One of the past week’s largest director sell orders came from the brokerage account of Patrick Vaughan, non-executive chair of LondonMetric, who banked £1.1m from the sale of 400,000 shares on November 23.
The sale followed a busy few days for the commercial landlord. On November 18, LondonMetric posted an expectation-beating total accounting return of 14.5 per cent for the six months to September. On the same day, the Reit announced and completed a £175m share placing to help fund £282m-worth of property purchases.
That fundraising was struck at 260p. Although half-year results revealed a 12 per cent jump in net assets to 214.4p a share — thanks to strong rental income growth, canny capital recycling and swelling investor appetite for the warehouses and urban logistics assets LondonMetric specialises in — that still leaves the shares at a chunky premium to forecast book value growth.
Might Vaughan have concluded the shares are overvalued?
Past trading activity suggests not. While the chair has gradually trimmed his absolute holding by 44 per cent over the past decade, he still owns 10.3m shares after last week’s disposal. And while historic sales have netted around £13.8m gross, the market value of Vaughan’s stake has increased from £25m to £28m over the period, thanks to the 8.9 per cent average annual return for the shares, before dividends.
His recent share sales, which are understood to be to meet tax obligations, have also consistently occurred at the end or slightly after each calendar year end. LondonMetric declined to comment.
At 274p, the premium to book value (and smaller peers such as Urban Logistics and Warehouse Reit has started to widen, but investors should weigh Vaughan’s disposal against the £175m of investor capital that just poured in. Prospects remain bright, though fairly priced.
Kin and Carta head sells shares worth £15m
The pandemic accelerated companies’ need for digital capabilities, which has been a boon for digital transformation consultant Kin and Carta. The potential to profit from companies’ digital drives led to the company selling off all of its non-core assets to focus solely on helping them.
Since August last year, Kin and Carta has sold almost all non-core businesses, along with three of its subsidiaries, for a combined £30.6m. The remaining core has performed well, with revenue from continuing operations increasing 13 per cent to £141m, while pre-tax profit jumped 61 per cent to £13m during the 12 months to July 31.
The group added 11 new clients through the period, with the effect that it now boasts 30 clients that each spend upwards of £1m a year on its services. Significant clients include the UK government’s Home Office, Santander and The Economist. Kin and Carta’s biggest issue is a lack of talented workers to tackle its record pipeline of £135m.
On the back of these promising results published at the end of October, the share price initially jumped 25 per cent.
This bullish rise was shortlived, though, as on November 23, Marie James Capital, a private holding company for chief executive John James Schwan III, announced its intention to sell £15.05m worth of shares — approximately 2.9 per cent of the company’s issued capital.
The announcement said the “sale has been made as a prudent diversification of Mr Schwan’s children’s estate”. However, this reassurance did little to assuage the market, with the share price dropping 6 per cent in subsequent days.
Given that Kin and Carta is trading at a pricey forward price/earnings ratio of 41, any sniff of trouble was always going to have an impact on the share price. Schwan’s estate’s diversification plan provided just enough bad news to have that effect.