J Smart – its Cash, Land and Shares Division and its Construction Division

PUBLISHED: Jan 25 2019 @ 09:33 | Comments (0) |

J Smart (LSE:SMJ), as well as holding a large portfolio of industrial units and offices to rent out has very large sums stored in bank accounts, in stock market shares, in land and in half-finished buildings. I regard this capital allocation as if it were placed in a business largely separate from the core property holding division (see yesterday’s newsletter). Most of this money could be paid out to shareholders without much impact on the investment property holding division.

We can see from the table that the cash pile is very large, at £23.6m, for a business with a market capitalisation of £1.12 x 43.58 shares = £48.8m. It also has £1.1m in shares and another £1m in land. Working in progress property developments chip in another £7.6m.

Even after deducting an overdraft of £11.7m the company is left with £21.5m in these fully, or fairly, liquid assets.

£000s	2018	2017	2016	2015	2014	2013
Cash	23,586	26,524	26,785	26,047	16,802	15,157
Less overdraft	-11,858	-8,791	-12,628	-12,724	-8,732	-9,664
Net funds	11,728	17,733	14,157	13,323	8,070	5,493
Deposits of cash (3 month’s notice)	48	2,536	5,519	3,502	0	0
Listed company shares	1,099	1,000	326	337	0	3,817
Land held for development	972	2,372	1,953	1,908	1,796	1,708
Work in progress	7,641	172	420	3,402	3,683	11,644
TOTAL	21,488	23,813	22,375	22,472	13,549	22,662

(Land held for development and work in progress is valued at the lower of cost and net realisable value).

Yesterday I showed that J Smart had £69.5m of property with no debt in that part of the business, producing a net income of £3.7m. To this we can add £21.5m of net liquid assets.

But there is a third division which unfortunately is perennially loss-making, so we need to take that into account when judging the firm’s value.

The Construction division

This generally engages in building social housing, but only when a deal can be made with a housing association. Much of the time there is no project. The directors describe this industry as “competitive”.

So, despite having good

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