I promised an occasional set of suggestions on undiscovered and undervalued ofex stocks. I said there were still a few astonishing bargains over there and in my view this one fits the bill admirably. (my first suggestion Millbrook is up after two new partnerships and a nice contract win.)

Before i go any further, if you do not like property stocks, look away now! Let's not have a debate on the delights or otherwise of a property crash. i think you as investors have your views and are pretty clued up on the arguments for and against, but suffice to say, if you think commercial property will tumble then this share is not for you.

The stock, then is GSC Property. I hold. GSC has a portfolio worth 43 million plus cash of just under 5 million, after a recent sale. Repayments are fixed over 25 years at around 6%, totalling about 37 million. So nav is over 10 million and the nav is 101p a share. The shares are trading at 55-60p (market cap 5.75 million, nearly covered by cash!) a 40%+ discount to nav and as i said in the headline are profitable.

So why else is this so attractive? It buys on the theme of covenant, rather than location. Among the properties they own are a banking hall in Essex and a drive through in Birmingham. 90% of their customers are top 350 UK companies and or government. They are due for a revaluation of their portfolio soon, (likely to be up if the market is any indicator) and rent reviews should add to profits. The nearest company I can find is Aim listed PHP which is trading at a 5-10% Premium to nav. That would put GSC on 110p a share. Even if you think a discount is more apt however a 10-15% discount would see the shares at 85-90p which i consider to be fair value for the short term.

Oh they even pay a dividend of over 1p a share.

Strong Buy.

Repayments will be about 2.3 million per year.
So we need to have an income from rent of at least 3 million.
Providing this is achieved I don't see anything to worry about.

It was 37 million over 25 years, so that is i reckon just under 1.5 million per year. (8ball, repayment isn't 6% of 37 million, it is 37 million in total over 25 years).

It was 37 million over 25 years, so that is i reckon just under 1.5 million per year. That in theory would make, in ten years, owing 22 million. If the property values were to increase 5% a year (if cumulative) would be a portfolio of aboout 75 million (nav 53 million).

In order to put a big smile on your face that would make the share price at nav just over 530p!! See why i like it!!!
In five years nav would be nearly 300p a share (Share price now 59.5p) :)

ALL THE ABOVE ASSUMES THE COMPANY ONLY BREAKS EVEN ON THE BOTTOM LINE!!!!

That puts a whole differant look on it.

So the debt will fall 1.5 million each year then the discount will be 48%, after 1 years repayments.
Add a small 3% increase in property value over the same year and the discount comes out at 54%.

With a fixed loan, the only downside is a fall in commercial property prices.
Which I don't see.

Have a property company in my Investment clubs portfolio similar to this.
Safeland current net asset value is about 1 and the share price is 55p.

Like look of Safeland too, more diversified with a stake in Tecc-Is (at 9p now 7.25p but not disastrous) and overseas investments in Italy. I see it has been buying back a lot of shares.

GSC is a much purer commercial property play i guess, so it depends if you want the diversification or not. Attractions in both i think, thanks for bringing my attention to Safeland, will have to have a deeper look. if you can add to my limited info on Safeland, please do! Thanks 8ball.

It amazes me that more people don't take an interest in GSC and the likes of Safeland, I guess it's not got a wonderful unique new technology solution, lol!

Safeland holds a large stake in Hercules properties (5.5%) worth 2.8 million with a good dividend.
Hercules has gone from 2 to 2.90 in 12 weeks this has not been reflected in Safeland.
They also have shares in Bizspace.
Plus 25% of TECC IS.

8ball tell me more! You are beginning to give me a very persuasive story here, cheers! Is it 2.8 million now or when they bought it, do you know what other investments they have? And what about overseas properties? Do they deal in private or commercial property mainly? Etc etc! i have bought abroad so am extra interested in the overseas arm. Cheers, all help appreciated, think you are onto a winner here.

The 2.8 million is based on current share price............
IE 5.5% of market cap.......

Also 25% of tecc is 750,000 based on current price.

Cheers you know your stuff 8ball! Will be digging more while the flashy stocks go into short term freefall (FTSE 4400 support?)

4400 looks as though was a good call! Decided not yet with SAF. It is a wee bit of a hotch-potch, but the nav is excellent (not the growth potential arguably of GSC), but think you have a shrewd investment there with virtually no downside that I can see. It is now top of my watchlist and if it did drop to 50p I would be in like a shot.
Thanks 8ball for drawing my attention to a quality value play. Let you know if/when I climb aboard.

No not much growth, They could go private.
Large family holding, similar to GSC.

They don't pay dividend, but are buying shares back on and off.

Only hold via club but with a 55p price and 1 assets, am happy to hold.

Too right 8ball believe me I would be happy to hold too. It deserves a following. Great call and i am still 'rather' tempted!

Nice move up today on a horrendous day elsewhere, but GSC still way undervalued. As the market slides considering SAF again too.

Hi

In a sea of red this was a welcome rise.........
In profit already

8Ball you mentioned SAF might get taken private, is that your feeling or has the company said something to make you wonder. It's the last thing holding me back, do you think we'd be able to get out first? I remember a similar ofex company doing something similar (Sion) and there is still bitterness about it.

They don't pay a dividend.

Instead they have used spare cash to buy back shares, that plus the discount to asset value makes me feel it is possible.

The family have a large percentage of the shares at the moment, so it would not take a lot to go private.

If it was me I would.

Truly the discount (down 2p again today) is astonishing. Thanks for your honest post. I am sure there must be others at such a discount, but i don't know what they are! Will sleep on it.......

Do you have a date for the results?

It was great to note that the 10% rise was from 10,000 shares bought.
Something exciting about small trading moving the price.

You should check out the ADVFN BB for more info on SAF.
Simonevans from my experiance is a good poster.

It would appear the 10,000 was the directors selling, in order to make shares available.

Thanks for e mail Hawick.

I am unable to reply as your address does not appear via Money AM.

Hi 8ball finally bought in. I see SAF sold some Hercules shares so nav now 95p+ against share price of under 54p.

Now in the very happy position of holding GSC and SAF!