Palace Capital

LSE: PCA

Market Cap£92m

Last Close 210p

Palace Capital is a UK property investment company. It is not sector-specific and looks for opportunities where it can enhance long-term income and capital value through asset management and strategic capital development in locations outside London.

Investment summary

H123 results will be announced on 24 November. Strategy is now focused on maximising cash returns to shareholders, while remaining mindful of consolidation in the UK sector. However, reflecting recent market volatility and increased economic uncertainty, significant disposals will pause. Year to date disposals amount to £4.8m at a 25% discount to book value. A further nine Hudson Quarter apartments have been sold for a total of £3.9m and seven units are under offer with a value of £3.3m, leaving 31 units remaining. Operationally, rent collection is strong (99%) and occupancy stable (88.9%) and leasing progress continues. Cost reductions of £1.2m pa represent 25% of admin. Costs are equivalent to 16% of EPRA earnings. Net debt is at a similar level to end-FY22. As government bond yields increase, PCA expects a property valuation decline of less than 7%.

Y/E Mar	Revenue (£m)	EBITDA (£m)	PBT (£m)	EPS (p)	P/E (x)	P/CF (x)
2020A	21.1	14.6	8.0	17.5	12.0	6.2
2021A	17.3	10.6	7.5	16.4	12.8	8.6
2022E	N/A	N/A	N/A	N/A	N/A	N/A
2023E	N/A	N/A	N/A	N/A	N/A	N/A

Industry outlook

The commercial property market is cyclical, historically exhibiting substantial swings in capital values through cycles while income returns have been significantly more stable. Commercial property has the potential to offer a degree of inflation hedging but rising government bond yields have begun to weigh on asset valuations across the main sectors.

Last updated on 30/11/2022