ACE Liberty & Stone

Ace Liberty & Stone

ACE (ALSP) acquires and rents secondary assets largely in regional cities in the UK.  HM government and city councils’ contribution to rental income accounted for 58% of rental revenues 1H20A vs. 59% FY19A. Major industrial and commercial companies account for the balance of revenues.

ACE collected 82% of revenues in the face of Covid at the end of March. Just £78k of deferrals have entered into CVAs. The remaining £672k of deferred rents are renegotiated and ALSP expects to collect this back log by Dec 2021. ACE traditionally looks for two types of core opportunities – 1) end of life tenancies to provide rental uplift via change of use and, in time, capital appreciation and 2) longer-term tenancies (weighted average life of tenancy agreements greater than 8 years) to underpin cash flows. ALSP announced in April 2020 that post Brexit (i.e., 31 Dec 2020) it would be looking for entire portfolios to acquire, signalling a potential nuancing of strategy.

The UK property market (commercial, retail and residential) slowed in terms of the rate at which transactions are completed post the Brexit vote and now Covid is slowing all bar fire sales – this is part of the property landscape for now. In our view, property portfolios (as opposed to individual properties) attractive to ALSP are more rather than less likely to become available, because of the extended Covid crisis.

Value range – 03/02/2021

Intrinsic Price104p
Value Range Low102p
Value Range High107p
Implied MCAP (m)£60.90
Implied EV (m)£104.13
AQSE IndexALSP LN
Financial YE30-Apr
CurrencyGBP

Business Activity

Commercial & retail
Property investment

Key metrics

Close Price96.5p
MCAP (m)£56.42.00
Net Debt (cash) (m)£43.23
EV (m)£99.65
52 Wk Hi110p
52 Wk Lo80p
NAV FD YE21E43.87p

Key ratios

S/P premium to NAV119.96%
% LTV ALSP adj.49.55%
Net Debt / Shareholder Equity %304.02%

Real Estate Sector Research
ACF Real Estate Team
+44 20 7419 7928
realestate@acfequityresearch.com

ace liberty and stone metrics

Outperforms sector

ACE Liberty & Stone (ALSP ISD), an Aquis Apex market listed property trading company, released a very strong set of results for 1H21 in the shadow of Covid, beating our interim forecasts very comfortably. We maintain our year end forecasts. We expect ACE to continue to outperform the commercial property sector, which has suffered stock declines averaging ~30%. Greater than 80% of rents collected vs. our 70% expectation. Rent deferrals written down £130k vs. our ~£250k expectation for the 1H21. Suspended the dividend against our expectation but prudent decision to contribute toward acquisition opportunities. LTV adjusted 53% vs. 54% y/y. 57% of rental is government backed vs. 58% y/yand 42% is triple-A commercial vs. 41% y/y. WAULB 6.94 vs. 8.08 years y/y. We have increased our VR to 102-107p

82%

>80% rental revenue collected

59%

57% of rental revenue is from government properties

Forecast beats, growth on track

+51%

Rental 1H21A £2.99m vs. £3.22m y/y -7% cf. our 1H21E £2m, 51% beat;

+57%

EBITDA 1H21A £2.2m vs. £2.5m y/y -10% cf. our 1H21E £1.4m, 57% beat;

+2%

Portfolio not for sale 1H21A 78.4m vs. YE20A £76.9m up 2%;

ALSP ISD 12m Price Rel (light) Chart vs. FTSE AIM (dark)

Competitive background

ACE (ALSP) acquires and rents secondary assets largely in regional cities in the UK. HM government and city councils’ contribution to rental income accounted for 57% of rental revenues 1H21A vs. 1H20A 58% and 59% FY19A. Major industrial and commercial companies account for the balance of revenues. ACE collected over 80% of revenues in the face of Covid for the 6-month period and wrote off Just £130k of rental income in 1H. ACE expects to collect the back log of deferred rents Dec 2021. ACE traditionally looks for two types of core opportunities – 1) end of life tenancies to provide rental uplift via change of use and, in time, capital appreciation and 2) longer-term tenancies (weighted average life of tenancy agreements greater than 8 years) to underpin cash flows. ALSP announced in April 2020 that post Brexit (i.e., 31 Dec 2020) it would be looking for entire portfolios to acquire, signalling a potential nuancing of strategy.

Exceeds Expectations Again

In a challenging  year for the rest of the quoted commercial property sector ACE Liberty & Stone is a beacon of light

+19%

Annual revenue YE20A £6.379m up 19% vs. £5.357m YE19A

-1.14%

In a consolidation year portfolio YE20A £87.4m down -1.14% vs. £88.3m YE19A.

+133%

Disposal Hume Ho. 133% capital return over 5yrs or CAGR 18.5% p.a.

+7.32%

Rental yield YE20A 7.32% vs. 5.74% yoy, up 158 bps, a 66 bps beat.

ACE promised a year of consolidation during 2020 before returning to growth with a strengthened balance sheet. ACE is delivering in spite of  Covid-19 and Brexit.  ALSP is outperforming the commercial property sector. 

Additional research notes

Click to download

It’s property but not much Covid here…?

ACE Four Beats to our Bar

Strategy shows its robust character

Margins rise, growth on track

ACE Exceeds Expectations

A record year

Trading stronger than ever

Growth with yield 19E >2%

Growth with yield 19E >2%

Activity rate high – Brexit opportunities

Another round of beats and growth

Positive performance

Chesterfield acquisition

Initialises Yorkshire’s tallest building project

Dividends more often

Generous estimates beat

Focused on the growth

Divs and Director “buying” confidence

Solid delivery – more growth to come

In sight 17E targets and value range >GBP 5.50

Activity Below the Surface

Gathering Critical Mass…

Revenues ahead of YE18 and YE19 expectations

Accelerating growth – beating estimates

Net income exchanged for growth

Bingo!…

To see the latest Ace & Liberty Stone press releases visit their website.

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