Compared with previous earnings releases, the interim statement from publicity-shy Mountview Estates (MTVW) was a veritable mine of information. That's because the residential landlord succumbed to shareholder pressure and agreed to have its trading properties revalued. This revealed that trading stock, presented at £318m on the books, is now worth £666m. This, combined with a 52 per cent increase in gross profits to £24m, gave the perennially cautious management team little choice but to double the interim dividend.
Mountview buys tenanted property at a discount, then sells it when it becomes vacant - typically because the tenant dies. This crystallises significant locked-in value, but there is a snag: the portfolio of properties is let on contracts signed before the rent reform laws signed more than 25 years ago. No so-called 'regulated tenancies' have been created since 1988, so the market is finite and shrinking. And because rising property values have made owning these tenancies that much more attractive, so the competition to buy them has increased markedly.
The company's reported book value rose 11 per cent year on year to £71. But add in the surplus value in the revalued trading stock and that book value rises to £160. This represents the company's current adjusted book value - equivalent to the triple NAV at Grainger (GRI) - and does not include the reversionary value due to be crystallised when tenants vacate.
| MOUNTVIEW ESTATES (MTVW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 9,250p | MARKET VALUE: | £361m | |
| TOUCH: | 9,200-9,250p | 12-MONTH HIGH: | 9,400p | LOW: 6,675p |
| DIVIDEND YIELD: | 2.7% | TRADING PROP: | £318m | |
| PREMIUM TO NAV: | 30% | |||
| INVESTMENT PROP: | £29.3m | NET DEBT: | 23% | |
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 6,410 | 13.2 | 276 | 50 |
| 2014 | 7,100 | 20.8 | 428 | 100 |
| % change | +11 | +58 | +55 | +100 |
Ex-div: 19 Feb Payment: 30 Mar | ||||
