I analysed the interim results in an online-only article a month ago ('Currency winners', 28 Nov 2016), and had no hesitation reiterating my buy advice and my target price of 56p, having first recommended buying at 18.5p in my 2011 Bargain Shares Portfolio. After factoring in total dividends of 7.265p a share, the holding is up 204 per cent. At the time of the interim results the board noted that its mandate for the Shipbuilding Industries Pension Scheme (SIPS) fund had recently been increased from £125m to £170m, which could add £200,000 to profits in a full year once fully invested. First Property's fund managers have wasted no time in deploying the additional funds as they have just completed on a portfolio of supermarkets and a retail warehousing scheme in Southampton. This means the SIPS fund is 95 per cent invested and the portfolio of 24 properties is producing an annualised yield of 6.3 per cent. I would flag up that chief executive Ben Habib “hopes to announce additional fund mandates very soon”.
Furthermore, this is not the only factor supporting profit growth as the company also owns a portfolio of 11 high-yielding commercial properties in Poland and Romania that are worth a combined £170m, including five properties worth £67m held by 74 per cent-owned subsidiary, Fprop Opportunities. These properties contributed £5.65m to First Property's first-half profit before central overheads, reflecting an attractive yield differential between the weighted average interest rate of 2.59 per cent on the €141m (£122m) debt secured on the €199m (£170m) portfolio, and the 9.8 per cent rental yield being earned. Bearing this in mind, the plunge in sterling this year has not only boosted the sterling value of overseas profits earned, but has enhanced the sterling balance sheet value of the assets, so much so that First Property's last reported net asset value of 46p a share is 20 per cent higher than 12 months ago.