Basically a REIT with a big bank loan and property investments in Europe.
Total liabilities = £243m.
Total Assets = £346m
Latest half yearly report here :
http://www.rns-pdf.londonstockexchange.com/rns/7260R_-2010-8...
i.e. Equity at £103m
Market cap currently around £30m.
Unless property in Europe continues to dive (which isn't impossible) should be a good if not great investment.
Hi Nigelpm,
I am looking to increase my exposure to real-estate, so read your post with interest. The link in the header should read: http://www.rns-pdf.londonstockexchange.com/rns/7260R_-2010-8-26.pdf
In assessing a property investment, we have to look a little beyond the NAV. In a highly geared play like this, the NAV is very vulnerable to mark-downs in property valuations, as we've seen in recent times. So, the first question I ask is: am I getting an income that comfortably pays for the debt interest and leaves a good return for the investor?
From the interims, net rental income for the half year is £18.4m. Admin expenses knock £4.4m off, leaving £14.0m. Net finance expense is £10.0m. Well, ISTM that this would be rather vulnerable to a rise in EURIBOR. I note that loans are all with Lloyds Banking Group, in sterling at a rate of EURIBOR + 2.25 to 2.75% p.a. Though Matrix uses interest rate swaps to hedge against short term interest rate rises, these don't provide indefinite protection.
Interest rate rises would cause a double whammy, not only reducing net income but also (possibly) reducing property valuations, as investors seek higher rental yields to make the investment worthwhile vs bond yields.
A furher complication is that the investments and income are denominated in Euros whereas the debt is sterling. Again, Matrix has hedges in place but this is a complicating factor, in the event of problems with the Euro (IMO 2011 will be a year of considerable turbulence for the Euro*)
There certainly could be value in Matrix and I note:
Shortly after the period end the Board was pleased to be able to
announce the reinstatement of the dividend, at a rate equivalent to 8
pence per annum, which is fully covered, and indicative of the Board’s
confidence in the long-term stability of the Group following the
substantial measures undertaken over the past year.
which is highly attractive at the current SP.
However, personally, I am looking for less highly geared property investments, providing a safer, steady yield. haven't seen many of those so far, so am prepared to be patient...
Cheers,
Mark
*IMO the current situation of the Euro is unsustainable. Without fiscal as well as monetary union, I can't see how the tensions between the PIIGS and Germany can be resolved. The PIIGS need to devalue/default to get their debts to sustainable levels but Euro devaluation is unacceptable (and consitutionally prohibited) to Germany. Extreme austerity alone is no solution, as it will destroy the possibility of growing out of the debts, leaving the interest burden unsustainable. Ireland's dire situation (with a worsening "double dip") illustrates what happens if you simply try to cut without otherwise relieving the debt burden. Some form of break -up of the Euro seems inevitable to me - and until the denouement, instability in the Euro market seems highly likely to me.
