I bought some FPO yesterday. One point I haven't noticed in recent remarks, is the tenant concentration for Group Properties. From the latest interims presentation, the top two tenants by rental income are Asseco S.A. with 29.36%, and Citibank Europe Plc with 12.32%. The top 10 tenants account for 71.31%. There's some info about Asseco on Wikipedia https://en.wikipedia.org/wiki/Asseco including "The company was ranked sixth in the Truffle 100 ranking of the largest software producers in Europe.".
If Asseco couldn't pay the rent for some reason, maybe First Property could find new tenants fairly quickly, but really I don't know how bad it could be., except I suppose no more than about 30% of Group Properties rent would be lost for some period. Apart from the tenant exposure, First Property seems like a good combination of safety, growth and value, so far as I can tell as an FPO newbie.
recurring theme of the small-cap companies I cover is the number of repeat buying opportunities they offer. As long as the rationale for making the original investment still holds, and the valuation is favourable, then it makes sense to exploit share price pullbacks.
A great example is Aim-traded UK and eastern European property fund manager and investor First Property (FPO:45p). I first recommended buying the shares at 18.5p in my 2011 Bargain Shares Portfolio, since when the board has paid out total dividends of 8.84p a share. So, if you had invested £1,850 to buy 10,000 shares seven years ago, and reinvested your dividends by purchasing more shares in the market, you would now be holding 13,400 shares worth £6,000. Thats a healthy annualised return of 18.2 per cent during the seven-year holding period. I have noted, though, that First Propertys share price has drifted from the 53p level it was at when the company issued interim results in late November and also when I rated them a buy in the autumn (Trading plays, 9 October 2017). But the results certainly didnt disappoint.
Reported pre-tax profits increased by 11 per cent to £5m in the six months to end September 2017, buoyed by a near-two-thirds increase in management fee income to £1.5m and a rock solid contribution from the companys £172m portfolio of 10 high-yielding commercial properties in Poland and Romania. These properties have a loan-to-value of 68 per cent and produce an average yield of 9.8 per cent, well in excess of the 2.46 per cent weighted average cost on non-recourse borrowing. The company also holds stakes in 10 co-investments it manages, and successfully too. For instance, a couple of years ago First Property invested 1m (£0.9m) for a 24 per cent shareholding in a Romanian fund and has just banked a £400,000 gain following the sale of nine Lidl supermarkets by the fund.
Management is proving adept at winning new mandates too. Third-party assets under management have risen 22 per cent to £382m since March 2017, the majority of the growth reflecting £51m of new investments made on behalf of Fprop Offices LP, a fund launched last summer to invest in office blocks and business parks across England. It has the backing of eight institutional investors, who invested £182m at first close, and with gearing the fund has buying power of £260m. First Property is taking a profit share, rather than a management fee, which property analyst Chris Thomas at house broker Arden Partners thinks could be in excess of £1m once the fund is fully invested.
The point is that the fast-growing fund management business is effectively in the price for free, with First Propertys shares trading on an unwarranted 12 per cent discount to net asset value (NAV) of 51.25p a share. Thats even more anomalous once you consider the impressive track record of the directors. Under the shrewd leadership of chief executive Ben Habib, First Propertys NAV per share has risen from 14p to 51.25p in the seven years since I initiated coverage, and shareholders have been rewarded with a payout that has grown by half based on a full-year dividend per share of 1.62p.
Furthermore, because recurring earnings per share (EPS) of 5.9p covers that payout more than three times over, there is built-in NAV growth from the retained profits, as illustrated by the wide gap between First Propertys 13.1 per cent earnings yield (the reciprocal of the PE ratio of 7.6), and the prospective dividend yield of 3.6 per cent. Add to that scope for the directors to use some of the £10m free cash on the companys balance sheet to finance the equity element of earnings-accretive debt-funded property acquisitions, and I feel that First Propertys shares are well worth buying at this level. Buy.
Dont know why these ever drifted lower,this is the best property company by far.
These results are a product of the managements hard work and they have done very well to build this company up.
They look a fantastic set of results and I notice that the book value of assets is about £21000000 less than market value as they hold stuff on the books in a conservative manner.
All in all very happy to hold and buy at this point.In my mind these should be around 61-64 pence.
FPO today announced a mandate to managed £180m of property into the UK.
It is possible the size could increase to closer to £400m by the end of the year.
Property FUM now up to 750m within 12 mths so I investors will start to think of this mgt team as managing £1bn of property - i..e a significant player.
I think it reasonable to assume an extra recurring PBT of well above >10m.
Current MV of 60m with a strong track record!!
This deal explains why the CEO presented the FUM first, despite being much smaller, in that recent presentation they have just doubled the size of their AUM impressive and no ceiling in sight given their track record.
Interestingly they have opted not to have fees re the FUM but to have a profit share so they must think that they can make more money than say fees of 1% p.a. on 400m of property mgt.(and they have skin in the game and a good track record).
And of course FUM is in many ways a much more attractive, and low capital, business than high yielding property ownership.
To me the really interesting bit (a deal changer) about this announcement is that it significantly de-risks the company. By de-risking I mean it takes it towards a much more evenly balanced business between the UK and overseas which ultimately gives stability. Before I feel it was rated by the market as high profits but lowly rated because of the risk re FX and high yielding over seas property. This now provides security and an even balance to GBP FX exposure. The hold held thrust of the company is to have a recurring dividend so now FPO firmly holds the prospect of long term sustainable divi growth from the current 3% yield.
CEO Ben Habib and Director, Business Development Jeremy Barkes talk about the new £180 million UK office fund.
The fund 00:26
The opportunity 1:06
The payment structure 1:39
The wider portfolio 2:15
The future 3:19
First Property Group plc
Fprop retains its No.1 ranking versus MSCI CEE Benchmark
First Property Group plc (AIM: FPO), the property fund manager and investor, is pleased to announce that it has retained its position as the best performing fund manager versus MSCI's Central and Eastern European (CEE) Benchmark, now for the eleven years to 31 December 2016.
First Property is also the best performing fund manager over the annualised periods from the commencement of its operations in Poland in 2005 to the end of each of the years from 31 December 2008.
For the year to 31 December 2016 it ranked second out of nineteen contributors.
MSCI is a leading provider of research-based indices and analytics. Performance is determined strictly in accordance with MSCI's globally defined data standards and performance measurement procedures, and is based upon independently verified direct real estate investment performance.
Today's announcement follows the recent news that First Property's UK Pension Property Portfolio LP was awarded best "Small Specialist Fund" by MSCI as part of its annual UK Property Investment Awards 2017. The measurement period for the award was over the three years to 31 December 2016, during which time the annualised total return earned by the fund, which is unleveraged, was 8.9%.
Commenting on the Group's ranking in CEE, Ben Habib, Chief Executive, said:
"I am delighted to have retained our number one spot in CEE for the eleventh straight year. We have no intention of resting on our laurels and will continue to focus on providing consistently high investment returns for clients and shareholders."
First Property Group plc ("First Property", "the Company" or the "Group")
First Property Group plc
First Property wins two prestigious awards from MSCI
First Property Group plc (AIM: FPO), the property fund manager and investor, is pleased to announce that its fund, UK Pension Property Portfolio LP (UK PPP LP), has been awarded best "Small Specialist Fund" by MSCI as part of its annual UK Property Investment Awards 2017. The measurement period for the award was over the three years to 31 December 2016, during which the annualised total return earned by the fund, which is unleveraged, was 8.9%.
In addition, First Property Asset Management Ltd was one of ten fund managers, out of a pool of 95 such managers, to be awarded a Data Quality Award. This award recognises data-management efficiency, governance and transparency.
MSCI Inc, is a leading provider of research-based indexes and analytics. The awards, established in association with the Investment Property Forum (IPF), are determined strictly in accordance with MSCI's globally defined data standards and performance measurement procedures, and are based upon independently verified direct real estate investment performance.
Commenting on the awards, Ben Habib, Group Chief Executive, said:
"I am delighted to receive this recognition from such a respected organisation as MSCI. It is testament to our disciplined investment process and the timely and efficient manner in which we manage properties and report on them."
Introduction - 00:24
Investment philosophy - 01:26
History of the company 2001 - 04:10
History of the company 2005 - 05:23
History of the company 2008 - 07:2
History of the company 2009 - 09:19
History of the company 2013 - 10:23
History of the company 2016 - 12:53
Results of thinking from first principals - 15:26
Track record - 16:13
Looking ahead - 17:22
Q&A, changing work habits - 19:32
Q&A, London price - 22:03
Q&A, how much portfolio is outside the UK? - 25:21
Q&A, leverage - 26:54
Q&A, why invest in the UK? - 30:22
I see FX as being positive relative to the half year results ( at the interim stage gbppln was 5.75 at 31mar2016 it was 5.41 , the interim fx hit was also down to the euro debt and this fx move was not repeated), and the indication is valuations are also positive , I think there will be a nice boost to the market value nav to maybe around 46p-50p , the asset manager business also has increasing additional bonus value, I think the shares are heavy as pistoia have been offloading some but below 40p these are too cheap and it would make a lot of sense to do a buyback with some of the spare cash on hand ,
the only reason I can think of for the fall off is that pistoia are selling and there is no liquidity, I think we will see it go back up after the finals are out, which they confirmed should have no nasty surprises ...
Any clues as to the recent drop. Recent forecast for Year End below expectation? Brexit weighing down on this. I'm certain it will come back; great fundamentals with superb management team but would appreciate anyones thoughts.
Read Arden Partners's note on FIRST PROPERTY GROUP PLC, out this morning, by visiting https://www.research-tree.com/companies/uk/asset_management/first_property_group_plc
"First Property (Fprop) has announced that trading and profit before tax for the year to 31 March 2016 are expected to be in line with market expectations "
First Property (Fprop) has announced that, in conjunction with a club of investors, it has acquired a new shopping centre in Swinoujscie, northern Poland at a cost of 24.08 million. The net operating income being generated by the properties is currently 1.89 million per annum, equating to a net yield of 7.85% per annum. The weighted average unexpired lease term is 4.5 years.
Full note at www.research-tree.com
Excellent business. Moves from strength to strength, their investments always pay off and with an ever increasing divi thrown in. Can't understand how it has been under the radar for so many years.
With the amount of profit they generate their SP still looks cheap.
These guys are doing a great job , they have done some great deals that have produced huge IRR returns and yet the management part of this business is valued at zero by the market, it is a way better run company than all the reits and yet unlike them it trades very cheaply and has a management company thrown in for free ...
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