Interactive Investor

Insider: boss buys share stake at big discount

Having recently slumped to multi-year lows there are signs of a turnaround, and the chief exec is buying shares. And there’s more heavy buying at an e-commerce technology group.

13th May 2024 08:27

by Graeme Evans from interactive investor

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The chief executive of £2 billion property firm CLS Holdings (LSE:CLI) has backed up his optimism over back-to-the-office trends by spending £50,000 on the company’s shares.

Fredrik Widlund believes the quality of the CLS portfolio in Europe’s largest economies of the UK, France and Germany leaves it well placed to recover after a tough 2023.

The company, which this year marks 30 years since its London stock market debut, has over 700 tenants including blue-chip organisations and government departments such as the National Crime Agency Bosch, Siemens and Honda.

Widlund bought his CLS shares on Wednesday at a price of 87.1p, which compares with last summer’s 140p before a reverse that included relegation from the FTSE 250. Trading with an 8.8% dividend yield, CLS ended last week at 91.4p for a 64% discount to net asset value.

The stock had traded above 300p at one point in 2019 before the pandemic and then higher interest rates brought significant upheaval to the property industry.

Widlund believes hybrid working is set to continue for at least the short- to medium-term, but that the actual reduction in space will be less than predicted as tenants look at how to cope with peak worker occupancy.

Together with construction delays and shortage of good stock, he expects that competition for well-connected, good-quality office space in mixed-use locations will support rental growth.

Widlund told investors at annual results in March: “We firmly believe the outlook for high-quality offices is bright and we are seeing a clear trend of companies thinking strategically about the return to the office as a value driver for their businesses.

“The investments we have made and continue to make across our portfolio mean we are well placed to thrive.”

The company, which is majority owned by the family and charitable trust of founder Sten Mortstedt, last year saw a 12.3% decline in the value of its portfolio to £2.1 billion. It is split 45% in the UK, 43% in Germany and 12% in France.

The decrease was accompanied by a 23% fall in net tangible assets per share to 253p, with the bottom-line loss £263.4 million.

Net rental income of £113 million still rose 4.8% as 55.2% of contracted rent is index-linked and the company benefited from an “excellent performance” by hotel and student operations.

Its underlying vacancy rate also held firm at 7.6% when excluding developments being marketed to prospective tenants, with rent collection remaining at 99%.

Ongoing efforts to reduce leverage were boosted last month through the sale of Westminster Tower at London’s Albert Embankment for £40.8 million.

An unchanged dividend of 5.35p a share was paid earlier this month, in line with the company’s policy of between 1.2 times and 1.6 times earnings cover. Broker Peel Hunt last month upgraded its stance on the stock to an “Add” recommendation.

What a beauty!

A flurry of buy orders for the shares of Hut Group business THG Ordinary Share (LSE:THG) included one last week worth £200,000 by the finance boss of the e-commerce technology group.

Damian Sanders, who served as a THG non-executive director for two years before taking on his current role in January 2023, made his purchase on Thursday at 63.55p.

The shares closed Friday’s session at 68.4p, representing a rise of about 8% over the week as investors revisited the stock following last month’s acceleration in quarterly sales growth.

In the recent update, chief executive and founder Matt Moulding said infrastructure spending between 2019 and 2022, specifically on fulfilment and tech capabilities, was now playing a significant part in delivering competitive advantage.

The standout performance came from the largest division of Beauty, which is home to sites including Lookfantastic, Cult Beauty and Dermstore. It grew revenues by 11.1% on an underlying basis following a change of focus onto more profitable customers and territories.

The Ingenuity third-party e-commerce platform grew revenues by 5.9% while the Nutrition division posted a decline of 5.8%, a reverse that reflected a 16% devaluation of the Japanese yen and the transition of product ranges.

Broker Peel Hunt recently reiterated a price target of 141p and said that sustainable free cash flow was now in sight. The broker regards this as a key milestone for improving sentiment and unlocking the sum-of-the-parts valuation, which remains well ahead of the share price.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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