RGN - Region Group

[Tyler Durden]

I had my eye on this and forgot to place a buy order for $1.60 on the day it went down to $1.60!!!

 

[nulla nulla]

I had my eye on this and forgot to place a buy order for $1.60 on the day it went down to $1.60!!!

I picked up a mix of parcels at $1.61, $1.605 and $1.60 but sold them on Thursday, way to low as it turns out. Then again if I had held looking for more, with my luck they would have retraced to $1.60. Such is life, however we are cashed up for the next opportunity.

 

[Tyler Durden]

This closed at $1.775 today. Why on earth is it shooting up?

Talk about missing the boat

 

[nulla nulla]

This closed at $1.775 today. Why on earth is it shooting up?

Talk about missing the boat

Maybe it was held down while the sale of nonmarketable parcels was being organised and now the brakes have been taken off?

I personaly think a comparable share is Bunnings Warehouse Properties and would not be surprised to see SCP go higher as fund managers and overseas investors lock in for the dividend (until the yield is diluted down to arround 5% or a little lower). Then again I could be completely up the wrong creek without a paddle . Will have to keep an eye on it and look for a re-entry if the opportunity comes up.

 

[coolcup]

Maybe it was held down while the sale of nonmarketable parcels was being organised and now the brakes have been taken off?

I personaly think a comparable share is Bunnings Warehouse Properties and would not be surprised to see SCP go higher as fund managers and overseas investors lock in for the dividend (until the yield is diluted down to arround 5% or a little lower). Then again I could be completely up the wrong creek without a paddle . Will have to keep an eye on it and look for a re-entry if the opportunity comes up.

Aside from having a high quality customer (Woolworths) as its primary tenant there is plenty different between BWP and SCP. Some of these differences include:

1. BWP has contracted rent increases every year at a minimum of CPI with market based reviews every 5 years or so. SCP's leases to WOW only deliver rental growth after the particular supermarket delivers above a certain sales target. As per WOW's last results only 5 or 6 stores in the country met that threshold. This means that SCP is unlikely to ever deliver underlying rental growth from the WOW leases. This means it is reliant on rental growth from specialty tenants. See next point

2. The specialty stores (ie non majors) in the shopping centres which SCP owns are 20% vacant across the portfolio. To get the IPO to fly, WOW have guaranteed the rent on this vacant space for a short period (1 or 2 years I think). If SCP cannot lease this space up at equivalent rents, then its income will reduce as the rental guarantee rolls off. In this environment, where retail is struggling, leasing up specialty stores is very difficult.

3. BWP has single tenant assets with limited capex and maintenance - the leases are typically double net, meaning Wesfarmers pays for most property outgoings. BWP just sits back and collects the cash. SCP is a far more "active" asset class. They are neighbourhood shopping centres where WOW only anchors around 60% of the rent. The specialties require constant remixing and capex is far higher than an equivalent BWP shed.

While the temptation is there, be careful that you don't automatically liken the two as there are some important reasons why BWP is a much "safer" investment than SCP and justifies a premium pricing level. There is a reason why institutions did not bid strongly into the IPO book. It was mainly supported by retail.

 

[Tyler Durden]

Aside from having a high quality customer (Woolworths) as its primary tenant there is plenty different between BWP and SCP. Some of these differences include:

1. BWP has contracted rent increases every year at a minimum of CPI with market based reviews every 5 years or so. SCP's leases to WOW only deliver rental growth after the particular supermarket delivers above a certain sales target. As per WOW's last results only 5 or 6 stores in the country met that threshold. This means that SCP is unlikely to ever deliver underlying rental growth from the WOW leases. This means it is reliant on rental growth from specialty tenants. See next point

2. The specialty stores (ie non majors) in the shopping centres which SCP owns are 20% vacant across the portfolio. To get the IPO to fly, WOW have guaranteed the rent on this vacant space for a short period (1 or 2 years I think). If SCP cannot lease this space up at equivalent rents, then its income will reduce as the rental guarantee rolls off. In this environment, where retail is struggling, leasing up specialty stores is very difficult.

3. BWP has single tenant assets with limited capex and maintenance - the leases are typically double net, meaning Wesfarmers pays for most property outgoings. BWP just sits back and collects the cash. SCP is a far more "active" asset class. They are neighbourhood shopping centres where WOW only anchors around 60% of the rent. The specialties require constant remixing and capex is far higher than an equivalent BWP shed.

While the temptation is there, be careful that you don't automatically liken the two as there are some important reasons why BWP is a much "safer" investment than SCP and justifies a premium pricing level. There is a reason why institutions did not bid strongly into the IPO book. It was mainly supported by retail.

Wow very informative post! Appreciate it, thank you!!

 

[nulla nulla]

............ There is a reason why institutions did not bid strongly into the IPO book. It was mainly supported by retail.

Thanks for the comparison in tennant structure. The comparison I made, SCP alongside BWP, is slightly skewed in that BWP only has one tennant on each site where SCP uses Wookworths as an anchor client and relies on "specialty" stores to make up the difference. It is worth noting that with Woolworths making up 60% of the tennancy, the 20% vacancy of the remaining 40% equates to an overall vacancy of 8%. A 92% occupancy rate compares favourably with other A-REIT companies with exposure to retail (except possibly Westfields).

However, it is the closest match I can think off for now and I don't think I am far off the mark when I see the share price rising to find its' niche balancing between Yield and Price/Earings multiple. Time will show me as right or wrong. Notwithstanding I am not recommending anyone buy and hold based on my ramblings.

In respect of the IPO, I participated in the IPO through a broker. The applications for sophisticated and professional investors were over subscibed and were scaled back as were the applications of retail investors through the brokers. I was advised that: sophisticated investors received 75% of their applications; retail investors applying through their brokers recieved 66% of their application; and retail investors applying directly recieved 100%. I only received 66% of my allocation and would have been better off applying directly rather than through the broker (the rate of scale back may have varied from broker to broker, I have no way of knowing).

The last two days price action shows a slowing of the climb, reaching $1.81 then faltering. It will be interesting to see whether SCP can keep climbing; hold these levels; or if it will fall back?

 

[coolcup]

However, it is the closest match I can think off for now and I don't think I am far off the mark when I see the share price rising to find its' niche balancing between Yield and Price/Earings multiple. Time will show me as right or wrong. Notwithstanding I am not recommending anyone buy and hold based on my ramblings.

I agree with you. I think it will trade similar to BWP but I don't think it will quite get to the same level in terms of premium to NTA. The closer match to BWP that you might consider is ALE Property Group (LEP). It owns a portfolio of pubs leased to ALH (a subsidiary of Woolworths). The leases are all triple net (ie LEP just collect rent, literally everything else is the tenant's responsibility); they are long circa 10 years or even longer average lease term from memory; they have structured increases at CPI. These guys are about as closely comparable to BWP as you can get.

I think the closer comparable to SCP is actually Charter Hall Retail REIT (CQR) which invests in grocery anchored neighbourhood retail centres. SCP's only tenant is Woolies, whereas CQR is happy with Woolies or Coles. The key difference is that CQR is externally managed - that is, it pays a management fee to its manager, Charter Hall. SCP does all the management internally and so is run a little more cheaply.

 

[nulla nulla]

SCP looked to be holding up better than most A-REIT's in the mid $1.60's then SCP decided to do a capital raising and combine the funds raised with finds on hand to go on a buying spree. The new shares were issued at the NTA value of $1.58 per share and were not at a significant discount to the current share price. Also the assets purchased are consistant with the existing assets, shopping centres anchored by a key supermarket only this time they have picked up some Coles and Target outlets (The Target outlet is a bit of a worry given the cutbacks they are facing). The NTA is unchanged at $1.58 but the earnings going forward is improved enough for SCP to revise the projected earnings and dividend per share upward, slightly.



After the trading halt and announcement, SCP reopened down, touched $1.58 , then rallied to close out the week at $1.61. Food and Groceries. Everyone needs them.

As always do your own research and good luck.

 

[Sharkman]

not really a question about the technicals or fundamentals of this so apologies if this is in the wrong place... but does anyone know how SCP needs to be treated for tax purposes if you were issued them for being a WOW shareholder at the record date, as opposed to buying them on the secondary market?

when i used the autofill function of e-tax it came up with the message

Some investments you have held may be affected by a class ruling and subject to capital gains tax... etc
WOOLWORTHS LIMITED CR 2012/121

there is this

http://law.ato.gov.au/atolaw/view.h...hs Limited - creating a new stapled security;

but i really don't want to have to wade thru it all if it can be helped, so was hoping someone has already done the hard yards and figured out how we need to treat these SCP units in this years tax return

i haven't sold any SCP units yet, so i don't think any income needs to be declared, but who knows what quirky stuff the ATO can come up with...

 

[wooly1]

I sold my smallish holding before the ex date in order not to have to muck around with a stapled unit distribution on the tax return this year and I am going to use the value on the CHESS allotment advice notice of $1.4397 per unit as the cost base.
I saw all that gobbledegook in the tax ruling as well - no way Jose!
You should have received a letter from SCA as well as the CHESS distribution statement and both documents indicate $1.4397 / unit - good enough for me.

 

[Sharkman]

I sold my smallish holding before the ex date in order not to have to muck around with a stapled unit distribution on the tax return this year and I am going to use the value on the CHESS allotment advice notice of $1.4397 per unit as the cost base.
I saw all that gobbledegook in the tax ruling as well - no way Jose!
You should have received a letter from SCA as well as the CHESS distribution statement and both documents indicate $1.4397 / unit - good enough for me.

i don't think it's that simple. if you were a WOW shareholder, then those SCP units are an in-specie distribution - ie. a distribution of the assets of a company in their natural form. not sure you can just sell them off at say 1.60, declare capital gains of 0.1603 a share and call it a day. merely receiving the SCP units is a tax event in itself!

i just bit the bullet and read thru the gobbledegook in that link in my earlier post. i am not a tax adviser so this is by no means tax advice, but for the potential benefit of those interested, my interpretation of the ruling is as follows.

the cost base of the SCP units is 1.4397 as you said.

of that 1.4397, 72.99279c per unit counts as a capital reduction, ie. they are splitting off the capital within their existing entity (WOW) to form part of the new stapled entities. as one needs 5 WOW shares to receive one SCP unit, that means when it's time to sell any WOW units that were held at the record date for the SCP distribution, one must reduce the cost base of those WOW units by 72.99279 / 5 = 14.598558c per WOW share. this will have the effect of increasing the CGT paid when selling those WOW units.

the other 70.97721c per unit counts as a fully franked WOW dividend, and you have to declare it as such, even if you have since sold off the SCP units. similar to the above, this becomes a 14.195442c per share fully franked WOW dividend.

has anyone else slogged thru that tax ruling and come up with a different interpretation to mine? or been advised by someone who actually is a tax adviser how we're meant to handle it?

 

[agumby]

found this that may help

http://www.macquarie.com.au/mgl/au/...-capital-reduction-and-in-specie-distribution

and this one may be even more helpfull

http://www.macquarie.com.au/mgl/au/advisers/products-platforms/tools/calculators/wow-ca-calculator

 

[wooly1]

WOW (pun intended).
That was a great find, explains it all beautifully and simplifies the tax calculation enormously.
Should help the tax return this year no end.
It really annoys me when companies have these schemes of arrangement and leave the poor shareholder scratching his head trying to figure the tax responsibility.

 

[Sharkman]

ditto, thanks for posting that. it looks like they came to the same conclusions from that ATO ruling that i did previously, which is good to know. i can finally finish off my tax return. i don't have all that many SCP units, but i gotta be careful even with small amounts - when the ATO hits you up for $60 in backtaxes from 3 years ago, you know you're firmly under their microscope!

 

[nulla nulla]

I thought SCP was a reasonable buy when it hit $1.51, even if only for a short term hold. Their income stream is underpinned by a contract with the anchor tenant Woolworths. Everyone needs food, so the yield is like money for jam for anyone investing on a longer term yield basis in the current economic gloom and low bank interest rates. With the Aud$ down from its' recent highs I'm surprised that the "japanese House wives" aren't borrowing at low offshore interest rates and buying up SCP.



When the share price slumped to $1.47 it was trading at levels close to the issue price. I think someone in here uses the phrase "a screaming buy". Mind you, while it shot back up to my entry price of $1.51, it appears to be struggling to get back above $1.535. Maybe next week? Still $1.47 to $1.53 is a quick 4% return.

As always do your own research and good luck .

 

[Tyler Durden]

I thought SCP was a reasonable buy when it hit $1.51, even if only for a short term hold. Their income stream is underpinned by a contract with the anchor tenant Woolworths.

Yes but isn't this for a limited time only?

 

[coolcup]

Yes but isn't this for a limited time only?

Yup. Only about 20 years or so...

I agree with nulla nulla's comments. The stock price downtrend is because of a broader shift in the market away from defensive stocks. Other REITs are all suffering from it too. Long term bond yields have been rising steadily in Australia and that environment has always led to underperformance amongst the REITs.

 

[piggybank]

Daily P&F.

 

[nulla nulla]

Personally, I think SCP will retrace from this level. My only query is whether the retrace will be as rapid as the recent climb or a gradual decline to more sustainable levels.




Of course I could be totally wrong and SCP could continue upward, however to me the steep climb in the share price looks more like a spike that will run out of strength.