However, there are good reasons to belive the consolidation period is now over. In fact, having successfully retested the summer low of 35p at the end of last month, coinciding with a test of the 200-day moving average, and regained the 20-day exponential moving average, I feel the price action is indicative of a base formation which is solid enough to warrant a rally back to this year's highs.
The fundamentals are supportive of such a move: the shares are only trading marginally above adjusted book value per share of 35.75p, offer a historic dividend yield of 3.4 per cent and are priced on less than 8 times EPS of 4.9p for the 2016 fiscal year, according to analyst Chris Thomas at broking house Arden Partners. Or put it another way with the shares being rated on an earnings yield of 12.4 per cent and the dividend yield 3.4 per cent, then the difference is the accretion to net asset value, a sum worth 3.5p a share in the current fiscal year.
And recurring revenue streams are solid as having made a number of smart looking property deals, mainly in Poland in the past couple of years, First Property has successfully replaced all the lost income following the scheduled winding up of the USS Fprop Managed Property in August. Since November 2013, the company has made nine high yielding property investments with a total value of €137m (£101m) of which eight have been from the USS Frop fund. In turn, this has created a substantial recurring profit stream.
Moreover, First Property has ample cash (about £12m) available on its balance sheet to part fund further earnings accretive and debt financed acquisitions. Importantly, the macro environment in its eastern European property space remains positive to do so: economic growth in Poland, Europe's sixth largest economy, is forecast to match last year's 3.4 per cent growth rate this year and next; rent levels for commercial property look sustainable; and capital values offer yields of between 2 and 3 per cent more than equivalent property in Western Europe, thus underpinning investment demand. First Property's own Polish properties have a reversionary yield of around 9 per cent, thus offering scope for yield compression.
It's worth noting too that Poland is the largest recipient of the EU Cohesion policy budget and will receive over €77bn between 2014 and 2020. It has also seen large foreign direct investment from multi-nationals including Dell, Carrefour, Tesco, and IKEA.
So with both the technical and fundamental case for investing strong, I rate First Property's shares a very decent buy on a bid-offer spread of 38.5p to 39.5p ahead of interim results due out on Thursday, 26 November 2015. My target price is 49p. Buy.
MORE FROM SIMON THOMPSON...
I have published articles on the following companies in the past fortnight:
■ Trakm8: Run profits at 195p, target 220p; Character Group: Run profits at 518p, target 575p; Marwyn Value Investors: Buy at 220p; Global Energy Development: Speculative buy at 30p; Software Radio Technology: Buy at 27p, target range 40p to 43p; Globo: Buy at 33p, target 69p; Pittards: Hold at 105p ('Cashed up for cash returns, 22 Sep 2015).
■ KBC Advanced Technologies: Buy at 112p, initial target 142p; K3 Business Technology: Run profits at 298p; Cenkos Securities: Buy at 177p; Netplay TV: Buy at 10p ('Small cap value plays', 23 Sep 2015).
■ Miton: Buy at 26.5p, target 35p; 32Red: Buy at 73.75p, target 90p; Stanley Gibbons: Buy at 138p; Vislink: Buy at 40p, target 70p ('Building momentum', 29 Sep 2015)
■ Moss Bros: Buy at 97p, target 120p; GLI Finance: Buy at 52p, target 80p; Town Centre Securities: Buy at 315p, target 350p; Globo: Buy at 39p, target 69p (‘Platforms for success’, 30 September 2015)
■ Safestyle: Run profits at 255p; Epwin: Run profits at 138p; Manx Telecom: Buy at 188p, target 210p (‘Income plays with capital upside’, 1 October 2015)
■ LXB Retail Properties: Buy at 86p, target 99p ('Bag a retail property bargain', 5 October 2015)
■ Creston: Run profits at 162p, target 171p; Fairpoint: Run profits at 184p, new target range 200p to 220p; Trifast: Buy at 114p, target 140p; 600 Group: Buy at 16p, target 24p; Renew Holdings: Buy at 315p, target range 350p to 375p; Stanley Gibbons: Hold at 105p ('Engineering ratings upgrades', 6 October 2015)
■ STM Group: Buy at 71p, target 80p ('Riding small cap winners', 7 October 2015)
■ First Property Group: Buy at 39.5p, target 49p ('In pole position for re-rating', 7 October 2015)
■ Tristel: Run profits at 99p, target 110p ('Cleaning up with superbug buster', 7 October 2015)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking'
