Investors Chronicle is highlighting Palace Capital, a high-yielding UK REIT which it says is currently trading at a discount.
Overview
- Palace Capital, a property investment company, is making big strides in selling off properties and cutting down debt.
- They’ve recently made a profit by selling properties for more than they’re recorded in their books.
- They’re using extra money to buy back their own shares and return money to shareholders.
Detailed Breakdown:
- Company in Focus: Palace Capital is a regional commercial property company that buys, manages, and sells commercial properties (like office buildings).
- What They’ve Done: Since their financial year ended, they’ve sold about one-third of their properties. The good news? They sold them for 6.9% more than they originally recorded in their books, bringing in £66.9 million.
- Debt Situation: With these sales, they’ve significantly reduced their debt. Imagine it’s like paying off most of a mortgage, leaving them with only a tiny amount left. Now, they’ve got a financial safety net of £20.1 million, which is almost equal to their remaining debt of £20.2 million.
- Why This Matters: This puts Palace Capital in a strong position. Their remaining properties are valued conservatively at £129.8 million. And if they decide to sell more, they could potentially earn more profits, especially if they continue to sell at prices higher than their book values.
- Share Buy-back: The company’s directors are using extra cash to buy back their own company shares. Imagine if a friend sold you something, then later offered to buy it back, typically at a higher price. This is good for shareholders (the people who own bits of the company) because it can increase the value of the remaining shares they hold. They’ve already bought back a chunk of shares for £6.3 million, and they’ve just gotten permission to buy back even more, given that their share prices are currently lower than their actual value.
- Benefits for Shareholders: All these smart moves by the company mean that the shareholders are seeing benefits. They not only benefit from share buy-backs (which can increase the value of their shares) but they also received payouts, similar to dividends, giving them a 5.8% return on their investment in the form of dividends.
Summary
In simple terms, Palace Capital is making clever moves in selling properties, reducing debt, and buying back shares. This is good news for shareholders as their investment in the company is becoming more valuable.