Last close As at 05/08/2026
GBP0.74
▲ 1.10 (1.50%)
Market capitalisation
GBP382m
Research: Real Estate
Picton Property Income has acquired a multi-let industrial estate for £13.1m, increasing its strong weighting to this well-performing sector. Funded using its previously undrawn low-cost £50m revolving credit facility, the acquisition will be clearly accretive. The existing portfolio contains strong reversionary potential to drive income growth and Picton has continuing financial flexibility for further accretive acquisitions.
Picton Property Income |
Accretive industrial acquisition |
Property acquisition |
Real estate |
1 October 2021 |
Share price performance
Business description
Next events
Analyst
Picton Property Income is a research client of Edison Investment Research Limited |
||||||||||||||||||||||||||||||||||||||||||||||||
Picton Property Income has acquired a multi-let industrial estate for £13.1m, increasing its strong weighting to this well-performing sector. Funded using its previously undrawn low-cost £50m revolving credit facility, the acquisition will be clearly accretive. The existing portfolio contains strong reversionary potential to drive income growth and Picton has continuing financial flexibility for further accretive acquisitions.
Year end |
Net property income (£m) |
EPRA |
EPRA |
DPS** |
EPRA NTA***/ |
P/NTA |
Yield |
03/20 |
33.6 |
19.9 |
3.7 |
3.25 |
93 |
1.02 |
3.4 |
03/21 |
33.5 |
20.1 |
3.7 |
2.93 |
97 |
0.98 |
3.1 |
03/22e |
33.9 |
20.4 |
3.7 |
3.50 |
103 |
0.93 |
3.7 |
03/23e |
35.2 |
21.4 |
3.9 |
3.58 |
107 |
0.89 |
3.8 |
Note: *EPRA earnings excludes revaluation gains/losses and other exceptional items. **Declared basis. ***EPRA net tangible assets.
Positive spread between yield and funding costs
The acquired asset (the Madleaze Trading Estate) is located in central Gloucester, adjacent to the Gloucester Quays Retail Park and the Gloucester and Sharpness canal. It comprises 18 industrial units let to eight occupiers with two units vacant and under refurbishment for re-letting. Rents of £2.74 per sq ft are affordable and the capital value a low £44 per sq ft, well below the estimated reinstatement cost. Rental income of £0.75m pa is reflected in a net initial yield of 6.1%, expected to increase to £0.86m once the estate is fully let, and further still as rents are reset to market levels over the medium term. With funding provided from a revolving credit facility at 1.5% pa plus Libor (currently less than 1.6% in total), the acquisition is clearly accretive to earnings. LTV remains low (22% on a pro forma basis) with remaining debt headroom for further accretive acquisitions. We will review our estimates with the interim results, which we expect in early November.
Strong performance has continued in FY22
Picton made a strong start to FY22, reporting a 3.2% increase in Q122 EPRA NTA per share to 99.9p, while continuing strong rent collection supported an increase in quarterly DPS to 0.85p (Q421: 0.80p), 121% covered by EPRA earnings. EPRA NTA growth was supported by a 2.9% like-for-like valuation uplift, which continued to be led by industrial assets (54% of the portfolio) but with signs of broadening, particularly to retail warehouse assets that delivered a strong gain. The long-term performance record is also strong and, on an ungeared basis to 31 March 2021 (end-FY21), Picton’s portfolio had outperformed the MSCI UK Quarterly Property Index over one, three, five and 10 years and since inception, with a top quartile performance in each of the past six years.
Valuation: Good yield with upside to covered DPS
The annualised rate of quarterly DPS (3.4p) represents a yield of 3.7% (and slightly higher on our forecast DPS). This compares favourably with risk-free alternatives, and we expect further DPS growth in FY22 and FY23. The discount to end-Q122 EPRA NTA is c 5%, above the five-year average of 3%.
Exhibit 1: Financial summary
Year end 31 March (£m) |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
PROFIT & LOSS |
|||||||
Rents receivable, adjusted for lease incentives |
40.6 |
41.4 |
40.9 |
37.8 |
36.6 |
38.1 |
39.4 |
Other income |
7.4 |
1.4 |
1.1 |
1.2 |
1.5 |
0.4 |
0.4 |
Service charge income |
6.5 |
5.9 |
5.7 |
6.7 |
5.3 |
5.7 |
5.9 |
Revenue from properties |
54.4 |
48.8 |
47.7 |
45.7 |
43.3 |
44.2 |
45.7 |
Property operating costs |
(3.5) |
(2.6) |
(2.3) |
(2.3) |
(2.4) |
(2.4) |
(2.5) |
Property void costs |
(2.0) |
(1.8) |
(1.4) |
(3.0) |
(2.2) |
(2.2) |
(2.2) |
Recoverable service charge costs |
(6.5) |
(5.9) |
(5.7) |
(6.7) |
(5.3) |
(5.7) |
(5.9) |
Property expenses |
(12.0) |
(10.3) |
(9.4) |
(12.0) |
(9.9) |
(10.3) |
(10.6) |
Net property income |
42.4 |
38.4 |
38.3 |
33.6 |
33.5 |
33.9 |
35.2 |
Administrative expenses |
(5.2) |
(5.6) |
(5.8) |
(5.6) |
(5.4) |
(5.7) |
(6.0) |
Operating Profit before revaluations |
37.1 |
32.9 |
32.5 |
28.1 |
28.1 |
28.2 |
29.2 |
Revaluation of investment properties |
15.1 |
38.9 |
10.9 |
(0.9) |
12.9 |
29.5 |
19.6 |
Profit on disposals |
1.8 |
2.6 |
0.4 |
3.5 |
0.9 |
0.0 |
0.0 |
Operating Profit |
54.1 |
74.4 |
43.7 |
30.7 |
41.8 |
57.7 |
48.9 |
Net finance expense |
(10.8) |
(9.7) |
(9.1) |
(8.3) |
(8.0) |
(7.8) |
(7.8) |
Debt repayment fee |
0.0 |
0.0 |
(3.2) |
||||
Profit Before Tax |
43.2 |
64.7 |
31.4 |
22.4 |
33.8 |
49.9 |
41.1 |
Taxation |
(0.5) |
(0.5) |
(0.5) |
0.1 |
0.0 |
0.0 |
0.0 |
Profit After Tax (IFRS) |
42.8 |
64.2 |
31.0 |
22.5 |
33.8 |
49.9 |
41.1 |
Adjust for: |
|||||||
Investment property valuation movement |
(15.1) |
(38.9) |
(10.9) |
0.9 |
(12.9) |
(29.5) |
(19.6) |
Profit on disposal of investment properties |
(1.8) |
(2.6) |
(0.4) |
(3.5) |
(0.9) |
0.0 |
0.0 |
Exceptional income /expenses |
(5.3) |
0.0 |
3.2 |
0.0 |
0.0 |
0.0 |
0.0 |
Profit After Tax (EPRA) |
20.6 |
22.6 |
22.9 |
19.9 |
20.1 |
20.4 |
21.4 |
Fully diluted average Number of Shares Outstanding (m) |
540.1 |
539.7 |
541.0 |
546.2 |
546.8 |
546.4 |
546.4 |
EPS (p) |
7.92 |
11.89 |
5.75 |
4.14 |
6.20 |
9.15 |
7.52 |
EPRA EPS (p) |
3.81 |
4.19 |
4.25 |
3.66 |
3.68 |
3.74 |
3.93 |
Dividend declared per share (p) |
3.33 |
3.43 |
3.50 |
3.25 |
2.93 |
3.50 |
3.58 |
Dividends paid per share (p) |
3.300 |
3.400 |
3.500 |
3.500 |
2.750 |
3.425 |
3.560 |
Dividend cover (x) EPRA EPS/DPS declared |
115% |
122% |
121% |
113% |
126% |
107% |
110% |
Dividend cover (x) - paid dividends |
115% |
122% |
121% |
105% |
134% |
109% |
110% |
EPRA cost ratio including direct vacancy costs) |
26.1% |
23.7% |
22.9% |
28.3% |
26.9% |
26.5% |
26.5% |
BALANCE SHEET |
|||||||
Fixed Assets |
615.2 |
670.7 |
676.1 |
654.5 |
669.5 |
704.6 |
730.2 |
Investment properties |
615.2 |
670.7 |
676.1 |
654.5 |
665.4 |
700.5 |
726.1 |
Other non-current assets |
0.0 |
0.0 |
0.0 |
0.0 |
4.1 |
4.1 |
4.1 |
Current Assets |
49.4 |
50.6 |
39.5 |
41.2 |
42.9 |
40.2 |
37.3 |
Debtors |
15.5 |
19.1 |
14.3 |
17.6 |
19.6 |
19.0 |
18.0 |
Cash |
33.9 |
31.5 |
25.2 |
23.6 |
23.4 |
21.2 |
19.3 |
Current Liabilities |
(20.6) |
(22.3) |
(23.3) |
(20.4) |
(19.9) |
(19.9) |
(19.9) |
Creditors/Deferred income |
(20.1) |
(21.6) |
(22.5) |
(19.5) |
(18.9) |
(18.9) |
(18.9) |
Short term borrowings |
(0.6) |
(0.7) |
(0.8) |
(0.9) |
(0.9) |
(0.9) |
(0.9) |
Long Term Liabilities |
(202.1) |
(211.7) |
(192.8) |
(166.0) |
(164.4) |
(164.8) |
(165.2) |
Long term borrowings |
(200.3) |
(210.0) |
(191.1) |
(164.2) |
(162.7) |
(163.1) |
(163.5) |
Other long-term liabilities |
(1.7) |
(1.7) |
(1.7) |
(1.7) |
(1.7) |
(1.7) |
(1.7) |
Net Assets |
441.9 |
487.4 |
499.4 |
509.3 |
528.2 |
560.2 |
582.5 |
NAV/share (p) |
82 |
90 |
93 |
93 |
97 |
103 |
107 |
Fully diluted EPRA NTA/share (p) |
82 |
90 |
93 |
93 |
97 |
103 |
107 |
CASH FLOW |
|||||||
Operating Cash Flow |
36.3 |
35.1 |
34.8 |
21.4 |
26.0 |
29.5 |
30.9 |
Net Interest |
(9.2) |
(9.1) |
(8.6) |
(7.9) |
(7.5) |
(7.4) |
(7.4) |
Tax |
(0.2) |
(0.3) |
(0.8) |
0.1 |
0.1 |
0.0 |
0.0 |
Net cash from investing activities |
48.7 |
(17.8) |
10.3 |
25.0 |
(1.3) |
(5.5) |
(6.0) |
Ordinary dividends paid |
(18.0) |
(18.5) |
(18.9) |
(19.0) |
(15.0) |
(18.7) |
(19.4) |
Debt drawn/(repaid) |
(46.5) |
9.2 |
(22.6) |
(27.2) |
(1.8) |
0.0 |
0.0 |
Net proceeds from shares issued/repurchased |
0.0 |
(0.9) |
(0.4) |
6.1 |
(0.6) |
0.0 |
0.0 |
Other cash flow from financing activities |
|||||||
Net Cash Flow |
11.1 |
(2.4) |
(6.3) |
(1.6) |
(0.2) |
(2.1) |
(1.9) |
Opening cash |
22.8 |
33.9 |
31.5 |
25.2 |
23.6 |
23.4 |
21.2 |
Closing cash |
33.9 |
31.5 |
25.2 |
23.6 |
23.4 |
21.2 |
19.3 |
Debt as per balance sheet |
(200.9) |
(210.7) |
(192.0) |
(165.1) |
(163.7) |
(164.0) |
(164.4) |
Un-amortised loan arrangement fees |
(3.7) |
(3.4) |
(2.7) |
(2.3) |
(2.6) |
(2.2) |
(1.8) |
Closing net (debt)/cash |
(170.8) |
(182.5) |
(169.5) |
(143.9) |
(142.8) |
(145.0) |
(146.9) |
Net LTV |
27.3% |
26.7% |
24.7% |
21.7% |
20.9% |
20.3% |
19.9% |
Source: Picton Property Income historical data, Edison Investment Research forecasts
|
|
Research: TMT
IQE has announced that it will be closing its Singapore site by mid-2022 and transferring activity to its sites in North Carolina and Taiwan. The move will generate estimated annualised cash cost savings of c £4.8m so we have revised our FY22 estimates, raising adjusted EPS by 8%. Importantly it helps create an optimised platform for pursuing volume opportunities for MBE epitaxy used for long-wavelength VCSELs and healthcare applications.