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Conygar’s hidden value revealed

The share price dipped slightly following a write-down on the carrying value of its site at Haverfordwest, but this is insignificant relative to the gains that are likely to be made from other projects
May 14, 2019

Half-year results from Aim-traded property vulture fund Conygar (CIC:150p), a constituent of my 2018 Bargain Shares Portfolio at 160p, have been weighed down by an £18.5m write-down on the carrying value of its site at Haverfordwest to reflect weaker demand from major housebuilders for its land parcels and potential home owners, too. I wasn’t expecting this, nor were analysts at house broker Liberum Capital.

The mitigating factor was the progress made in the rest of the portfolio, including a £4m surplus on revaluation of its retail park at Cross Hands, in south west Wales, which offset some of the hit at Haverfordwest. The retail park is held in the company’s accounts at £15.85m (28p a share) and should be completely let out once Lidl moves into a new 23,000 square foot (sq ft) store in September 2019. A valuation closer to £18m seems in order based on gross rental income of £1.3m a year.

Moreover, since the end of March Conygar has exchanged conditional contracts, subject to planning permission, on the sale of an industrial property in Selly Oak, Birmingham, to a well-known student accommodation provider that is seeking planning consent for a 608 unit scheme in the largely residential area. The property was acquired by Conygar about 13 months ago for £3.5m and produces an annual rental income of £215,000. Assuming planning permission is consented, and after exiting leases on the site, the company could easily make a profit more than double the price it paid.

As I noted a week ago, there are also the prospect of reaping material gains at the mixed-use scheme in Nottingham city centre that is held in Conygar’s accounts at £15.3m (27p a share) now that it has planning consent. Chairman Robert Ware informed me during our results call on Tuesday 14 May that he has already been approached by lenders willing to fund all the £400m cost of the 2m sq ft scheme. He also says that he could sell off the land tomorrow. However, to maximise the profit potential on a scheme that has a gross development value north of £600m, the company is looking at options including partnering on the project.

Not that Conygar is short of cash, having a net cash pile of £45.6m (80p a share) at the end of March 2019 and one that is set to get a boost when the forward sale of a 20,000 sq ft B&M Retail unit for £4.3m in Ashby-de-la-Zouch, Derbyshire, completes in September 2019. The property is held in the accounts at £1.3m and should generate a profit of around £1m for Conygar.

The point being that the potential material gains to be made at the sites at Nottingham, Cross Hands and Selly Oak are not being reflected in the company’s net asset value of £101m (178p a share). Buy.

 

■ Simon Thompson's new book Successful Stock Picking Strategies and his second book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. The books are being sold through no other source and are priced at £16.95 each plus postage and packaging of £2.95, or £3.75 if you purchase both books. Details of the content of both books can be viewed on www.ypdbooks.com.