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‘Reit good value’: EPIC fund manager buys big chunk of trust’s 6.6% yielding shares

11 February 2020

Danny O’Neill, fund manager of Ediston Property Investment Company, ploughs £435,000 into real estate investment trust’s (Reit) shares, signalling his belief they have been oversold in flight from retail.

Danny O’Neill, fund manager of Ediston Property Investment Company (EPIC ), has ploughed £435,000 into the real estate investment trust’s (Reit) high yielding shares, signalling his belief they have been oversold in investors’ flight from the retail sector.

O’Neill, chief executive of Ediston Properties Limited, EPIC’s investment manager, yesterday bought 500,000 of its shares at 87p, more than doubling his stake to 858,488 shares worth £746,884.

The purchase comes as the trust has stood on the sidelines of a post-election rebound in sentiment towards UK commercial property, with its heavy exposure to retailers continuing to weigh on the shares despite the clearance of some of the Brexit uncertainty that has dogged the sector since 2016.

Last year EPIC shares de-rated as investors took fright at the £309m portfolio’s two-thirds allocation to out-of-town retail parks. The shares dropped 11% in 2019 and having drifted this year stand 16% below their net asset value (NAV).

This is slightly wider than than its average 14% deficit to NAV of the past 12 months and compares poorly with the average 1% discount of all UK commercial property Reits, which invest in a mix of retail, office and industrial assets.

O’Neill believes the low price is a buying opportunity for investors looking to lock in a high level of income from its monthly dividends.

He stated: ‘The compelling case for me is the company’s attractive yield of 6.6% with a dividend which is more than fully covered at 117%.

‘While there has been negative sentiment to the wider retail market, which has impacted the company shares over the past 12-18 months, the investment managers’ ability to maintain the income over the period and constantly manage the assets positively illustrates that retail warehousing is the sub-sector with the most resilience and potential upside in the current retail market.’

EPIC’s poor share price performance masks better underlying returns from its 16 properties, which in addition to the retail parks include one supermarket, two bingo halls and four office blocks.

In December in its annual results the company reported a 5.7% decline in NAV in the year to 30 September, although unchanged dividends of 5.75p, covered by 6.66p in earnings per share, largely offset this to produce a -0.8% total underlying return.

By contrast, the sentiment-hit shares tumbled 17% in the period even with dividends included.

The fourth quarter of 2019 - the first of its financial year - continued to be tough with NAV per share sliding 4.6% to 103.7p but debt at 33.5% of assets well within its bank covenants.

However, the company says it is is outperforming the retail warehouse sector and insists that ‘retail is not dying, it is changing’ and that its convenience-led properties are well positioned to benefit from the growth in online shopping with no presence on the high street or department stores.

 

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