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Bargain Shares: On the property beat

A property development group’s land on Anglesey could be gold dust if the UK government proceeds with nuclear power expansion, while development of its flagship scheme in Nottingham is enhancing value, too
Bargain Shares: On the property beat
  • Net asset value per share of 212p at 31 March 2022
  • Net cash of £30.7mn accounts for 25 per cent of NAV of £126.5mn
  • Planning permission expected imminently on hotel and build to rent element of Island Quarter scheme

Aim-traded property development and investment group Conygar (CIC:144p) continues to enhance the value of its flagship 36-acre Island Quarter site in Nottingham.

Later in the summer, the food, beverage and events venue at Canal Turn will open, and development work will commence on a 702-bed purpose built student accommodation (PBSA) scheme on one acre of the site. Chief executive Robert Ware says the group already has funding offers from lenders to cover all or part of the £59mn cost of the development work. The scheme should be worth £88mn-£95mn based on rental income of £5.7mn, so there is a hefty profit to be made.

The same is true for the plot adjacent to Canal Turn, which is expected to be granted planning consent imminently for 247 build-to-rent apartments, an extensive food and beverage offering and two hotels, to be managed by InterContinental hotels. The 36-acre site is in Conygar’s books at £82.4mn (138p a share), or £2.3mn per acre, a low-ball valuation given that the PBSA scheme alone could earn the group a profit of £30mn within two years and the residential element could eventually deliver 3,500 apartments.

Importantly, Conygar is negotiating from a position of financial strength. In the six months to 31 March 2022, disposals of industrial units in Birmingham and the Cross Hands retail park in Carmarthenshire realised £25.3mn of proceeds and helped boost net cash from £13.7mn to £30.7mn (51.5p a share).

Conygar also owns 200 acres of brownfield developable land at Parc Cybi and Rhosgoch in Anglesey (combined book value £3mn) as well as a site at Holyhead waterfront (book value £5mn) where a planning application has been submitted for a proposed 250-berth and 259 residential unit development.

Bargain Shares Portfolio 2022 
Company nameTIDMMarketOpening offer price 11.02.22Latest bid price 10.05.22DividendsTotal return
Tavistock InvestmentsTAVIAim4p5.3p0p35.9%
Vector CapitalVCAPAim46.6p55p0p18.2%
H&THATAim304p341p0p12.2%
Billington BILNAim214p228p0p6.5%
Henry BootBOOTMain300p314p3.63p5.9%
TekcapitalTEKAim29.15p30p0p2.9%
Sylvania Platinum SLPAim98.4p90p2.25p-6.3%
ConygarCICAim160p141p0p-11.9%
Average      7.9%
FTSE All-Share Total Return index8,525 8,109  -4.9%
FTSE Aim All-Share Total Return index1,258 1,102  -12.4%

Source: London Stock Exchange

Bearing this in mind, the UK government’s Energy Security Strategy has set out proposals for the provision of greater energy independence and security, by way of supercharging the deployment of cleaner and more affordable energy. This includes the provision of a £120mn Future Nuclear Enabling Fund to progress a series of projects as soon as possible, including the Wylfa site in Anglesey, where talks are ongoing between the UK and Welsh governments and US energy and engineering firms Westinghouse and Bechtel.

Conygar’s land holdings on Anglesey are well positioned to provide the significant residential and logistical requirements to support such nuclear projects. Ware also says that Conygar has received approaches from renewable energy companies interested in the land, and at well above book value, too.

Admittedly, Conygar’s share price has drifted 12 per cent since I included the shares in my 2022 Bargain Shares Portfolio. However, I can see imminent news flow emerging on multiple fronts to narrow the unwarranted 32 per cent share price discount to net asset value. There is scope for material valuation uplifts, too. Buy.

 

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