It’s not often that you get to buy shares in a company on half book value when almost two-thirds of the share price is backed by cash and the balance of the asset base is income producing. But that’s exactly what’s on offer at specialist residential development finance firm and asset manager Urban Exposure (UEX:45p), a company that listed its shares on London’s junior market in May 2018 when it raised £150m of new equity at 100p a share.
Not only are the shares trading on half of the company’s end of June 2019 book value of 93p a share (net tangible value of 85p a share), but cash of £46.4m (29p a share) and a high-quality loan portfolio worth £83.6m (53p a share) offer solid asset backing. For good measure, there is an 11 per cent prospective dividend yield on offer for the 2019 financial year based on the board’s maintained guidance to double the payout to 5p a share.
The proceeds of last year’s fundraise are being channelled into a bumper £1bn high-quality pipeline of lending prospects across 18 loans which have an average weighted term of 36 months, weighted internal rate of return (IRR) of 10 per cent and is based on a gross development value of £1.76bn. Moreover, the high level of demand from borrowers is enabling the company to accelerate growth of its asset management business where it manages and services real estate development loans financed by third parties for a fee. In 2018, Urban Exposure committed to funding of £525m for 16 such loans and at the time of the annual results in early April the directors were guiding investors to expect loan issuance of £700m to £900m this year. They still are.