NADLAN (NAD) - LSE Quoted Property Vehicle

Tipped today by CityVoice :

20-08-2006

Greetings CityVoice listener

its been a while since we sent out our last newsletter. Our writers have been busy with other projects and contributing their skills in launching a new magazine very soon.

We have rushed this newsletter to bring to your attention one very overlooked stock which has been unduly marked down (more later). Nadlan (NAD) is an AIM property company which trades in, or develops, residential and commercial properties.

The company was floated on the AIM on 23 March 2004. Nadlan Plc was formed as a cash shell to attract companies and businesses which were seeking admission to trading on AIM but which were being discouraged from proceeding due to the difficulties in raising finance because of adverse market conditions. The company acquired Merseybank Limited, a residential and commercial property trading company for an initial consideration of 5m. The shares were floated at a placing price of 5p.

The company has managed to successfully carry out a couple of deals in the property market and produce steady growth in the business. The share price has had mixed fortunes and had reached stability at around 1.5p/1.75p. until an ex-director decided to sell around 5% of his holding in the market at c.0.18p, which damaged the price considerably and dropping it from around

1.75p to around 0.20p. Why the ex-director thought it was wise to sell his stake in the market is anyone's guess as we are sure there would have been other more prudent ways of selling such quantity outside the market eg placing with investors. However, his sale has provided a very good opportunity for investors to make a shrewd purchase and a eventual profit.

To reinforce the fact there was nothing untoward regarding the drop, the company explained on 28th June the reason for the mark down :

060628102751P98DD "The Company believes that the shares were sold at a substantial discount to the then prevailing market price, which may be responsible for the subsequent sharp fall in its share price."

Furthermore and more importantly, two directors purchased shares in Nadlan to once more send a positive signal that the company is trading as normal and there wasn't anything negative that the could be associated with the drop :

060707140440PA8F0 On 7th July, the Chairman, Anthony Leon purchased 800,000 shares at 0.4p and

060717140612PD40B on 17th July, the Finance Director, bought 3,125,000 shares at circa 0.32p. This holding amounted to 1.38% of the company.

As at 31st October 2005, they had net assets of 6.1m which equates to 2.6p. However, to take a conservative view point, 4.6m were intangibles (goodwill associated with the Merseybank purchase). So if we deduct this from the net assets, this would result in a figure of 1.5m which equates to around 0.7p per share. The cash position has strengthened on 22nd March 2006

060322070000PB91E when they raised 185,000 by selling a stake in another company. They made a profit of 166k on that investment.

And on 10 April

060410070000PC40F they disposed their holding in another investment which raised 115,000.

Other investments include 18,500,000 shares in Northern Lynx PLC (NLX) (another quoted property company) and that holding is currently valued at

1,200,000. Compare that to Nadlan's market cap as it stands at the moment which is just over 1m.

The company owned a property in Tunstall (Stoke on Trent) which they purchased from a company controlled by Mr Andrew Perloff, who is better known as the executive chairman of Panther Securities plc, a successful fully listed property company.

Following this transaction, Mr Perloff acquired a small interest in Nadlan (showing his confidence in Nadlan). The site had planning permission for 35 apartments, which we pre-sold off-plan.

On 14th August

060814090020PC020 Nadlan announced that this property had been sold for 800,000. The company made a profit of 93,000. After paying off the debt that was secured against the property, Nadlan will increase their cash balance by over 280,000. One very interesting point to note here is that shares were issued in part payment to pay for expenses incurred in the sale. These were issued at 1p / share.

On 11th August 20, 2006

060811070000P171D Nadlan purchased property in Bolton for 250,000. The purchase of this property was immediately cash flow beneficial for Nadlan as it generates

17,000 per year in rent. The property is fully let. Again, to the buyer, in part payment for the property, shares were once more issued at 1p/ share.

Nadlan is also involved (58.6% interest) in a potentially very lucrative joint venture regarding a property in Haydock, near the racecourse. This site had planning permission for a 102 bedroom hotel and a 15,000 square foot casino. They commenced negotiations with the local council, last August, to obtain a change of use on this site to permit the development of modern office units. If the planning permission was to be granted, it could increase the potential profit substantially. The good news is that we believe that permission has been recently granted which means the value of the property will considerably increase and the joint venture can finally commence.

What does this all tell us ? Well it tells the market (and shrewd investors) the company is alive and kicking and operating well at the business level. They are doing successful property deals, for example, last year, they completed the sale of their industrial site at Fishbrooke, in Bolton, for

975,000, which contributed a profit of over 200,000. Very impressive. Consider the following basic facts :

- Market cap c. 1m

- Approx cash balance 400k to 600k

- NLX holding worth 1.2m

- Net Assets c.2.5p/ share (inc intangibles), c.0.7p (exc intangibles)

- Still an active operating business doing very good property deals

- Business assets backed by bricks and mortar so you know what you are buying

- Director buying indicating neither Hollows nor Leon believe next final results will disappoint.

- The reason for the fall is known and the company has stated as such, this presents an excellent opportunity for shrewd investors.

Simple facts : Name : Nadlan Plc EPIC : NAD NMS : 25,000 Market Makers : 5 (Evo, Wins, T&G, Scap, KBC, Shore) Current price : 0.45p (mid) Spread : 0.43p - 0.47p

We suggest readers to get on board as we feel the price will be nearer to

1.5p very soon, once the market wakes up to the potential undervaluation of this company. The shares have been unduly hammered by the ex-director share sale, but provides a superb opportunity for shrewd investors to buy at current prices. We feel there is nothing fundamentally wrong with the business (as shown by the director buying and no negative news release from the company to explain the drop), the business is still operating successfully in the property market, and has assets which are not reflected in the current valuation of the company. We view the shares as a VERY STRONG SPECULATIVE BUY with a short term price target of 1.5p.

IMPORTANT NOTE :

1. You should always do your own research before considering purchasing shares.
2. Share prices go down as well as up.
3. Only invest what you can afford to lose.
4. All content is intended as information only and does not constitute a recommendation to buy, sell or hold any share or stock.
5. All data contained within should be treated as estimated, and should be verified for accuracy by you.
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