Abrdn Property Income Trust (API) - oversold on an 8.7% yield

[SKYSHIP]

Abrdn Property Income Trust (API) is an actively managed UK REIT targeting high yield and capital growth.

API is a “generalist” fund and achieves its investment objective by investing in a diversified portfolio of UK commercial properties in the industrial, office, retail and ‘other’ sectors, where ‘other’ includes leisure, data centres, student housing, hotels and healthcare. As at Mar’23 the sector allocations were:

Industrial: 53.4%; Office: 19.5%; R/W: 14.8%; Other: 10.5%; Retail: 1.8%

As at 31 March 2023, API had a Loan to Value (LTV) of 28.7%, calculated as debt less all cash divided by investment portfolio value. Debt with RBSI totals £165m for 3yrs from Apr’23 with interest capped at 5.5% - full details in the links below

Dividends:
Following the dividend being maintained at an annualised rate of 4p per share since December 2021, the dividend cover for Q1 2023 is 88.6%. The Board has provided guidance of its intention to maintain the current dividend level which it believes will be substantially covered in 2023 and 2024.

The relentless interest rate rises have hit the REIT sector hard; but the sell-offs may well be overdone as in most cases rents are still rising; development standstill means less property becoming available; recession (if it does come) should be mild & the cycle should be about to swing, especially with the market always looking 6months ahead!

API has been particularly badly hit due to an earlier refinancing blunder, as detailed in the presentation below. But at 45.8p the 45.3% discount and 8.73% yield suggest the stock is way, way oversold. Friendless at the moment; but even a slight normalisation to a 7.5% yield would provide a 15% upside capital gain, which combined with the running yield suggests a 23%+ gain over the next 6months.

24/04/23: Annual Results to Dec’22:
https://uk.advfn.com/stock-market/londo ... s/90833182

13/06/23: Latest corporate presentation:
https://tinyurl.com/ye2fm7zh

API Website:
https://www.abrdnpit.co.uk/en-gb

[richfool]

Hi Skyship, Thanks for the assessment.

I felt bold enough to top up at 50p, early this month (August), but I don't think I feel bold enough to top up any further, not even at the current 45p SP., as inflation and thus interest rates are looking stickier than previously envisaged. I will however await some upside.

[Dod101]

Hi Skyship, Thanks for the assessment.

I felt bold enough to top up at 50p, early this month (August), but I don't think I feel bold enough to top up any further, not even at the current 45p SP., as inflation and thus interest rates are looking stickier than previously envisaged. I will however await some upside.

Why pick on API? There are plenty of REITS and indeed other shares which look very oversold at the moment, but, as has been said elsewhere, it takes a lot of confidence and sang froid to buy at the moment, only to see another slide the day after.

Dod

[SKYSHIP]

Since my original post 7 weeks ago (18th August) API has been fairly steady in an overall weak sector. They have risen c7% to 49p, at which level the discount is still high at 41.5% and the yield likewise at 8.16%.

With interest rates now looking to have peaked, though predicted to stay high until Summer'24, this generalist fund should make further progress as the Market tends to look ahead; and in this case that should mean looking ahead to more "normal" valuations.

So I see API as a strong hold; and still a BUY for those coming new to the sector.

Currently the BEST BUY in the sector is EBOX. At 48.75p the discount to their Mar'23 NAV is 45.9%; but more importantly their yield is a massive 8.90%.

Their Interims back in May just reinforced everything the bulls say about EBOX. Quality, assets; quality tenants, rising income, secure dividend. LTV modestly too high, but a reduction through minor sales projected. Debt costs low, RCF only half drawn, medium term maturities.

Well worth spending a fruitful 50mins viewing this Presentation:

hxxps://stream.brrmedia.co.uk/broadcast ... 24552e4f2b

[Dod101]

I still would not touch Abrdn Property Income. Ebox I think is in a better sector but any number of REITS are at least theoretically good value at the moment.

Dod

[Newroad]

Evening All.

Apropos of not that much in particular, I topped up LAND on Tuesday at a cost of £5.802 inclusive of fees/stamp duty. At least it didn't go the other direction immediately after purchase - currently at £5.904.

This should not be construed as an opinion on LAND versus API or EBOX - but reflects my methodology more generally.

Regards, Newroad

[Dod101]

Evening All.

Apropos of not that much in particular, I topped up LAND on Tuesday at a cost of £5.802 inclusive of fees/stamp duty. At least it didn't go the other direction immediately after purchase - currently at £5.904.

This should not be construed as an opinion on LAND versus API or EBOX - but reflects my methodology more generally.

Regards, Newroad

With respect your methodology seems to depend on being able to buy second rank companies for some reason. I have never ever made any money from B Land or Land Secs and
have not held them since about 2010. They share a spot on my never buy list along with supermarkets and phone companies. These comments may be construed as my considered opinions.

Dod

[SKYSHIP]

Newroad - what was your reason for buying / topping up LAND? BLND & LAND were the major losers in the last cycle; only saved by massive diluting rights issues.

[Newroad]

Hi SkyShip.

What I'm doing (experimenting with) can be found in more detail elsewhere on the site - look up "Pseudo-HYP" if interested. Given that it's not directly germane to the OP, I won't go into too much detail here. However, in short, for a given sector, I pick the highest yield stock from the "universe" (which for me currently is the FTSE100). On the second pass (i.e. stocks 12-22) I pick the second highest yielding stock in the sector. That's where we're currently at - I hold LAND and BLND (and am aware the latter is now in the FTSE250). From there, I top up the stocks which are most below their cash weight which is derived from their risk weight. This month, that meant SBRY and LAND. If one has enough budget, one would instead buys stock 23-33 etc.

{Dod} For some reason, you seem to like the phrase "second rate" to describe companies you choose not to purchase yourself. If you had anything helpful to say, even if critical, that would be fine, but I'm not seeing much, if anything, of actual use to anyone above. In any case, I would caution against taking a view of a company and making that your view of the stock - they are not one and the same. Time may prove you right on this and the other "second rate" stock you commented on recently - but it may also prove you wrong. We'll see. For me though, it's the success (or otherwise) of the overall methodology over time which will matter.

Regards, Newroad

[Dod101]

Hi SkyShip.

What I'm doing (experimenting with) can be found in more detail elsewhere on the site - look up "Pseudo-HYP" if interested. Given that it's not directly germane to the OP, I won't go into too much detail here. However, in short, for a given sector, I pick the highest yield stock from the "universe" (which for me currently is the FTSE100). On the second pass (i.e. stocks 12-22) I pick the second highest yielding stock in the sector. That's where we're currently at - I hold LAND and BLND (and am aware the latter is now in the FTSE250). From there, I top up the stocks which are most below their cash weight which is derived from their risk weight. This month, that meant SBRY and LAND. If one has enough budget, one would instead buys stock 23-33 etc.

{Dod} For some reason, you seem to like the phrase "second rate" to describe companies you choose not to purchase yourself. If you had anything helpful to say, even if critical, that would be fine, but I'm not seeing much, if anything, of actual use to anyone above. In any case, I would caution against taking a view of a company and making that your view of the stock - they are not one and the same. Time may prove you right on this and the other "second rate" stock you commented on recently - but it may also prove you wrong. We'll see. For me though, it's the success (or otherwise) of the overall methodology over time which will matter.

Regards, Newroad

Well the methodology seems to work in that you keep buying second rate shares. As I have said I have never ever made money from B Land and Land Secs, I am taking a view of a company and its share price performance over many years in the case of the two property companies I have quoted. I am much more into 'soft' issues and culture and so on than analysis. I am just amused that's all. But why for instance B Land and Land Secs have proved such poor investments I do not know but they have never been any good. It might be the long term nature of their developments so that by the time they are completed a project things have changed in terms of market demand, interest rates or whatever. I can only say that I use experience. These two stalwarts may have a couple of good years but they always revert to type.

Dod

[SKYSHIP]

Newroad - I'm 100% with Dod101 on this. Avoid the property majors. Take some time to research the secondary / tertiary players. Plenty of good corporate presentations to help guide you. IMO start (& finish) with the excellent ones on the EBOX site.

[BullDog]

Newroad - I'm 100% with Dod101 on this.

I would say forget voodoo methodology. If, as is apparent, you don't have a clear understanding of market machinations, I suggest your best course of action has to be to select a diversified portfolio of investment trusts or ETFs.

Occasional articles in the IC, Moneyweek or Citywire can assist you in that regard, if you don't feel qualified to select.

+1

[SKYSHIP]

Ahh - well Bulldog. I didn't edit quickly enough! Thought I was being rather contentious

[Newroad]

Hi SkyShip.

I don't have the conceit that I am a stock-picker - hence I prefer a methodology. This can be tested, calibrated, kept, discarded etc. If that is voodoo for you, so be it - all I can do is answer questions honestly about it that, at the time at least, I always assume are asked in good faith. Further, my performance good or bad is a matter of record.

If you and others fancy yourselves as stock pickers, whether that be by some innate gift or by analysing company presentations and reports, that's fine - good luck to you. I suspect that it's a bit like average perception of driving ability - most think they are better at it than they actually are.

As to whether I understand market machinations, you'd have to define what you mean. You'd then have to consider its applicability in the context discussed above.

Regards, Newroad

[SKYSHIP]

Newroad - a pretty long-winded statement meaning not a lot. I am a stock-picker; and over the last 22 years have compounded at 15%pa. That looks likely to reduce slightly this year as down c3%YTD. My comments in good faith - don't mess with a sector that you seem not to understand.

Over and out; and good luck to you.

[Newroad]

Hi SkyShip.

Let me express it more simply by analogy then - would you have the same or similar advice for investors in Index Funds and similar - i.e. don't because there may be some/all within they are not expert in and/or don't understand to a degree you regard as satisfactory? Index investing is closer to what I am doing, whilst not being exactly the same, than a "stock picking" approach.

I can't comment on performance over a similar timeframe to that which you quote as I only have accurate records going back a few years, but as I mentioned to another poster, if you want a proxy over most of that period, look at the performance of ATST, FCIT and WTAN (with a bit of MYI) - as they were what we were mostly invested in. My guess is the performance was fairly reasonable, but the effort involved in figuring it all out retrospectively is not worth it, for me at least.

Regards, Newroad

[richfool]

Since my original post 7 weeks ago (18th August) API has been fairly steady in an overall weak sector. They have risen c7% to 49p, at which level the discount is still high at 41.5% and the yield likewise at 8.16%.

With interest rates now looking to have peaked, though predicted to stay high until Summer'24, this generalist fund should make further progress as the Market tends to look ahead; and in this case that should mean looking ahead to more "normal" valuations.

So I see API as a strong hold; and still a BUY for those coming new to the sector.

Currently the BEST BUY in the sector is EBOX. At 48.75p the discount to their Mar'23 NAV is 45.9%; but more importantly their yield is a massive 8.90%.

Their Interims back in May just reinforced everything the bulls say about EBOX. Quality, assets; quality tenants, rising income, secure dividend. LTV modestly too high, but a reduction through minor sales projected. Debt costs low, RCF only half drawn, medium term maturities.

Well worth spending a fruitful 50mins viewing this Presentation:

hxxps://stream.brrmedia.co.uk/broadcast ... 24552e4f2b

I continue to hold API, which I topped up a couple of months ago, with some of the proceeds from my sale of EPIC.

Looking at the breakdown of API's holdings, I would rather it held less offices and perhaps more warehouses and industrial.

My other REIT/Property company holdings are: WHR (warehouses) and PHP, both of which I have topped up earlier this year, but as we know are all down currently, primarily due to higher interest rates (which don't look like going away for some time to come).

[SKYSHIP]

Richfool - Jason Baggaley of API said in the last results presentation how he would like more Retail Warehouse. I suspect that if they hadn't made such a total mess of their debt issues, they might well have had a go at EPIC.

[brightncheerful]

But why for instance B Land and Land Secs have proved such poor investments I do not know but they have never been any good. It might be the long term nature of their developments so that by the time they are completed a project things have changed in terms of market demand, interest rates or whatever.

Neither company is what they were. BL was good for Sir John Ritblat but is nowadays run by people who overpay. A good example is its Woolwich estate for which in Feb 2018 BL paid £103M for a net initial yield of 4.1% (public domain info) The co they bought it from paid £52.5M in July 2014. (ditto) That company bought it from a shrewd private company (ditto) which bought it from Prudential. In other words, in approximately 7 years the sale price rose from I would guess probably under £30M. BL told me that another co had offered £108/110M for it to which I thought so what?

Land Sec is a slow mover which as you say. Long ago I dabbled in the hope its Picadilly London W1 holdings would come to fruition but it still hasn't.
( I have fond memories: the firm I worked for at the start of my property career had some dealings with the Piccadilly lights and I remember entering the rooms behind the lights.) Site assembly takes a long time. The snag with pro cos that own large buildings is that they can't be bothered with tiddler property and it takes a lot of borrowing to buy more large buildings.

Also for Land Sec, despite its quality portfolio, I thought its tax management left a lot to be desired. When it converted to a REIT it paid some £300M in tax only to have a deep discount rights issue a few years later to prop it up during a downturn.

Mind you most quoted prop cos are run for the benefit of the directors and managers and for access to cheap borrowings. Also, it doesn't help that their NAVs are based on informed opinions which are often at odds with the market's opinion.

[Dod101]

But why for instance B Land and Land Secs have proved such poor investments I do not know but they have never been any good. It might be the long term nature of their developments so that by the time they are completed a project things have changed in terms of market demand, interest rates or whatever.

Neither company is what they were. BL was good for Sir John Ritblat but is nowadays run by people who overpay. A good example is its Woolwich estate for which in Feb 2018 BL paid £103M for a net initial yield of 4.1% (public domain info) The co they bought it from paid £52.5M in July 2014. (ditto) That company bought it from a shrewd private company (ditto) which bought it from Prudential. In other words, in approximately 7 years the sale price rose from I would guess probably under £30M. BL told me that another co had offered £108/110M for it to which I thought so what?

Land Sec is a slow mover which as you say. Long ago I dabbled in the hope its Picadilly London W1 holdings would come to fruition but it still hasn't.
( I have fond memories: the firm I worked for at the start of my property career had some dealings with the Piccadilly lights and I remember entering the rooms behind the lights.) Site assembly takes a long time. The snag with pro cos that own large buildings is that they can't be bothered with tiddler property and it takes a lot of borrowing to buy more large buildings.

Also for Land Sec, despite its quality portfolio, I thought its tax management left a lot to be desired. When it converted to a REIT it paid some £300M in tax only to have a deep discount rights issue a few years later to prop it up during a downturn.

Mind you most quoted prop cos are run for the benefit of the directors and managers and for access to cheap borrowings. Also, it doesn't help that their NAVs are based on informed opinions which are often at odds with the market's opinion.

So there is an insider’s view of what I have regarded for some years as a couple of hopeless cases. Methodology? Forget it.
Dod