A recurring theme of the small-cap companies I cover is the number of repeat buying opportunities they offer. As long as the rationale for making the original investment still holds, and the valuation is favourable, then it makes sense to exploit share price pullbacks.
A great example is Aim-traded UK and eastern European property fund manager and investor First Property (FPO:45p). I first recommended buying the shares at 18.5p in my 2011 Bargain Shares Portfolio, since when the board has paid out total dividends of 8.84p a share. So, if you had invested £1,850 to buy 10,000 shares seven years ago, and reinvested your dividends by purchasing more shares in the market, you would now be holding 13,400 shares worth £6,000. That’s a healthy annualised return of 18.2 per cent during the seven-year holding period. I have noted, though, that First Property’s share price has drifted from the 53p level it was at when the company issued interim results in late November and also when I rated them a buy in the autumn (‘Trading plays’, 9 October 2017). But the results certainly didn’t disappoint.
Reported pre-tax profits increased by 11 per cent to £5m in the six months to end September 2017, buoyed by a near-two-thirds increase in management fee income to £1.5m and a rock solid contribution from the company’s £172m portfolio of 10 high-yielding commercial properties in Poland and Romania. These properties have a loan-to-value of 68 per cent and produce an average yield of 9.8 per cent, well in excess of the 2.46 per cent weighted average cost on non-recourse borrowing. The company also holds stakes in 10 co-investments it manages, and successfully too. For instance, a couple of years ago First Property invested €1m (£0.9m) for a 24 per cent shareholding in a Romanian fund and has just banked a £400,000 gain following the sale of nine Lidl supermarkets by the fund.