CLS Holdings: 219p             Mkt Cap £873m

CLS reported half year results today.Over the last 12 months the EPRA NAV has risen by 18% and now stands at 268p. At 219p the shares are at an 18% discount to the EPRA NAV, which is below the average 30% discount over time.  

This remains a family controlled and run business but where it employs some seriously talented property managers. In contrast to the UK majors like British Land (LON:BLND) or Land Securities (LON:LAND), CLS does not buy and hold. Instead it buys non prime commercial property  at high yields and sells at low yields. Simples!  It has been quoted in London since 1994 and sticks to its knitting.

Here is its recent portfolio activity over the last 6 months (my highlighting below)

Disposals of £179.3 million at a net initial yield of 2.1% generated profits before tax of £41.7 million, including £41.5 million at Vauxhall Square sold for £144.1 million

· £209.6 million of acquisitions exchanged since 1 January 2017 at a net initial yield of 6.6%, of which £46.6 million completed by 30 June 2017; £133.7 million portfolio of 12 properties in Germany due to complete in the third quarter of 2017.

The current mix of properties, accounting for the German office acquisition is 58% in the UK with c6% yield, 31% Germany with 6.1% yield, 16% France with a 5.7% yield.  On top of this there is a corporate bond portfolio

The Group remains approriately financed with Gearing down to 35% (31 December 2016: 43.7%), and loan-to-value ratio 48.8% (31 December 2016: 49.8%)

  Interest cover high at 3.7 times (2016: 3.6 times)

·      Weighted average cost of debt remains low at 2.94% (31 December 2016: 2.91%)

·      Refinanced £76.6 million of loans at an average all-in rate of 2.05% and, since 1 July, refinanced a further £16.6 million at an average 2.1%

·      70% of loan portfolio at fixed rates (31 December 2016: 67%)

My view

I first bought into CLS post the BREXIT vote where I felt the share price reaction was an absurd overreaction rather than a considered investment decision. More here:

The obvious anomaly has now closed, but I remain invested as i feel this is a class management team that doesnt remain…

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