I’ve added another fund to my watchlist today, Stenprop. This is a UK listed operator of multi let industrial (MLI) properties in the UK. Crucially this is a fund in transition, having sold down most of its international (mostly European) assets to focus on the UK MLI space which it reckons is more appealing on a risk return basis.
The share price is currently 97p, on a discount of 30% which has widened in recent weeks. Year to date the shares are down 23% while NAV YTD is up 3.2%. In simple terms, if a recovery does happen in the UK domestic economy, my hunch is that MLI industrial assets will be an excellent place to be, especiall if the government lives up to its ‘levelling up’ agenda. The downside is also obvious – continuing corona virus chaos and defaulting industrial and commercial clients.
This week the management updated on the current state of the market. They’ve received “received 73% of total rent invoiced and due for the aggregate quarter ending 24 June and for April. This is broken down as 79% of all rent invoiced was for the quarter commencing 25 March and ending 24 June, of which 77% was paid by 15 April; and 21% of all rent invoiced was for April 2020, of which 56% was paid by 15 April.”
In terms of gearing, the overall loan-to-value ratio (LTV) stands at approximately 40.7% based on September 2019 valuations, adjusted for acquisitions and disposals. According to Numis’ report on the numbers “ when unrestricted cash of £60m is deducted from loans, the LTV falls to 29.6%, which combines with significant headroom in banking covenants”.
Numis also reports that Stenprop’s share price has been hit harder than its industrial peers (Warehouse REIT and Urban Logistics REIT) where price total returns have been -7.5% and -10.9%, respectively, and discounts to NAV of 4.8% and 4.0% are significantly narrower.
STP has a large amount of cash on the balance sheet after selling its European assets which should come in handy during this downturn and allow the managers to increase their weighting to these MLI assets which are currently 57% of the portfolio. I rate this a long term buy.
Sticking with the subject of watchlists I thought I’d share a note from Peel Hunt from this week which identifies companies they believe will emerge in a “stronger competitive position with greater growth opportunities post COVID-19″. The key themes that have driven the selection are:
- Focus on risk rather than price in supply chains
- Acceleration in technology adoption
- Companies with strong balance sheets
- Material impact on competitors
- Sectors with significantly increased government spending
- Companies focused on opportunity rather than survival
- Management and companies that recognise the importance of ‘doing the right thing’
The note concentrates on only those businesses where Peel hunt is “highly confident” of a strong competitive position. The list is below:
- Consumer – Hilton Foods, Inspecs
- Financials – Impax, Integrafin, Manolete, Paragon
- Healthcare – Abcam, Hikma
- Housebuilders – Marshalls, Volution
- Industrials – Avon Rubber, Bodycote, Coats
- Leisure – Dominos
- Media – 4imprint, Autotrader
- Real Estate – Assura, PHP, London Metric SEGRO, Warehouse REIT
- Retail – ASOS, Dunelm, DJ Sports
- Support Services – Balfour Beatty, Rentokil, Serco, Speedy Hire
- Technology – Boku, Gamma, Ocado, Softcat