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.

Hi 8ball. I don't think they would go for further growth this year as they have a lot of investments to settle down, rent reviews etc to deal with and I am certain from speaking to them they would want to see the shares much closer to nav before considering a fundraising.
There will come a point, hard to say when, that they probably will go for growth (and that would be good of course for us as investors) and then a fundraising becomes possible - my guess, and that is all it is - would be the second half of next year - but remember they have tripled the size of the company recently.
Incidentally for one of my tranches i paid 63p and would not hesitate to do so again if they stay round this level, when I have funds available in the new tax year.
The Directors have made 5% of their holdings available to Jenkins immediately on demand (normal for an ofex introduction stock) and hope to get institutions in over the next twelve months.

Nice to see Wynnstay at year high despite going ex-div!
No need to answer, was just wondering if you got a few GSC? (Incidentally when I spoke to GSC they promised not to forget new investors if they wanted to participate in any future fundraising).

Anyone else here interested/taken a look at GSC?

You should! :)

Been reading your notes and yes apart from i'm a new trader in shares & haven't bought ofex yet!! not so easy to find info

Hi amberjane, welcome to the 'sharegame'!! Thanks for reply.
As a start point www.ofex.com It is exactly like trading any other shares though they can be illiquid (ie difficult to buy or sell in big numbers - usually over 1000 pounds is hard to sell all at once) and not all brokers trade ofex yet, though most are now doing so.

GSC, in my opinion, is not a short term investment - 12-18 months minimum. Good luck if you have a go!

Thanks, I'll consider.

Hi Hawick.

May take a small flutter on GSC tomorrow.
Will let you know what price I get.

Wynnstay is now 7 and gained a few shares via script divi too.

Good luck if you do 8ball and amberjane. I can safely say we are on the same side and i will be holding mine for a long time!
One thing i like is that the downside is very limited, which is more than I can say for most stocks - it would take a property crash of mammoth proportions for this one to be out of the money. Also their customer profile means bad debts are almost guaranteed never to be a problem.

Just a thought, a 40% discount to nav is deceptive, in that to reach nav the shares (around 60p) would have to rise nearly 70% to reach nav (102p).

I got some at 62p today.
Got them rather easy too, not sure if the price was that good but when it get to 1 who cares.

Welcome on board 8ball. Glad you had npo probs! Cracking little number this one.

Hawick

Is the 6.2% loan interest only?

Also when do you expect full results.

It is just like a mortgage 8Ball. Results due - interims - end September.

So it will be cleared at the end of 25 years?

Only in theory (though of course it won't be longer). Of course they will buy and sell properties in that time and hopefully make profits on the rent as well as the properties! The customer base is particularly stong too - and they should be able to pay us nice divvies along the way. I don't envisage holding for the full period somehow - though neither do i see it as a short term investment - and i am sure they will grow along the way!

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.