric out of these figures is the FFO. This effectively measure the free cashflow and therefore the amount a company can pay in dividends. Mapeley figures show that FFO is up to £56.4 million or 192p a share. This enabled them to pay the 188p dividend out of existing income making the whole process very sustainable.
Paradoxically one of the reasons that the City has been marking down Mapeley is because its investment portfolio is heavily office and regionally based. These provincial properties are perceived rightly to be more of a risk of value reductions. However, as the Times commented that Mapeley is protected from a potential slump in demand for commercial property by the fact that a majority of their tenants are in the public sector (over 60% is let to the public sector tenants). These are just the low risk tenants who going into a economic slump are the ones you need because they are less likely to miss rents or be unable to pay.
Income Monkey Recommendation
I still think that Mapeley has a bright future. The big risk on the horizon is that Fortress are just stalling their time in making the bid in the hope that the market still responds to lack of confidence the share price by launching a secret bid at the right time. For more views and discussion about Mapeley go here
Saturday 29 March 2008
Wednesday 19 March 2008
Crazy Crazy Market!
If you said to me a couple of months ago that I would be able to get a 10% yield on solvent, asset backed businesses with growing incomes then i would said you were crazy. We live in extraordinary times.
The credit crunch as well as sucking confidence from the market has also robbed it of any sense.
There is no doubt that the rapid removal of credit from the international financial markets will effect companies prospects but a melt down? Fear and uncertainty has taken hold and investors have run for the door. These are times when income investors can pick up a steal which they can hold for a lifetime and will reward investors handsomely. Here is just a small selection of some great high yielding shares to buy & why.
DAWNAY DAY TREVERIA (DTR)
I've been busily filling my boots with this stock for sometime. For Income Monkeys looking at avoiding the down turn in the UK commercial property market. They should consider Dawnay Day Treveria. This company is focused on investing in income generating German retail property. Launched in December 2005 the company has now completed its objective of having a portfolio of euro 2.3 billion. The company's share price has been hit by the down turn in sentiment towards property assets.
The dividend for 07/08 is projected to be 5.05 cents rising to 7 cents in 08/09equating to a projected 11% yield on its current share price of 64 cents. These levels of dividend are easily affordable from its rent roll of 59,319,000 euros for the 6 months ended 30 June 07. After expenses and interest net revenue should be approximately 42 million euros for the year before tax. This is enough free cash to pay up to a 6.6 cent annual dividend. The company's share price is easily covered by its' net assets. It had a NAV of 116c back in June which means the property income stock is now trading at over a 30% discount to its current share price. Too high for a company investing in a property market that has not seen the excessive over valuations experienced in the UK and therefore it is on a much firmer footing. With a growing revenue stream leading to a potential rising dividend, this looks like a great income generating stock to hold.
Price 64 cents Projected yield 11%
MAPELEY (MAY)- success!
Well we don't like to boast but we did tell you so. Mapeley a share that this blog has mentioned continuously has plumbed the depths over the last few months but has recently rebounded as a result of a potential bid which saw its price soar. Mapeley's latest results just vindicate what we have being saying all along. Mapeley is a thoroughbred cash machine throwing off income and dividend payments.
Mapeley is a classic case of the City not understanding a company. Mapeley is a hybrid which has confused the City. It is partly property investment company but mainly an outsourcing company deriving much of its income from managing other companies property requirements. The result is that it generates much greater levels of income than traditional property investment companies.
The latest results for year ended 31 December 07 show:
dividends up 11.9% to £1.88
FFO up 23.4% to £56.4 million
EBITDA up 23.4% to £115.4 million
On there current share price of just over £15 the yield is a massive 12.5%.
The main downside was the fact that as a result of the fall in commercial property values Net Asset Values were down to £18.62 from £24.23 a year earlier.
This prices at a discount to asset value of 20%. However as Citi property analyst Harry Stokes observes Mapeley should not be valued as an investment company
"We use enterprise value/EBITDA because we consider property outsourcing an earning play, not a property play" he said.
This all means that you have a company with a cast iron and rising income stream, most of its properties are let to government or the Santander Bank (formerly Abbey). The company is paying a whopping and rising dividend and trading at a discount to underlying asset values into the bargain.
The worry is that short term jitters means that the majority shareholder and current take over interest Fortress will get away with underpaying for this great income stock should they decide to press forward with a full bid. Logically this company should be worth £25-30 on its income generating capacity, growth prospects and recession proof business model. However, since when have markets been rational?!
Price £15.07 Projected yield 12.5%
PROSPECT EPICURE J-REIT (PEJR)
PEJR is another example of an unloved stock in an unloved sector. This company originally floated in November 2006 at £1 was a £100 million in has been set up with the purpose of investing in Japanese REITs. This stocks like UK REITs invest in a variety of Japanese real estate and in return for preferential tax treatments are required to pay out most of their incomes to shareholders in the form of dividends.
The Japanese property market has been in a slump since the early 90's and was until the recent 'credit crunch' showing signs of life . The Japanese market like the German property market are amongst the best investment opportunities having missed out on the global boom in values experienced over the last 5 years.
Why invest in PEJR? Well if you believe in value investing and investing for income this stock is a must. The shares are now down from their 52 week high of and trade just of their lows. The most attractive thing about them are the investment fundamentals.
Prospect Asset Management, Inc., the investment adviser to the Company believes that low vacancy rates and limited supply of property,combined with robust demand are pushing rents higher. This provides strong fundamental underpinning for real estate capital values and rental yields. They note that some J-REITs are trading at discounts to stated book value as high as 48.7%, and some have yields of up to 9.9% p.a. The Investment Adviser believes that this discount to stated book value may be expected to narrow due to a shift in the attitude of J-REIT underwriters toward consolidation. PEJR estimates that the Company's current portfolio holdings are trading on a 36.8% discount to their net asset value.
Low interest rates om Japan - BOJ rate at 0.75% is practically zero means that finance costs are very low so this leveraged fund can borrow for very little and then invest in J-REITs yielding in the high single figures. The result is that they can afford to pay high dividends. The O7 dividend should total 6.5p which on its current share price of just over 50p means a whopping dividend of over well over 10%. This added to the fact that the companies ad visors announced earlier this month that they were about to embark on a placing to raise an additional $100m of funds to raise their investment in the sector. Most encouragingly this appears to be prompted by existing institutional investor demand who have expressed a firm commitment to take over $50 million of these new shares themselves. The main risk to investors is the currency risk as funds and income are derived in Yen.
Price 53.75p Projected yield 12%
The credit crunch as well as sucking confidence from the market has also robbed it of any sense.
There is no doubt that the rapid removal of credit from the international financial markets will effect companies prospects but a melt down? Fear and uncertainty has taken hold and investors have run for the door. These are times when income investors can pick up a steal which they can hold for a lifetime and will reward investors handsomely. Here is just a small selection of some great high yielding shares to buy & why.
DAWNAY DAY TREVERIA (DTR)
I've been busily filling my boots with this stock for sometime. For Income Monkeys looking at avoiding the down turn in the UK commercial property market. They should consider Dawnay Day Treveria. This company is focused on investing in income generating German retail property. Launched in December 2005 the company has now completed its objective of having a portfolio of euro 2.3 billion. The company's share price has been hit by the down turn in sentiment towards property assets.
The dividend for 07/08 is projected to be 5.05 cents rising to 7 cents in 08/09equating to a projected 11% yield on its current share price of 64 cents. These levels of dividend are easily affordable from its rent roll of 59,319,000 euros for the 6 months ended 30 June 07. After expenses and interest net revenue should be approximately 42 million euros for the year before tax. This is enough free cash to pay up to a 6.6 cent annual dividend. The company's share price is easily covered by its' net assets. It had a NAV of 116c back in June which means the property income stock is now trading at over a 30% discount to its current share price. Too high for a company investing in a property market that has not seen the excessive over valuations experienced in the UK and therefore it is on a much firmer footing. With a growing revenue stream leading to a potential rising dividend, this looks like a great income generating stock to hold.
Price 64 cents Projected yield 11%
MAPELEY (MAY)- success!
Well we don't like to boast but we did tell you so. Mapeley a share that this blog has mentioned continuously has plumbed the depths over the last few months but has recently rebounded as a result of a potential bid which saw its price soar. Mapeley's latest results just vindicate what we have being saying all along. Mapeley is a thoroughbred cash machine throwing off income and dividend payments.
Mapeley is a classic case of the City not understanding a company. Mapeley is a hybrid which has confused the City. It is partly property investment company but mainly an outsourcing company deriving much of its income from managing other companies property requirements. The result is that it generates much greater levels of income than traditional property investment companies.
The latest results for year ended 31 December 07 show:
dividends up 11.9% to £1.88
FFO up 23.4% to £56.4 million
EBITDA up 23.4% to £115.4 million
On there current share price of just over £15 the yield is a massive 12.5%.
The main downside was the fact that as a result of the fall in commercial property values Net Asset Values were down to £18.62 from £24.23 a year earlier.
This prices at a discount to asset value of 20%. However as Citi property analyst Harry Stokes observes Mapeley should not be valued as an investment company
"We use enterprise value/EBITDA because we consider property outsourcing an earning play, not a property play" he said.
This all means that you have a company with a cast iron and rising income stream, most of its properties are let to government or the Santander Bank (formerly Abbey). The company is paying a whopping and rising dividend and trading at a discount to underlying asset values into the bargain.
The worry is that short term jitters means that the majority shareholder and current take over interest Fortress will get away with underpaying for this great income stock should they decide to press forward with a full bid. Logically this company should be worth £25-30 on its income generating capacity, growth prospects and recession proof business model. However, since when have markets been rational?!
Price £15.07 Projected yield 12.5%
PROSPECT EPICURE J-REIT (PEJR)
PEJR is another example of an unloved stock in an unloved sector. This company originally floated in November 2006 at £1 was a £100 million in has been set up with the purpose of investing in Japanese REITs. This stocks like UK REITs invest in a variety of Japanese real estate and in return for preferential tax treatments are required to pay out most of their incomes to shareholders in the form of dividends.
The Japanese property market has been in a slump since the early 90's and was until the recent 'credit crunch' showing signs of life . The Japanese market like the German property market are amongst the best investment opportunities having missed out on the global boom in values experienced over the last 5 years.
Why invest in PEJR? Well if you believe in value investing and investing for income this stock is a must. The shares are now down from their 52 week high of and trade just of their lows. The most attractive thing about them are the investment fundamentals.
Prospect Asset Management, Inc., the investment adviser to the Company believes that low vacancy rates and limited supply of property,combined with robust demand are pushing rents higher. This provides strong fundamental underpinning for real estate capital values and rental yields. They note that some J-REITs are trading at discounts to stated book value as high as 48.7%, and some have yields of up to 9.9% p.a. The Investment Adviser believes that this discount to stated book value may be expected to narrow due to a shift in the attitude of J-REIT underwriters toward consolidation. PEJR estimates that the Company's current portfolio holdings are trading on a 36.8% discount to their net asset value.
Low interest rates om Japan - BOJ rate at 0.75% is practically zero means that finance costs are very low so this leveraged fund can borrow for very little and then invest in J-REITs yielding in the high single figures. The result is that they can afford to pay high dividends. The O7 dividend should total 6.5p which on its current share price of just over 50p means a whopping dividend of over well over 10%. This added to the fact that the companies ad visors announced earlier this month that they were about to embark on a placing to raise an additional $100m of funds to raise their investment in the sector. Most encouragingly this appears to be prompted by existing institutional investor demand who have expressed a firm commitment to take over $50 million of these new shares themselves. The main risk to investors is the currency risk as funds and income are derived in Yen.
Price 53.75p Projected yield 12%
Sunday 27 January 2008
Apologies - but new income generating share to watch!
Firstly, I would like to apologise to fellow Income Monkeys for my lack of postings over the last few weeks. Pressure of work being the editor of the fast growing buy-to-let website Property Hawk and trying to keep up with the Stock market in the fast moving & volatile conditions have kept me too busy to allow for me to keep Income Monkeys up to date with the latest developments & there have been plenty:
Anybody who took our ongoing advice about buying into commercial property shares might have just got in before the rush. The papers including the Financial Times have been full of stories over the last few weekends about how sentiment towards commercial property shares is just about to turn. The latest developments have been the talk of property vulture funds which are likely to herald a whole raft of takeover activity and speculation after February when they first start to appear.
The Income Monkey has already made several income generating share tips see previous postings on which income generating property shares to buy.
The bank have also had a rocky ride with the fall out in the sub prime market but again some kind of stability may have returned.
Those Income Monkeys that took my advice and bought Northern Rock PIBS rather than the shares should be showing a healthy capital profit and potentially with a semi private public rescue now proposed by the Government could be in line for a very healthy income over the next few years.
Retail stocks have been hammered, but whilst there is a likelihood that dividends on these shares could be cut in the short term those Income Monkeys that are prepared to take an 18 month view on these shares could start to see an improving situation and a recovering dividend yield and ultimately a good long-term investment opportunity.
So that’s the past but what about new opportunities. One income generating investment opportunity that has caught my attention and one that I have already have a holding in is Northern European Properties (NEPR).
Northern European Properties Limited is a Jersey incorporated company which invests in real estate opportunities in the Nordic and Baltic Regions and Baltic Russia. The company has been listed on AIM, a market of the London Stock Exchange, since 15 November 2006. As per December 18, 2007 the company is listed on Euronext Amsterdam in addition to the current AIM listing.
The company has a strong income bias in that it is committed to paying 90% of its FFO - Funds From Operations (A figure used by real estate investment trusts (REITs) to define the cash flow from their operations. It is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis)
NEPR now valued at 385 million euros is mainly invested in Sweden and Finland although it sees substantial opportunities in Russia and has just started to acquire properties in the area which should yield far more than their portfolio in the Nordic countries.
The share price has been hammered by the sentiment toward property companies shares and now stands at 0.81 euros just above the year low of 0.64 euros but well of the high of 1.31 euros. The interesting thing is that the company has recently agreed several large disposals in the Swedish and Finnish part of its portfolio which will give it substantial funds to either take up opportunities from overstretched investors or to return substantial funds to investors or both. All this is potentially good news for income seeking investors.
The other interesting thing is that one of the non executive director investors Ian Livingstone a non executive director clearly things that the shares are undervalued. He has purchased 3 million shares on a CFD (so he is borrowing money to purchase them) during the last week. To my mind if a director and one with the track record and experience is confident enough to put £2 million of his own cash on the line, then I'm happy to put a few grand into NEPR. Other Income Monkeys might also want to follow suit.
I hope that the next week sees more vindication of the new paradigm of investing. Remember fast buck capital growth is dead. Its all about the income. Get that right and the capital growth will look after itself.
Finally a request. Any Income Monkeys with income generating ideas of their own, please feel free to share them with the rest of us. Any genuine income generating tips featured will be rewarded with a organic Income Monkey banana signed personally by my own fair hand. So what are you waiting for.....
Anybody who took our ongoing advice about buying into commercial property shares might have just got in before the rush. The papers including the Financial Times have been full of stories over the last few weekends about how sentiment towards commercial property shares is just about to turn. The latest developments have been the talk of property vulture funds which are likely to herald a whole raft of takeover activity and speculation after February when they first start to appear.
The Income Monkey has already made several income generating share tips see previous postings on which income generating property shares to buy.
The bank have also had a rocky ride with the fall out in the sub prime market but again some kind of stability may have returned.
Those Income Monkeys that took my advice and bought Northern Rock PIBS rather than the shares should be showing a healthy capital profit and potentially with a semi private public rescue now proposed by the Government could be in line for a very healthy income over the next few years.
Retail stocks have been hammered, but whilst there is a likelihood that dividends on these shares could be cut in the short term those Income Monkeys that are prepared to take an 18 month view on these shares could start to see an improving situation and a recovering dividend yield and ultimately a good long-term investment opportunity.
So that’s the past but what about new opportunities. One income generating investment opportunity that has caught my attention and one that I have already have a holding in is Northern European Properties (NEPR).
Northern European Properties Limited is a Jersey incorporated company which invests in real estate opportunities in the Nordic and Baltic Regions and Baltic Russia. The company has been listed on AIM, a market of the London Stock Exchange, since 15 November 2006. As per December 18, 2007 the company is listed on Euronext Amsterdam in addition to the current AIM listing.
The company has a strong income bias in that it is committed to paying 90% of its FFO - Funds From Operations (A figure used by real estate investment trusts (REITs) to define the cash flow from their operations. It is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis)
NEPR now valued at 385 million euros is mainly invested in Sweden and Finland although it sees substantial opportunities in Russia and has just started to acquire properties in the area which should yield far more than their portfolio in the Nordic countries.
The share price has been hammered by the sentiment toward property companies shares and now stands at 0.81 euros just above the year low of 0.64 euros but well of the high of 1.31 euros. The interesting thing is that the company has recently agreed several large disposals in the Swedish and Finnish part of its portfolio which will give it substantial funds to either take up opportunities from overstretched investors or to return substantial funds to investors or both. All this is potentially good news for income seeking investors.
The other interesting thing is that one of the non executive director investors Ian Livingstone a non executive director clearly things that the shares are undervalued. He has purchased 3 million shares on a CFD (so he is borrowing money to purchase them) during the last week. To my mind if a director and one with the track record and experience is confident enough to put £2 million of his own cash on the line, then I'm happy to put a few grand into NEPR. Other Income Monkeys might also want to follow suit.
I hope that the next week sees more vindication of the new paradigm of investing. Remember fast buck capital growth is dead. Its all about the income. Get that right and the capital growth will look after itself.
Finally a request. Any Income Monkeys with income generating ideas of their own, please feel free to share them with the rest of us. Any genuine income generating tips featured will be rewarded with a organic Income Monkey banana signed personally by my own fair hand. So what are you waiting for.....
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