CLS Holdings - strong results. EPRA NAV +17% to 286p. Mkt cap £900m

Wednesday, Mar 07 2018 by
3

CLS holdings : EPRA NAV 286p. Share price 241p. 16% discount to NAV

Strong results today from CLS Holdings. THe EPRA NAV, which is a standardised way of looking at the Net Aseet Value which includes marking debt to market, dilutive effect of share options etc rose 17% to 286p / share.

I like the company because it focuses on higher yielding regional offices, often with shorter leases and employs an active management strategy. Its properties are much less at risk from disintermediation from the internet than regional shops. Buying high yielding properties generates more cash flow per unit up front via rents and gives greater protection if yields shift outwards.

Today's results are a continuation of the strategy it has employed for many years. The difference between CLS a and the major real estate companies is that the Mordstet family own just under 58% (Sten owns 51%, Bengt 7%). Decisions are made for the long term health of the business, not just to hit some LTIP target!

The portfolio is worth £1753m, with PPE a further £103m and a corporate bond portfolio worth £121. The properties have an initial yield of 5.2% despite higher vacancies post sales and purchases. The spread of assets is 52% UK (61% in 2016), 32% Germany and France 16%

Sales were £240m during the year (£144m for Vauxhall Sq) and purchases of £239m were made, mainly in German offices. As as result of refurbishing some offices and buying some offices with vacant space (av 9% vacancy in purchased offices) the overall vacancy rate has risen to 5.9% from 2.9%. However the Group has shown skill in leasing up vacant space so I see this as an opportunity.

Gross debt is £914m. The group has a cost of debt of 2.51% of which 74% is fixed for an average of 4.2yrs. So it is well protected from rising interest rates. LTV is 36% so not hugely leveraged. Interest cover is 3.7x.

My view
I have put my faith and £££ with a proven management team, who aim to deliver value throughout the cycle and are not afraid to reposition the portfolio for the longer term good. The discount has narrowed to 16% to EPRA NAV when it was over 50% post Brexit. The business is now roughly 50% UK,…

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CLS Holdings plc is a United Kingdom-based investment property company. The Company is principally involved in the investment, management and development of commercial properties, and in other investments. The Company's business activity is the investment in commercial real estate across four European regions, such as London, the rest of the United Kingdom, Germany and France with a focus on providing offices in key European cities. The Company operates through two operating segments, which include Investment Property and Other Investments. It manages the Investment Property division on a geographical basis due to its size and geographical diversity. Its Investment Property segment includes London, rest of the United Kingdom, France, Germany and Sweden. Other Investments segment comprises the hotel at Spring Mews, corporate bonds, shares in Catena AB and First Camp Sverige Holding AB, and other small corporate investments. more »

LSE Price
220p
Change
-1.4%
Mkt Cap (£m)
896.3
P/E (fwd)
15.8
Yield (fwd)
3.3



  Is LON:CLI fundamentally strong or weak? Find out More »


5 Posts on this Thread show/hide all

jonno 7th Mar '18 1 of 5

Good resume VegPatch. I also continue to hold CLS Holdings (LON:CLI). An adeptly managed and differentiated property play. Thank you for alerting me to the company, a year so ago.

All the best

Jonno

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VegPatch 7th Mar '18 2 of 5

A pleasure - it has been a good performer

certainly differentiated and i love it that management has proper skin in the game and a long track record of shareholder value creation. ticks many boxes for me

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VegPatch 7th Mar '18 3 of 5

FWIW Peel Hunt expecting to upgrade NAV to 300p for this yr

Given historic levels of value creation (NAV growth) eg leasing up vacant space which gets reflected in increased value plus some balance sheet gearing I think CLS will exceed this.

I think 310-320p NAV forecast for 2018 is more reasonable.

(This is purely my view and should not be relied upon.)

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andrea34l 7th Mar '18 4 of 5

I am also a happy holder of CLS Holdings (LON:CLI) ... and will top up on any general-market dip. I think they are one of the most promising companies in the sector and, as you state, the increasing move into a broader spread of European opportunities only adds to the appeal.

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gordon crosson 14th Mar 5 of 5

Looks to me like a cup and handle has formed too, on both weekly and daily charts. Very bullish sign.

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