J Smart (LSE:SMJ), as well as holding a large portfolio of industrial units and offices to rent out has money stored in bank accounts, in stock market shares, in land and in half-finished buildings. I regard this capital allocation as if it were to a business largely separate from the core property holding division (see yesterday’s newsletter).
Most of this money could be paid out to shareholders without much impact on the investment property holding division.
You can see from the table that the cash pile is very large, at £23.1m, for a business with a market capitalisation of £1.253 x 42.4 shares = £53m. It also has £0.9m in shares and another £4.2m in land. Working in progress property developments chip in another £1.9m.
Even after deducting an overdraft of £10.1m the company is left with £20m in these fully, or fairly, liquid assets.
Yesterday I showed that J Smart had £78.6m of property with no debt on that, producing a net income of £4.8m. To this we can add £20m of net liquid assets.
But there is a third division which is perennially loss-making, so we need to take that into account when judging the firm’s value.
The Construction division
This generally engages in building social housing when a deal can be made with a housing association, and in private housing. Much of the time there is no project. The directors describe this industry as “competitive”.
So, despite having good relationships with potential clients and a good reputation they seem to have gone through long periods of either low activity resulting in a large group of underemployed tradesmen receiving full wages or periods of work on low margin.
When John M Smart was in charge (he retired ………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
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