Shares to buy, hold and sell: Martin Cholwill
BUY: INTU PROPERTIES
Intu Properties was the result of a rebranding of Capital Shopping Centres at the beginning of 2013; it owns 10 of the top 30 regional shopping centres in the UK, including Essex's Lakeside and Manchester's Trafford Centre.
The most attractive thing about these centres, explains Royal London UK Equity Income fund manager Martin Cholwill, is that they have very high occupancy rates. Whereas the high streets are suffering from a steady decline, these "destination" centres are going from strength to strength. "People like to go shopping; not everything is going to be bought on Amazon," says Cholwill.
He has been buying the shares over the past few months; they have been "very dull" in recent years, trading at a discount to net asset value (NAV) of around 15%. But with a dividend yield of 4.7%, they are now appealing to income funds looking for a sustainable dividend with the potential for growth.
HOLD: RESTAURANT GROUP
Although many people may not have heard of Restaurant Group, the likelihood is they will be familiar with the Frankie & Benny's and Chiquito outlets, just two of the popular brands the company owns.
There are two parts to the group's business, says Cholwill: the restaurants located on leisure parks alongside cinemas and bowling alleys, and those based in airports, where "there are limited things to do: shopping and eating". Because of this, Restaurant Group's branches tend to enjoy a continual turnover of table covers.
Cholwill adds that the "eating out industry" has not suffered during the recession. While some pubs or other chains have fallen by the wayside, Restaurant Group has benefited because of its strong balance sheet, allowing it to expand steadily in the past few years. "You'll notice that these restaurants don't do much of the voucher business that other high-profile chains rely on," points out Cholwill.
Eating in these restaurants is, he says, a relatively small-ticket thing, which has added to the group's success. The share price has tripled over the past five years, although he adds that this achievement has piqued investor interest and the dividend yield has inevitably fallen, to 2.4%.
Cholwill thinks the company is still likely to outperform its peers in the next five years, but he rates it as a hold rather than a buy at the moment, with the shares priced around 540p, having risen from just 355p a year ago.
SELL: DAILY MAIL AND GENERAL TRUST
While the national newspaper may be the most high-profile part of the DMGT business, it is not the area that interests Cholwill the most. DMGT also owns online estate agent Zoopla, and while he won't go as far as calling the market a duopoly between Zoopla and Right Move, he maintains there is little room left in the online estate agency world for any competitors. "I thought it [Zoopla] was an attractive hidden gem in the group," he says of his decision to purchase DMGT shares around four years ago.
The group also has a strong web presence across its businesses, despite being "a late starter".
Cholwill says the Daily Mail's website is one of the most widely read English- language news outlets in the world, and has been successfully monetised too. "But that hidden value has been recognised now," he continues, explaining his decision to take profits over the past few months, which has seen him halve his holding.
The dividend yield has fallen from 4.5% when he first bought into the stock, to around 2.5% today. The shares are currently trading at around 863p, up from 500p just a year ago.
This features was written for our sister publication Money Observer
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Net asset value
A company’s net asset value (NAV) is the total value of its assets minus the total value of its liabilities. NAV is most closely associated with investment trusts and is useful for valuing shares in investment trust companies where the value of the company comes from the assets it holds rather than the profit stream generated by the business. Frequently, the NAV is divided by the number of shares in issue to give the net asset value per share.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
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If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.