Palace Capital

LN: PCA

£128m market cap

279p last close

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

REIT conversion from 1 August 2019 will support total return by reducing future tax liabilities and may also broaden the appeal of the shares to a wider group of investors. The first dividend as a REIT will be paid in December. FY19 DPS was held at 19p in anticipation of the future income growth that management expects from asset management and potential acquisitions. We expect the Hudson Quarter development in York where interest in the initial marketing of the residential development has been strong, to be a key driver of growth over the next two years. With income and capital values continuing to grow and the FY19 total property portfolio return was 7.1%, well ahead of the MSCI UK Quarterly Property Index return of 4.6% and benefiting from a focus on office and industrial properties (together c 60% of the portfolio). Adjusted PBT increased to £8.9m (FY18: £8.5m) with like-for-like rental income up 1.1% and like-for-like valuations up 0.5%. EPRA NAV per share was slightly lower at 407p and including DPS paid EPRA NAV total accounting return was 2.6%.

Y/E Mar
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2018A 16.7 10.7 8.5 21.2 13.2 N/A
2019A 18.8 12.4 8.9 17.3 16.1 N/A
2020E 20.9 14.9 8.2 17.1 16.3 N/A
2021E 18.3 12.3 8.4 18.2 15.3 N/A
Last updated on 18/10/2019
Industry outlook

The supply demand balance for regional office and industrial property remains generally firm, and a positive yield spread between the regions and London offers potential for further narrowing. Parts of the retail sector are displaying clear signs of stress.

Last updated on 18/10/2019
Share price graph
Balance sheet
Forecast net debt (£m) N/A
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (0.4) 0.4 (9.4)
Relative* 1.4 3.7 (11.5)
52-week high/low 328.0p/265.0p
*% relative to local index
Key management
Neil Sinclair CEO
Stephen Silvester CFO

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