Today we would like to provide further insides into our hidden Asset valuation of Hargreaves Services plc, where a friend of us, Daniel Gilcher helped us.
According to the annual report of 2014 the book value of land assets are carried at cost: 8,418m GBP. The problem is, that we don’t have a lot available information on the different land patches across the country nor the status and information of the plan projects.
Her is what we know: Where the old mines are and that 300 acres (1% of overall land) is developed towards a residential area. A minimum of 1600 housing units will be erected. The cost for development remains unknown. Please see below the landbank of Hargreaves around Edinburgh.
And in the next picture the landbank around Westfield.
And in the following picture you can see the landbank in Castlebridge.
Furthermore, we have obtained the official documents of the Blindwells housing area development project.
Additionally, Hargreaves has two sides next to Ayr which are called Piperhill and Killoch which are both 1 hour away from Glasgow. But this land is not ready to use and is furthermore unlikely to be used in a housing context we used a low-value agricultural and wood land value for it. Please see the total landbank below (click to enlarge).
The valuation of the prospective wind farms and the underlying land is more complex, but here we went for the guideline of german wind projects of around 8,7m GBP, which are normally lower valued. For the rest of the land we simply used a 50/50 mixed use of the remaining land between low valued agricultural and wood land.
Please see below the per share basis.
In the respective valuation we only discounted the residential land value at 10% over 10 years. If our conservative estimation is correct, the company is sitting on a hidden asset value which is around 40% above the current share price.
Edit: In the new annual report they speak about 55 MW of wind projects, up from 43,5 MW last year. This would increase the value of the wind projects from 8,7 million GBP to 11 million GBP. This additional 2,7 million GBP in hidden assets increase the hidden value per share by 10,7 GBp. Furthermore, Hargreaves has stated, that they have 3 further areas wich are currently undergoing a feasibility analysis and have the potential for three big projects.
But another fact from the current report was even more interesting Hargreaves Services stated, that they have sold a piece of land from their Poinel site near Lanarkshire. We have done some further research to find this land and surprisingly a broker is offering a plot on old Hargreaves Land. You can find the land here and here. We assume, that Hargreaves has sold it for 2/3 of the now offered value which would leave us with 40.000 GBP per acre, which is much more than our assumed 4.000. After we have found the sides and we also researched the actual size. We found out, that the land bank should be around 1290 acres. Furthermore, we used 32.020.684 shares outstanding.
Please see the new valuation below:
This would leave us with a hidden value of around 4,17 GBP per Hargreaves Services Plc share.
Disclosure: no position