YSP: Discount to Net Asset and Turning the Corner

hi cr, yeah some good points, but i think you may be missing a trick or two on this one

it appears the company has changed from an investment company to that of a trading company, if thats the case the implications for shareholders are immense, after holding the shares for 2 years and one day the holding is excempt from IHT and also enjoys 20% and 10% CGT liability after 1 year and 2 years on any gains after disposal of the shares(because its on AIM and is a trading company)

there arnt many products that gorden brown allows to avoid IHT and one that pays an income thrown in as well has that added attraction, if you throw in the 10% CGT liablity on any gain after 2 years its the icing on the cake.

regarding the results and valuing the company i think its worth looking at the cash that is being generated and the returns that are being made , returns on capital employed is a whopping 26% in the period reported.

some other pointers, the company appears to now be accounting for its tax liabilities this further reduces NAV of the shares, but its for the shareholders to see,(most pure investment companies dont pay tax on the gain until disposal) plus in the interims it also states it hasnt had its liverpool site revalued yet?? or including any of the land that may achieve planning consent

regarding the development side look at the return on the developed site at manchester and run that over the 100,000 sq/ft under construction add on more sites (as announced today it appears more are on the way) and could the profits be stepping up considerably ?

if you look at the serviced office side the company reported in the annual accounts that the rent increased by over 200% post refurishment and in the interims today they say the rent is up over 30% on the midlands site already.

the company also project managers its own sites and based over the last 12 months performance it knows how to extract value and produce a product , being the serviced office space, it can then enjoy rates of return that are well over the cost of producing the space in question,

say the company adds more and more centres and sells each one making the sort of profit from the manchester site and the midland location(already enjoying an increase according to the interims and its not finished and there is no inclusion for the land value)
but on selling then has a lease to operate a smart looking serviced office biz( have a look at the web site of the work at the midland site that has been completed , it looks grade A quality)it can roll this out throughout the uk generating cash , reinvesting back in the company , paying dividends and building a national company with what appears to be a quality product selling serviced office space and all the services that go with it and all at no dilution to shareholders, in fact the company has bought back shares this yearon top of paying dividends.

i think you need to value the development profits with one rating and the serviced office profits with another and factor in the growth prospects and if the company does produce the goods the CGT rate is 10% after 2 years (or nowt for your estate for IHT if your over the revenues threshold, if your unlucky enough not to enjoy it yourself)

final thoughts cr and with respect,do a bit of research on the non-execs of the company, the chairman was the chairman of colliers cre , other directors have a serious track record in development , have a look at the circular the company sent out to us shareholders last year which included the track record of the exec directors, its pretty good, look at the operating costs ,the company appears to be growing at quite a rate yet it is controlling its costs?

as i said at the start cr, you have some good points but on this one it appears you may be short on your research, have a look at regus they have a £1bill market cap , but assets of just over £100m, that may help you make the call on valuing the potential profits from the services operation.

well done for making 200% on selling out a quid, you seem to be able to find the stocks, any other tips for us mere mortals??