Argent shines in a sad sector

Investment Column

Against the background of a 15 per cent fall in the value of the property sector as a whole, the 8p rise in Argent's share price since flotation last June from 255p to 263p is testament to the company's intrinsic strengths.

Within a whisker of the net asset value of 268p announced with preliminary figures yesterday, Argent is better valued than most companies in the sector, which has fallen to an historically wide discount to its underlying worth as the prospects of capital growth have slipped further and further out.

In its debut full-year results, pre-tax profits came in at £2.7m compared with last year's £3.9m loss and earnings per share were 5.3p (9.7p loss).

With the benefit of hindsight, Argent slipped under the wire with its market debut just as the market was becoming seriously disenchanted with an industry it had been guilty of dreadfully overhyping since the exit of sterling from the exchange rate mechanism.

Share prices tripled between autumn of 1992 and spring of 1994 as lower interest rates meant higher values could be attached to the income flows from commercial buildings and the prospect of economic recovery promised higher rents for property owners.

Since then, however, the reversal of the trend in base rates and slower- than-expected take-up of surplus space has made the outlook considerably gloomier. Many property companies have lost a third or more of their value over the past 12 months.

Argent has held up well because of its strong record through boom and slump and because as a smallish player it is better placed to ride any upturn.

Last year net assets increased by 15 per cent last year despite little growth at all in the market as a whole, and Argent has now achieved 35 per cent compound growth over the past five years despite an extremely hostile market.

It has done that by creating a balanced group, with steady income-earning assets to pay the bills, higher-yielding properties with improvement potential to provide growth and some exciting development sites to give the company some spice.

The last of these make Argent stand out from its peers, especially a 17-acre site in Birmingham, acquired for just £3m from the receivers to Rosehaugh and now worth almost 10 times as much.

Argent paid no dividend last year, preferring to retain cash for developments. That means investing in the company is a gamble on management's skill in squeezing value from an unforgiving market. They are among the best- regarded in the industry and the elements are in place for the creation of a highly successful company - the question is whether it isn't in the price already.