Caledonian Trust – doing well

PUBLISHED: Feb 07 2018 @ 09:51 | Comments (0) |

I first bought into Caledonian Trust (LSE:CNN), a Scottish property developer, in July 2013 at 70p after valuing the company at much more than its market capitalisation (£7.7m). My reasoning focused on the fact that the balance sheet failed to reflect the true market value of its properties. This was because most of the building sites were carried at cost, failing to allow for value uplifts due to gaining planning permission. Since then more planning permissions have been granted. Now, Mr Market seems to recognising some of the hidden value and the shares are trading at 180p – 195p (market capitalisation £21m – £23m).

The quirks of accounting practice, and thus the phenomenon of hidden value, was amply demonstrated by this week’s announcement that just one of its properties is to be sold for £15m. It was carried in the books at £5m.

(Previous Newsletters on Caledonian: 6^th – 12^th January 2015, 4^th – 6^th January 2016, 1 Feb 2016, 9^th – 11^th January 2017, 30^th January 2017, 26^th April 2017)

A recap

Caledonian was bought as a net current asset investment in 2013 based on the following:

The balance sheet showed investment properties (long term lets) of £8.1m, and a portfolio of properties (something like two dozen sites) described as for ‘trading’ (balance value £11.6m). The later were, and are, valued at the lower of cost or net realisable value – not open market value.
Total liabilities were £3.2m. There were a few small items, leaving NAV at £16.9m and net current asset value at £8.8m (this on the strictest approach to NCAV – if instead we count all property held by this company as current assets then NCAV moves close to NAV) .
The very experienced managers had spent the previous seven years intelligently adding value to the sites, rather than actually building on them and trying to flog the houses/offices during the Scottish property recession.
Going through each development site separately, noting that the majority had good planning consent, I concluded that true NCAV was much greater than shown in the balance sheet.

The 2015 valuation

By January 2015 the shares had almost doubled to 134p, givi

………………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

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Ltd. ADVFN Ltd does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.