Langton Capital – 2016-01-06 – Daily Wrap: Pub properties, oil price, retail sales & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
• Fleuret’s suggests that the programme of major disposals undertaken by Greene King, Marston’s, Punch, Enterprise and others is essentially over
• Hence disposals will be much more selective going forward
• Average values are up 5% plus but, as Fleuret’s is suggesting that the average quality of units being sold is now rising, this may not be comparing apples with apples
Property, specifically London:
• Fleurets puts a positive spin on it when it suggests that high London pub prices are incentivising operators & property-owners to look to the regions for a better deal.
• Nationwide suggests the salary multiple re residential housing in London is out of kilter with the historic norm
• Great Portland Estates yesterday sold its 60 Great Portland Street site for a price of GBP102.15 million representing a net initial yield of 3.89%.
• Maybe we’re badly off the ball but we consider that it’s hard to suggest that the yield on London properties should be much below the level at which the professionals are selling
Oil – price outlook:
• Big brains are gambling billions on getting this right.
• Langton doesn’t have a big brain and is 9-10 zeroes behind the big boys in terms of financial fire power – but that doesn’t mean we don’t have an opinion.
• Oil’s now trading below $37 and that’s rather a big deal.
• We keep seeing headlines suggesting ‘oil price off the bottom’ but it’s on a declining trend and the ‘bottom’ keeps edging down.
• The headlines could just as easily refer to new lows.
• Saudi may be punishing the fracking industry but now we have an Iran – Saudi situation that could incentivise the former to re-enter the world oil market in a major way in order to upset their various Sunni rivals
• Add in the China slowdown and you have the makings of a weak price for some time to come.
• And yes, we do know that 1) North Korean explosions may push prices in the opposite direction and 2) speculative trading is likely to dwarf ‘real’ volumes but, at the end of the day, speculation is driven by an appreciation (right or wrong) of the fundamental situation
Random information, hopefully not all of it useless:
• Tunisia extends state of emergency. A kind of ‘emergency creep’. It’s not likely that it will be back as a holiday destination for some time yet
• Sainsbury – Home Retail. Is that really such a good idea?
• Halo slips a little further, John Lewis has announced that Waitrose was disappointing at Xmas. It reports LFL sales down by 1.4%.
• Online still in growth, John Lewis department stores’ online sales up by as much as 21% up to comprise 40% of total sales.
• Pound down slightly vs US$, up vs Euro. We get to see the Fed’s minutes later today. Shouldn’t be anything in them to change the view that there will be 4x rate increases this calendar year.
• Milk price off the bottom. Cocoa price off the top. Quite what that means for milk chocolate, we’re not sure.
• Retail stocks weak yesterday with the obvious exception of Home Retail Group. Elsewhere Dixon’s downbeat comments re the warmer-than-average winter weather outweighed any bid-spec. Sainsbury, Next, Burberry, AB Foods, Supergroup, AO World and Poundland were amongst the major losers. Quite why Kingfisher rose ‘in sympathy’ with Home Retail Group, we don’t know.
• Brexit concerns overdone? Bookies have us 2:1 to leave, 2:1 on to stay in. Looks like game-over.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Fleurets updates on pub capital values says 2015 saw extension of price recover to all regions of England and Wales
a. Fleurets says London values remain strong but says it is also in ‘the early stages of increased deal activity in many northern towns’.
b. Fleurets says ‘merger and acquisition activity is very firmly back on the agenda’
c. Fleurets says average freehold sale price is up 5.5% in 2015 vs 2014. It notes a 22% decrease in freehold sales volume
d. Fleurets sees 46% increase in volume of leasehold deals with twice as many leasehold deals in the south
e. Fleurets notes ‘managed house operators continue to grow market share, either by new build…individual acquisitions…or by group deals’
f. Fleurets. ‘The mass disposal of bottom end tenanted pubs has now ended.’ Sales going forward will be more selective.
g. Fleurets says 50% of the freeholds that it has sold remain as pubs (down from 56% in the year before).
2. Carlsberg to scale back growth ambitions + to dispose of non-core assets in an attempt to make itself a more resilient business
3. Champagne sales reached a record high of 312m bottles last year, with value sales up 4.4% to €4.7bn
4. BBPA welcomes proposed changes to business rates. Says ‘it is one part of the jigsaw’.
5. Salad bar chain Chop’d has secured a site in Leeds as part of the group’s aim to open at least six new stores this year.
6. IAG boss Willie Walsh has renewed his call to scrap air passenger duty, labelling the charge an ‘out of control rip-off’.
7. A state of emergency has been extended in Tunisia until 21 February and the Foreign Office continues to advise against all but essential travel
8. Twitter is reported to be considering dumping its 140 character limit on the length of tweets in order to boost growth.