News

  • Park Group changes its name to Appreciate Group Plc.
  • Investec becomes joint broker to Litigation Capital Management
  • Peel Hunt is the third joint broker to Paragon
  • DWF announces it has hired 15 senior people in 2 months. They employ 3,200 people.

Urban Exposure – Tchenguiz Proposal

Share Price 56p

Mkt cap £90m

Conflict Disclosure: No Holding

  • Proposal I don’t recall a time when these non bank lenders have been so neglected by markets and the evidence is now starting to show.  Robert Tchenguiz’s R20 Advisory (which has a 12.6% stake) has released a proposal which Urban Exposure is evaluating.  This involves turning the company into a listed debt fund with the management company being spun out which would, they say reduce costs by £12-£13m p.a. thereby intending to close the 25% discount to NAV at which the shares trade. It also proposes to issue 100m shares at 35p, a discount of 60% to NAV with pre emption rights for existing holders and paying a 30p/share dividend which will largely be underwritten by Tchenguiz.
  • For Tchenguiz it appears he would get most of the management company for free (which may be loss making) and will underwrite the share issue at a 60% discount. For shareholders that take the dividend and reinvest in the share issue their position will effectively be putting in 5p/share and it will bring forward the profitability of the business by perhaps 1-2 years.
  • Estimates This year to Dec 2019 Liberum forecasts anticipate £2.1m adjusted pre tax loss, rising to 2m PBT in 2020 followed by £12.8m and £25m. The statement says the proposal would reduce costs by £12-£13m.
  • Conclusion This proposal is effectively arbitraging the impatience of the stock market. Shareholders with less than a 3 year view may find it attractive while those with a longer time horizon may not.  In 2022 the ROE is expected to be 13% when it may be reasonable to expect the share to trade at perhaps 1.5X book value which is 135p/share if this deal doesn’t happen. But today the proposal may result in a closing of the 25% discount to NAV.  So it not an overwhelming proposal. But it does put the company in play.

WH Ireland – H1 Results

Share Price 49p

Mkt Cap £21m

Conflict Disclosure: I consult for the company

  • Results Revenue down 11% to £11.36m and costs down 17% to £12.25m. Loss reduced from £2.1m to £1.35m.  At the segment level Wealth Management contributed £1.6m and Institutional broking contributed £349k while central costs amounted to £3.17m. Net assets are £7.4m while cash is £4.1m. The company announces an accelerated book build for £2.5m this morning. The outlook refers to further cost reductions and monthly profitability expected by the new financial year which is April 2019.
  • Estimates No forecasts in the market
  • Valuation The AUM of £2.3bn is 48% discretionary (£1.1bn). If this was valued at 3% that is £31m, 47% ahead of the current market cap.  Assuming institutional broking and the non discretionary AUM are worthless.
  • Conclusion It is possible the business won’t reach break even by April next year but the clear statement suggests the company may have visibility on that.  Or it is possible they may lose some more AUM on the way to profitability, but it appears if the company achieves its aspirations there is significant upside.

jeremy@charltonillingworth.co.uk