Shareholders can either opt for a cash dividend or redeemable 'B' shares, or a combination of the two. The B shares will be treated as capital for UK tax purposes. The shares will be marked ex-dividend at 7am on 26 May and shareholders have until 1pm on 27 May to send in their instructions. The default option is the cash dividend which will be payable to all shareholders unless they elect otherwise. If you have any doubt how to complete your election form for the capital return then registrar Capita Asset Services can be contacted on 0371 664 0321. Cheques for the cash dividend and B share redemption will be dispatched no later than 9 June 2016.
The reason why LXB can afford to make such a thumping cash return is because the company has just received £65.2m of initial cash proceeds from the completion of Rushden Lakes, a major new leisure and shopping destination in Northamptonshire, that was pre-sold to The Crown Estate in April 2015. I reckon the valuation uplift on that scheme will add around 10p a share to the company's end September 2015 net asset value of 103.7p and so underpins a significant proportion of the 16.3p a share increase in net asset value which analysts at Stifel Europe predict in the financial year to end September 2016. These are tax free gains, too, as Jersey has a zero corporate tax rate, so shareholders are getting the full benefit of this value creation.
I explained the rational for the expected valuation uplifts in quite some detail at the start of the year when I rated LXB shares a strong buy at 97p ('Hot property', 7 Jan 2016), having initiated coverage seven months ago when the shares were trading at 86p ('Bag a retail property bargain, 6 Oct 2015).
I still believe there is significant share price upside and with good reason. That's because once you strip out the cash return from LXB's current share price then in effect the shares are being priced 29 per cent below forward net asset value post the capital return. That hefty share price discount is overly harsh considering that the company will have a largely ungeared balance sheet after returning the £64m, and a spot net asset value currently somewhere between 117p to 120p a share, according to my calculations.
At the end of September 2015, LXB had net borrowings of £48m, but since that date it has received a cash inflow in excess of £106m from property sales of which it spent £6.5m on net asset value accretive share buy backs in January this year. And that cashflow excludes a further cash receipt, which is estimated to be £5.2m, once the scheme at Brocklebank, Greenwich, which was sold to The Charities Property Fun, has achieved practical completion in October. There are other hefty inflows expected, too.
In other words, as the planned schedule of pre-sold sites reach completion, we can expect another chunky cash return from LXB in due course, details of which I would expect later this year. In the circumstances, I feel that the shares have decent prospects of delivering a 20 per cent return over the next six months or so as the company winds itself down, and importantly with negligible downside risk given the pre-sale agreements in place on developments sold to blue chip investors. Buy.
