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What does the 79.1% shareholder think of Caledonian’s prospects?
Douglas Lowe, founder and executive chairman wrote in the 2016 Annual Report:
“The Registers of Scotland provide detailed figures up to Q3 2016 [on Scottish house prices] ……. Edinburgh recorded the second highest rise of 5.7%……. flats rose by 8.0% and anecdotal evidence indicates that price rises are very strong for refurbished flats and new flats. New flats, even those peripheral to the established residential areas, are obtaining prices of GBP340/ft to GBP360/ft, a rise of probably over 15% compared to last year. Agents report a strong and continuing market for such properties.
…………..The Group is starting to take advantage of a housing market which is stable in the Scottish Central belt and which I expect to remain stable over the next few years.”
But Douglas Lowe seems determined to release value for shareholders rather than expand the business:
“We will continue to invest in projects that require long-term planning work, but on a reduced scale. We will emphasise the completion and realisation of previously postponed development opportunities which can be built and marketed shortly, provided market conditions allow. We will seek to develop our major sites with the necessary consents and, for the largest projects, continue our analysis of innovative financial methods and joint ventures as appropriate.”
He does not think much of Mr Market’s valuation skills:
“The mid-market share price on 21 December 2016 was 85.5p, a not insignificant discount to the NAV of 152.88p as at 30 June 2016.”
And promises dividends when a high proportion of the portfolio has been sold:
“The Board does not recommend a final dividend, but intends to restore dividends when profitability and consideration for other opportunities and obligations permit.”
The bonanza scenario
There are two properties with potential to each be worth seven figure sums.
•The office block and car park at St Margaret’s House, central Edinburgh. This plot could be worth £11m or more (same as entire company MCap). It has planning for residential/student/hotel/offices.
•Parkland estate at Gartshore (120 acres of farmland + 80 acres policies and tree-lined parks + Georgian pigeonnier, etc.) There is potential here for at least 400 houses in a new village, only 7 miles from central Glasgow. Planning authorities and politicians are being lobbied, but planning permission may still be 3 – 4 years away. If it comes through these plots alone will be worth at least 2-3 times the current market capitalisation of the firm (I put this land at merely £2m in my conservative estimate of NCAV – see yesterday’s Newsletter).
Some additional indicators of a well-run company
They run this company on a small budget (total administration expenses of £635,000 in 2016, about 2% of assets), with their eye set on the long term.
At the last AGM I was impressed to find………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
