Conygar Investment Company: Interim Results

The Conygar Investment Company has reported its interim results for the six-months ended 31st March 2015. The results showed a further increase in both its Net Asset Value (NAV) per share and investment property portfolio on a like-for-like basis as well as a reduction in its vacancy rate. The investment and development group is also making progress with various refurbishment and redevelopment opportunities at several of its investment properties as well as on its development projects. With the shares offering investors exposure to the high growth property market as well as offering a decent dividend of 1%, we classify the shares as a hybrid growth and income stock.

Financials

For the six-months ended 31st March 2015, excluding the amounts incurred paying dividends and buying back shares, NAV per share increased by 2.6% to 199.2p as the underlying investment property portfolio increased in value on a like-for-like basis by £1.2 million to £154.4 million. Excluding a one-off credit, administrative expenses amounted to £1.6 million. Pre-tax profits decreased from £7.46 million to £4.1 million due to a lower revaluation of its investment properties versus the comparable period. Cash decreased to £45.0 million, primarily as a result of share buy backs, bank debt repayments, administrative costs and development project investments. Accordingly, net debt increased to £33.6 million, equating to 20% of the NAV and 22% of investment property portfolio value.

Property Portfolio

Since 30th September 2014, the contracted annual rent roll decreased by £0.4 million to £11.8 million, owing mainly to a number of property disposals. Nevertheless, the cash yield on the portfolio remains strong at 7.7%. And following the disposal of Norfolk House, Birmingham, the portfolio vacancy rate is 11.8%, down from 18.2% at 30th September 2014.

Development Projects

Its total expenditure to date on development projects amounts to £45.8 million, having spent a further £8.8 million since 30th September 2014.

Valuation

Shares in Conygar are currently trading at a 9.9% discount to NAV. This contrasts with our selected peer companies that trade at a premium to their most recent NAV. The average premium to NAV of our peer companies is 10.3%, and if we apply this to Conygar’s shares we get an implied value per share of 219.8p. There could be potential upside for Conygar from its investment portfolio in the form of increases in NAV if the economy and commercial property markets continue to improve or if any future acquisitions perform successfully.