AIMprospector
After rising tenfold in the last twelve months, have shares in regeneration specialist Sigma Capital got further to go? Sigma Capital is a ‘residential property and urban regeneration specialist’. The company has been quoted on AIM for more than ten years.
In August 2011, Sigma acquired InPartnership Limited. At the time, Sigma described InPartnership as a ‘bridge between public and private sector organisations’, working on ‘large scale property-related regeneration projects’. The acquisition brought InPartnership’s three existing arrangements with Liverpool, Solihull and Salford councils. Each partnership has earmarked significant long-term development projects.
significant long-term development projects The relationships acquired with InPartnership helped Sigma to secure a company-changing deal last year. Sigma’s share price soared in November when the company announced a joint venture with Gatehouse Bank to build 2,000 new rented homes in the North West. The final number to be built could reach 6,600. Sigma’s Chief Executive,
Graham Barnet, described the deal as having the potential to deliver one of the UK’s largest portfolios of privately rented residential property portfolios. Earlier this month, Sigma announced another deal on a site in Barking, London. Here, Sigma will work with the Greater London Authority and Bellway on the development of the area and delivery of 318 new homes.
considerable political support Similar schemes have been announced by insurance giants Prudential and Legal & General. They plan to use their financial reserves in the construction of large housing projects in the UK. These properties will then deliver long-term, reliable income for policyholders. The significance of this deal was not lost on the company’s directors. The same day that it was announced, Sigma’s Chief Operating Officer and Investment Director each purchased over 100,000 shares in the company at a price of 30p. Three weeks later, Sigma issued 5% more shares at a very small discount to buy out a former partner’s stake in InPartnership. The Gatehouse deal has an estimated development cost of
£200m, rising to £700m should the full 6,600 homes be delivered. The project has significant political support. On the day of its announcement, statements were issued by both the Prime Minister and the Business Minister, Vince Cable. Number 10 described the deal as “brilliant news for the North West and for Britain”. Revenues are not yet in the bank and Sigma/Gatehouse are yet to secure finance for the deal. However, the extent of political support for the project and the ambitions of large investment firms, suggest that there is a high probability that the go-ahead will be received. To quickly follow the Gatehouse deal in the North West with the Bellway agreement for Barking is impressive. Shareholders look set to enjoy a significant increase in company profits beginning at some point in the future, or an offer for Sigma’s stake in these projects from a larger firm. Sigma Capital Group (LON:SGM) FOR Early leader in new regeneration/housebuilding model Strong government support AGAINST Lack of experience on projects this size Unclear when cashflows will be delivered Market Cap
8
£44m
Bid:offer
89p:93p
52week low:high
8.2p:93p
P/E (forecast)
n/a
Yield (forecast)
0%
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