r21442
20 Nov 2015
Re: Another IC / ST update Another factor is the diminished management credibility after the attempted scam.Are they bitter aboiut it?Will they try something else less stupid?Are they distracted by all that?Human nature would suggest the last thing they are doing is sitting there acknowledging it was a crazy idea, what were they thinking, admonishing themselves? But then I don't know the management.One other thing, through a avariety of reasons I did not participate in the last redemption offer so did not bank the special divi but retained more shares. Anyone know if I am likely to be better or worse off as a result?
thirty fifty twenty
19 Nov 2015
Re: Another IC / ST update hi r21442I know that ST have his critics but I do think he has made some good points in this article...namely that there are marginal factors which make LMS more attractive now:1 - the last update a few months ago said completion on 2 sales was expected shortly2 - The FX rate has gone slightly in out favour - its only small but 1 or 2p in the right direction tips the risk reward significantly3 - the strategy is clearly to return money to shareholders and after the failed attempt this is likely to be accelerated.although ST doesn't say so the bit that I like is that 'time is our favour',the downside remains the same (i.e. something unexpected but surely an exit price is still > 70p so at this price risking only 2p of capital in worst downside (10% probability),but the upside is likely within a few weeks so although the upside has not changed from a couple of months ago - our capital only has to be tied up for a few weeks not 2-3 months...one thing he didn't mention (frequently seems to ignore some downsides!) is that the aborted revised strategy will have cost 1-2m in fees. as above it is not material but given the 'limited upside' such small amounts are relevant IMHO. So I see it that likely to get 30p through a buy back within 6 weeks,leaving 65p of NAV which I put on a 15-20% discount i.e. 52p to 55p.I've been a holder and increased my weighting recentlyAll IMHO, DYOR + BoLLMS is in my portfolio
r21442
19 Nov 2015
Another IC / ST update Shares in investment company LMS Capital (LMS:72p) have been flat-lining ever since shareholders forced an about turn by the board over their controversial proposals to turn LMS into an investment trust focused on buying up energy assets, rather than pursuing its current mandate of returning all cash from asset sales to shareholders.I was strongly opposed to the proposed change of strategic direction ('Game changers', 28 July 2015), and clearly enough shareholders were too. I subsequently updated the investment case when the board did their volte face (‘Shareholder activisim works’, 2 September 2015).So it’s back to business with the board pursuing the realisations of its investments with a view to returning cash to shareholders. There has been no announcement since the company cancelled its general meeting at the end of August which explains a flat-lining share price, as investors patiently await news of further disposals and a tender offer to buy back their shares. However, I would anticipate some news flow before the year-end as the LMS board clearly stated in that August release that since the publication of its half year report on 24 July “it has continued to see progress with realisations and it is currently expecting completion of two transactions in the near term. When the outcome and timing of these transactions is known the board expects to be in a position to announce a further return of capital to shareholders”.Breakdown of portfolio Bearing this in mind, the company's last reported net asset value of £136m at the end of June 2015 included net cash of £35.3m, quoted securities worth £13.2m, unquoted private-equity-style investments worth £53.2m, and investments held in funds of £43.8m. More than 60 per cent of the portfolio is in the US and LMS's 10 largest investments account for 84 per cent of the portfolio by value, so it's concentrated in a small number of investments which should be relatively easy to divest. This means that excluding the two aforementioned disposals, LMS has net cash of 24p a share, a sum representing a third of the current share price, and almost a quarter of the company’s end June 2015 net asset value of 94p a share. Clearly, irrespective of the timing of disposals, there is substantial excess cash on the balance sheet to support a tax-efficient tender offer to shareholders pitched around net asset value.And that’s the very reason why investors have been holding the shares. In fact, since I initiated coverage when the price was 54.5p ('Capital returns', 11 February 2011), LMS has returned the equivalent of 77 per cent of its market value through three tender offers: a buy-back of 17.4 per cent of the share capital at 84p in December 2012; a buy-back of 17.2 per cent of the share capital at 90p in July 2013; and a buy-back of 22.5 per cent of the share capital at 95p in May 2014. So although the current share price of 72p is only a third above my original entry point, this is misleading as to the returns investors have actually made. Indeed, if you who bought 10,000 shares at 54.5p on my initial advice you will still retain a holding of 5,300 shares worth £3,800, and with a net asset value close to £5,000, and have so far received cash proceeds of £4,200. In other words, adjust for the cash returns, and those remaining LMS shares worth £3,800 in effect only cost £1,250. Moreover, with the company’s net asset value 30 per cent higher than the current share price, I would suggest that when all the disposals are made then you will receive a sum far closer to the book value of £5,000 of the underlying assets.LMS’s spot net asset value Of course, LMS's net asset value could have changed since the June half-year end. But I reckon by not that much, and in any case with sterling weakening from £1:US$1.5712 to £1:US$1.5225 then there will be a currency gain on US dollar holdings worth £67m at the end of June 2015 to factor in. In fact, I reckon the appreci
thirty fifty twenty
02 Sep 2015
Re: IC update No surprise to see ST cover the recent RNS.The news better than I thought though re the change in value since 30 June as the FX rate is favourable and continues to be so in recent days.I do think some discount to NAV is warranted but with a tender offer at 90p+ due within weeks for 33% I think a 15% discount is probably where the price will settle. I. E. That is the equivalent to 20% discount on the non CASH assets.At 75p the best of the gains are gone but still view as a 'better than CASH' holding.All IMHO, DYOR + BoLLMS IS in my top5 hldgs
r21442
02 Sep 2015
IC update Shareholders in investment company LMS Capital (LMS:73p) have won the day and forced an about turn by the board who have now withdrawn their controversial proposals and cancelled the general meeting to approve a change in investment strategy. The circular outlining the company's plan to become an investment trust focused on buying up energy assets, rather than pursuing a mandate to return all cash from asset sales to shareholders, was published alongside LMS's financial results at the end of last month ('Game changers', 28 July 2015).As I noted in that article, I didn't recommended buying into LMS for exposure to the energy sector. If I wanted that then there are far better ways of doing so than paying a new investment team handsomely for their expertise. And it goes without saying that it would have increased the risk profile of the shares markedly, something that clearly other shareholders who bought into the orderly wind down of the company have rejected too.So LMS will now continue to pursue the realisations of its investments with a view to returning cash to shareholders. Bearing this in mind, the company's last reported net asset value of £136m at the end of June 2015 included net cash of £35.3m, quoted securities worth £13.2m, unquoted private-equity-style investments worth £53.2m, and investments held in funds of £43.8m. More than 60 per cent of the portfolio is in the US and LMS's 10 largest investments account for 84 per cent of the portfolio by value, so it's concentrated in a small number of investments which should be easy to divest.Indeed, LMS is currently expecting completion of two transactions in the near term. When the outcome and timing of these transactions is known the board expects to be in a position to announce a further return of capital to shareholders. Even before the proceeds from these disposals is taken into account LMS has net cash of 24p a share, or a third of the share price, so there is ample surplus funds on the balance sheet to support another tax-efficient tender offer to shareholders pitched around net asset value of 94p, or almost a third above the current share price. Please note I reckon that LMS's net asset value hasn't changed much in the past couple of months as paper losses on quoted investments have been largely offset by currency gains on US dollar denominated holdings.However, amid the sharp stock market volatility last week investors have overlooked LMS's important announcement and the likelihood of a significant share buy-back through a tender offer process pitched at net asset value. Trading on a bid-offer spread of 71.75p to 73p, I rate the shares a buy on a 22 per cent discount to book value.Please note that since I initiated coverage on the shares at 54.5p ('Capital returns', 11 February 2011), LMS has returned the equivalent of 77 per cent of its market value through three tender offers: a buy-back of 17.4 per cent of the share capital at 84p in December 2012; a buy-back of 17.2 per cent of the share capital at 90p in July 2013; and a buy-back of 22.5 per cent of the share capital at 95p in May 2014. So for instance if you who bought 10,000 shares at 54.5p on my original advice you will still retain a holding of 5,300 shares worth £3,800, and with a net asset value close to £5,000, and have so far received cash proceeds of £4,200.
thirty fifty twenty
12 Aug 2015
at 72p. NAV at 94p and disposals NAV is 94p, yet the share price is only 72.5pand I calculate some upside within weeks even if they go for distressed assets sales25p CASH,13p quoted, (maybe value at 12p given oil price fall)14p UK property, 42p of other assets held in funds (distress value assumed to be a 30% discount to NAV), less 3p (5m) costs of wind up total realisable value = 77.5p;I think more reasonable to see a 20% discount applied to the funds which gives = 82p.The catalyst is the recent change in strategy....a group of investors want access to the £100m of assets to invest in the oil sector,but they have been greedy in the management fees they want to charge,the current controlling shareholders have blocked the new strategy....so what happens and what is the impact of the falling oil price.....my view if the falling oil price means that new investors see even more value in sector,then they will have to compromise more to get control - this will involve some certainty re asset realisation and thus a increase in the price towards the 80p level.if however the fall in price makes them nervous then it is back to the original disposal strategy..... and again think the price will revert to closer to its pre-proposal levels of 80pits had to see any scenario where 72p is not realisable and yet I think when discussions are concluded will be able to sell in the market for 75p +. Not worried by lack of buyers as its very tightly held and suspect there are a lot of insiders to the discussions thus prevented from trading.It is a tiny upside but likely to happen within weeks so that is 4% in a month after costs.All IMHO, DYOR + BoLLMS is in my top5 hldgs
r21442
02 Aug 2015
Citywire article on strategy change Former BP boss Tony Hayward’s plan to relaunch LMS Capital (LMS as a global energy fund received a setback today as the investment trust adjourned a shareholder meeting to vote on the proposed change of strategy.LMS Capital said it had received ‘representations’ from shareholders over the proposal to drop the private equity fund’s wind-up programme that has returned £115 million to investors from the sale of assets in the past four years.‘The board wishes to give careful consideration to these representations and accordingly has decided to adjourn the general meeting convened for 12 August 2015 to enable discussions with shareholders to take place,’ it said in a statement.Shares in LMS had slid 11% since Friday when LMS announced it wanted to invest in a new portfolio of distressed energy assets, managed by a team including Hayward and Robert Rayne, a director of LMS whose family control over a third of its shares.The shares bounced back 6% today at the prospect of the proposed change in strategy either being dropped or its terms improved, with existing investors perhaps given an exit from the trust if they did not want to participate in the new strategy.Charles Cade, investment trust analyst at Numis Securities, commented: ‘It is encouraging that the board is willing to listen to shareholders’ views, although we would question why such consultation did not take place ahead of the proposals being announced.‘In our view, it would have made more sense to include a realisation option for shareholders as part of the proposals.’He added that the proposed ‘2 and 20’ fee structure typical of hedge funds was ‘excessive; and that a seven-year contract for the new team that would oversee the new energy portfolio was too long.LMS' largest investor after the Payne family is Asset Value Investors, manager of the British Empire Securities (BTEM ), with a 15% stake. Other fund managers and wealth managers are prominent shareholders: Schroders (11%); Rathbone (7.8%) and Taube, Hodson, Stonex Partners (3.5%), according to Thomson Reuters data. The rationale for the new strategy is what Hayward’s team has described as the ‘compelling’ opportunity in energy markets caused by the slump in the oil price.This view was endorsed by comments today from Riverstone Energy (RSE ), a £734 million closed-end fund investing in privately owned North American energy companies. Delivering its half-year results the investment manager said ‘the current opportunity set in the North American upstream sector is arguably more robust than it has been at any time in recent history.’
r21442
02 Aug 2015
IC comment on strategy change The new investment policy being proposed by the board of LMS Capital (LMS: 71p), an investment company with a £100m market value, has clearly been given the thumbs down by some investors judging by the 10 per cent sell-off in its share price after last Friday's surprise announcement. The circular outlining the company's plan to become an investment trust focused on buying up energy assets, rather than pursuing a mandate to return all cash from asset sales to shareholders, was published alongside LMS's financial results. The figures showed a small rise in book value per share to 94p in the first half of this year.It's a company I have followed for quite some time, having initiated coverage when the share price was 54.5p ('Capital returns', 11 February 2011). I have remained positive ever since - and with good reason, too. That's because at the end of 2011 LMS's shareholders approved an asset disposal programme as a way of optimising value from its investment portfolio. In the past three-and-a-half years since then, LMS's board has returned £115m through three tax-efficient tender offers. This equates to approximately half the company's net asset value and three-quarters of its market capitalisation when shareholders approved the realisation process in November 2011. It's fair to say that the disposal programme has been a success, which is why I was happy to reiterate my buy advice at the time of the full-year results in March (‘Exploiting currency tailwinds, 17 March 2015).Bearing this in mind, the company's latest net asset value of £136m includes net cash of £35.3m, quoted securities worth £13.2m, unquoted private-equity-style investments worth £53.2m, and investments held in funds of £43.8m. More than 60 per cent of the portfolio is in the US and LMS's 10 largest investments account for 84 per cent of the portfolio by value, so it's now concentrated in a small number of investments which should not be that difficult to divest. Indeed, having reassessed the portfolio, I see no reason at all why the company and its investment managers can't successfully continue the asset disposal programme to its end and return a further 90p a share to shareholders. Furthermore, having banked £26.6m of asset sales in the first half, LMS's net cash now equates to 24p a share or a third of the share price, so there is ample surplus cash on the balance sheet to support another tax-efficient tender offer to shareholders pitched around net asset value of 94p, or almost a third above the current share price.However, LMS's board are proposing a complete change in investment strategy and one that shareholders will have the opportunity to vote on at the forthcoming general meeting on Wednesday, 12 August. It's worth considering what is being proposed. A sea change in strategy Reflecting the plunge in oil and gas prices in the past year, which has led to massive disruptions in the energy sector, LMS is proposing to create a new investment team to capitalise on the investment opportunities in the bombed out energy sector.The aim is to make between 10 and 20 investments with an average holding size of £20m to £40m by using at least £100m of the proceeds from the realisation of the remaining legacy assets, and by raising an additional £150m of new equity capital within 24 months. Property stalwart Robert Rayne, who has an interest in 34 per cent of LMS's share capital through a direct holding and family interests, and directors controlling 3.26 per cent of LMS's shares, intend to vote in favour of the new investment strategy. Apart from Mr Rayne, the proposed investment team will include Tony Hayward, chairman of Glencore (GLEN: 205p) and former BP chief executive; Bernard Duroc-Danner, chief executive of LMS's largest quoted shareholding, New York Stock Exchange quoted Weatherford International (WFT: NYQ - $10.27), a global diversified upstream oilfield service group; and Tom Daniel, a person who has foc
r21442
17 Mar 2015
And another IC article The ongoing strength of the greenback against both the euro and sterling is having a major impact on a number of listed companies I follow and none more so than investment company LMS Capital (LMS: 77.5p). Moreover, I expect this trend to continue in the months ahead. That’s because the US Federal Reserve looks poised to embark on an interest rate tightening cycle as early as June this year - The Federal Open Market Committee of the US central bank meet tomorrow - but the Bank of England is unlikely to follow suit given the weaker inflationary backdrop in the UK. In fact, with UK core inflation set to drop into negative territory in the months ahead according to the central bank’s governor Mark Carney, money market futures point towards the first base rate rise being delayed until next year. In turn, this divergence in interest rate policy is benefiting the greenback and is boosting the sterling value of LMS’s US investments.For instance, in the financial year to end December 2014, the company reported a £5.9m unrealised currency gain on its US portfolio of quoted, unquoted and fund investments, reflecting a 9 per cent devaluation of sterling against the greenback in the second half of last year. Moreover, since the company’s fiscal year-end, the US dollar has appreciated by a further 5 per cent from £1=US$1.557 to £1=US$1.474. To put this latest currency move into some perspective, around 64 per cent of the LMS investment portfolio is held in US assets, the equivalent of £85m of the £133m of assets held at the end of December 2014. This means that the weakness of sterling since the start of this year has resulted in an additional £4.8m unrealised gain on LMS’s US portfolio, or the equivalent of 3.3p per LMS share to lift its spot net asset value to 96.3p, up from 88p at the end of December 2013.And having realised significant gains (£12.3m) in the past year on £45.9m worth of asset sales, the board are actively seeking to dispose of more investments as part of an orderly wind up process of the company, the proceeds of which are being returned to shareholders. Last year £40m was returned through a tender offer process pitched in-line with net asset value per share. With net cash of £9m on its balance sheet, and more asset sales in the pipeline, expect another tender offer this year too. The takeover of US graphic design company ChyronHego by Vector Capital will realise a further £5m of cash proceeds for LMS on that holding.True, a steep fall in the share price of the company’s largest investment quoted holding, New York Stock Exchange quoted Weatherford International (WFT: NYQ - $11.40), a global diversified upstream oilfield service group with a market value of $9.1bn (£6.2bn), means the current market value of LMS’s holding is now only £14.7m, sharply down from £19.1m at the end of 2013 but up from £13.6m at the end of December 2014. That said, LMS still managed to boost its book value per share by 5p a share last year even after factoring in the reversal on the Weatherford shareholding. And a divestment of this stake would be relatively easy to execute too. Indeed, LMS sold 10 per cent of its holding at $21 a share last May to realise £2.6m of proceeds.In my opinion, the share price slump in Weatherford largely explains why LMS’s shares have drifted from 87p six months ago to 75p at the end of last year. It’s therefore interesting to note the price low was retested earlier this month and there was clear positive divergence on the daily price chart with the 14-day relative strength indicator (RSI) significantly higher at the time of the retest, implying that the downtrend has been arrested as I believe is the case.So with further US dollar gains against sterling a distinct possibility in my view, then LMS shares look set to bounce back as a foreign exchange tailwind benefits its US portfolio, and one where the currency risk remains unhedged. Add to that potential for positive news flow on asset
