Civitas Social Housing – December 2016

Civitas Social Housing – LON:CSH
Share Price – £1.04
Market cap – £364M

Analysis

Civitas Social Housing came to market in an IPO just a few days ago and attracted my attention. For those of you who are curious, the prospectus is available to review here, it proclaims the following.

The Company will be the first REIT to be listed on the London Stock Exchange which offers a pure play exposure to Social Housing.

The first “pure play” social housing REIT?  Sounds wonderful, because surely a REIT that wasn’t a “pure play” on social housing would be a terrible thing? Regardless of my cynicism, management will undoubtedly be pleased that the offering was over-subscribed, raising the maximum possible amount of £350M. Excluding the £5M of listing costs, that leaves the company with a NAV of £345M, meaning on a current share price of 104p, the company trades at a 5.5% premium.

After reading about the 5.5% premium on the share price to NAV, I pretty much stopped my analysis immediately. Since other larger UK REIT’s are often trading at a discount to NAV, offer ~5% dividend pay-out’s, and are already established – why would anyone take a risk on buying into this shaky business model of being dependent on government subsidies with insiders having almost no skin in the game?

Disclosure

No position

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