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Shares in AIM listed UK and Central Europe commercial property fund manager First Property (LSE:FPO) were recommended on t1ps, the website I founded in 2000 and edited until I left in September to set up the Nifty Fifty, at 19.25p in May 2008. They presently trade at 19p and thus, though the company has paid out 4.82p per share in dividends since the initial share tip, this has not been a stellar recommendation – but far from disastrous either. Ahead of results from the company for the six months ended 30th September 2012 – due a week today (on 5th December) – the following takes a look at the current position here…
At its AGM on 14th September, the company reported continuing good performance despite the difficult banking and economic conditions. This follows a strong track-record – with the company largely exiting the UK market at a high point in 2005 and shifting its investment focus to Poland – the only EU country to have avoided recession during the worst of the global economic downturn. The company’s investment performance is ranked first versus the independent Investment Property Databank’s Central-Eastern Europe universe over the three, four, five and six years to end December 2008, 2009, 2010 and 2011 and it has now also returned to the UK following yield adjustments “substantial enough to make opportunistic acquisitions of investment property an attractive proposition”.
The AGM update emphasised that First is working on growing its business through expanding assets under management to invest in Poland, raising a new fund to invest in relatively high yielding UK commercial property and raising a new fund to invest in debt secured on income-producing UK commercial property. It added that the company is “making progress in raising new funds and hope to report further in this respect in due course. We are also working on some attractive property investment opportunities and similarly hope to report on these in due course”.
It will be interesting to see what the results statement reports on these aspects. Results for the company’s year ended 31st March 2012 showed a pre-tax profit of £3.97 million and net attributable assets of £17.09 million. A current market cap of £21.1 million doesn’t look particularly demanding in this context and a projected increased dividend for the current year as a whole of 1.1p per share (£1.22 million) leaves the shares offering highly attractive yield of 5.8%. Given that dividends are well covered by bankable earnings (from fund management) and the strong net cash position the dividend is pretty safe.
Thus, ahead of next week’s results statement, it might well be worth a small nibble for income.
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I like FPO a lot as a company but feel you should include thoughts on the USS contract. This expires in 2015 (63.9% of their AUM) and without it, those profits will be much much much lower. This should be factored into valuation (big time!). TNAV obviously provides some downside protection but I guess Polish property would trade at a significant discount if USS do not renew…
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