EDISTON (EPIC) – the next to look anomalously cheap…
Since the cyclical peak last January, the whole REIT sector endured a turbulent 2022 due to the rapidly rising interest rates post Putin’s invasion of Ukraine in February.
As usual, Markets moves tend to overdo things; and the sell-offs, averaging c30%, stalled in late Autumn and a significant recovery in the range of 10%-15% saw prices nicely off their lows by the end of the year.
However, rather surprisingly, one anomaly has been EPIC. I say surprisingly because of the host of positive factors which apply in this case:
# EPIC’s portfolio is 100% in Retail Warehouse, a sector widely adopted as a secure bet, alongside Industrials
# At 60.6% the NAV discount = 36.1% to the Sept’22 figure of 94.86p
# The Yield = 8.25%. Dividend uncovered, though temporarily ahead of the reinvestment of their cash pile. The directors have stated the dividend will be held at 5p (payable monthly at the rate of 0.4167p/month
# The LTV = 35.2%. Debt with Aviva fixed at 2.86% for an average of 3.8yrs
# As can be seen from their recent Prelims to Sept’22 (see link below), EPIC has £227.5m in property & £86.2m in CASH – a very useful commodity in these straitened times – intended for reinvestment in H2’22, but wisely held in abeyance as valuations fell back
https://uk.advfn.com/stock-market/londo ... N/89772691# The well-respected TR Property Investment Trust (TRY) has been a buyer of EPIC stock and now holds c16%. In their recent Interim statement they wrote:
"Our retail exposure in the UK remains minimal. However, I have steadily added to the specialist retail warehouse owner, Ediston, where we now own [16%] of the company. It has successfully deleveraged with the sale of its remaining office buildings and is now a pure retail warehouse play. As a very small company in listed terms (market cap. GBP130m) it has failed to attract a broader range of investors even though its portfolio and balance sheet are sound. Its dividend yield is over 7% and its implied yield on current share price of over 10%. It has no refinancing requirements until late 2025 with 100% fixed priced debt."
There is a great opportunity to take advantage of the value here, presented by the recent tap seller. That eye-catching 8.25% yield at 60.6p is a very useful return whilst we wait for the capital gain likely to come throughout the year ahead.