Sutton Harbour (SUH) is a work in progress that has passed below the radar of many investors. It says something that the primary regenerator of Plymouth's harbour seafront is still classified as part of the industrial transportation rather than real estate sector. However, within the harbour front, the multi-story car park, the fish market and the closed airport it owns, there is some serious value that has yet to be reflected in the share price.
- Big discount to book value
- Fast-growing fish market
- Unrealised profit locked in closed airport
- Second marina coming on stream
- No dividend
- Protracted development pipeline
Plymouth is steeped in history, and yet this is not being exploited to the extent that it could be. Sutton Harbour has been steadily improving the water front and marina facilities there, starting with the installation of a lock gate in the harbour. This enabled a transformation from a tidal basin into a yachting marina. Mooring fees are about at the top end of what is charged in the south-west, but are still around half what is charged further up the coast towards Brighton. Occupancy levels are near to full, and another marina at King Point has recently been developed, and is already more than half full. A new and very popular restaurant is also operating there.
Chief executive Jason Schofield admits that there is still plenty to do towards making the waterfront an all-inclusive, joined-up experience. In fact, it will probably take another six years before all the entry points and all-round accessibility aspects are brought up to scratch. New lettings of vacant space proceed apace, but there is plenty of further potential, with occupancy rates currently at 86.4 per cent.
There are other revenue streams and potential financial gains to consider, too. The fisheries complex is the second largest of its kind in England and will benefit from £1.2m of infrastructure investment in coming years. Despite the horrific storms that battered the south coast earlier this year, the value of fish landed remained broadly flat. The auction system it operates has attracted fish landed elsewhere to be driven by road to take advantage of the key pricing system in place. All fish landed or delivered attract a commission payable to Sutton Harbour. Parking is also restricted in the area, so the group's car park has seen gross revenue up nearly 8 per cent in the year to March, and further developments on the harbour front are expected to boost demand for parking space still further.
| SUTTON HARBOUR (SUH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 31p | MARKET VALUE: | £30m | |
| TOUCH: | 30-32p | 12-MONTH HIGH: | 35p | LOW: 23p |
| FORWARD DIVIDEND YIELD: | nil | FORWARD PE RATIO: | 84 | |
| NET ASSET VALUE: | 40p | NET DEBT: | 52% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 9.9 | 1.7 | 1.7 | nil |
| 2013 | 7.0 | 0.7 | 0.6 | nil |
| 2014 | 7.0 | 0.3 | 0.2 | nil |
| 2015* | 6.8 | 0.4 | 0.3 | nil |
| 2016* | 7.0 | 0.5 | 0.4 | nil |
| % change | +3 | +29 | +28 | - |
Normal market size: 1,500 Market makers: 4 Beta: 0.23 *Arden Partners forecasts, adjusted pre-tax profits and EPS | ||||
A subject of considerable local controversy, the former airport - closed three years ago - now looks destined for redevelopment at some stage, and the 113-acre site is currently subject to a full planning application which, if successful, will almost certainly be developed to help meet the current housing shortage. Of the proceeds generated, Sutton Harbour is entitled to one quarter.
The major attraction with shares in Sutton Harbour is that very little of all this is reflected in the share price. The latest total estate portfolio valuation rose at the March year-end to £38.5m, far more than the group's market value of around £30m, despite the significant development potential.
