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10 September 2020
By Maynard Paton
First, a wealth warning.
The last price-to-book ‘bargain’ I looked at for SharePad was Hammerson.
Back then investors were in theory able to purchase £1 of assets for just 30p. The share price has since lost 75%.
A few tweaks to the same stock screen now leads me to Fuller, Smith & Turner.
This pub group has suffered during the pandemic, but sleuthing via SharePad reveals substantial freehold assets that the balance sheet may significantly undervalue.
This property backing may limit further downside as the group re-opens its pubs and aims to recover.
Read my full Fuller, Smith & Turner article for SharePad.
Maynard Paton
How have you calculated the market cap. A shares + C shares + 10% of the B shares?
Hi Brian,
Yes, A + C + 10% of B. Should get you to c56m shares if you also subtract the 1 million shares held in treasury.
Maynard
I confess I’m very much attracted to this idea, quite possibly because I used to enjoy the product. I do wonder though, whether the company would ever entertain a sale of what I imagine are quite iconic properties. That said, the contrarian in my suspects that companies like this and others in the hospitality will bounce back hardest once the restrictions ease and life returns to normal. I was also interested in the Pref shares, but it doesn’t look like they trade much at all and I’m not even sure Interactive Brokers has them. As always, thanks for posting
Hi Christian,
Thanks for the comment. The company did sell its brewing interests last year, so management does not appear wedded to the past and the notion of numerous site disposals is perhaps not as fanciful as it once was. I suspect if the pandemic and restrictions drag on, then management will have to take a view on the more marginal outlets. Redeveloping some of the sites into housing could be a money-spinner. I too imagine the sector will recover strongly once restrictions are completely lifted, but the question remains whether the operators have the resources to see out the restrictions.
Maynard
Hi Maynard
Now that Hammerson has dropped considerably, Im curious to hear whether you would consider buying it at its current price. I like your in depth writing and research by the way.
Hi Daniel,
Thanks for the message. Glad you like the articles.
I am not interested in Hammerson. Does not offer the management I prefer, and faces significant industry issues with its retail properties. Could be a turnaround possibility from a ‘deep value’ perspective, but anyone going in will need to judge Hammerson’s likely rental income with ongoing debt levels. Also, last time I looked the balance sheet had a number of joint ventures, in which Hammerson is not in complete charge of certain assets, which complicate matters further and are not ideal from the analysis perspective.
Maynard