Currency in GBP
Last close As at 26/05/2023
GBP0.79
▲ 0.60 (0.76%)
Market capitalisation
GBP433m
Research: Real Estate
Picton Property Income has published an encouraging trading update ahead of results for the year-ended 31 March 2023 (FY23), to be released on 25 May. This shows stabilising property valuations, mirroring broad market trends so far in 2023, and progress with a range of asset management initiatives. We will review our forecasts with the results.
Picton Property Income |
Positive update ahead of results |
Trading update |
Real estate |
24 April 2023 |
Share price performance
Business description
Next events
Analyst
Picton Property Income is a research client of Edison Investment Research Limited |
Picton Property Income has published an encouraging trading update ahead of results for the year-ended 31 March 2023 (FY23), to be released on 25 May. This shows stabilising property valuations, mirroring broad market trends so far in 2023, and progress with a range of asset management initiatives. We will review our forecasts with the results.
Year end |
Net property |
EPRA |
EPRA |
DPS |
NAV** per share (p) |
P/NAV |
Yield |
03/21 |
33.5 |
20.1 |
3.7 |
2.93 |
97 |
0.78 |
3.8% |
03/22 |
35.4 |
21.2 |
3.9 |
3.45 |
120 |
0.63 |
4.5% |
03/23e |
36.5 |
21.1 |
3.9 |
3.50 |
98 |
0.78 |
4.6% |
03/24e |
38.0 |
21.6 |
4.0 |
3.60 |
98 |
0.77 |
4.7% |
Note: *EPRA earnings exclude revaluation gains/losses and other exceptional items. **NAV measure is net tangible assets (NTA), currently the same as IFRS NAV.
Leasing progress while market pricing is stabilising
There are increasing signs that the sharp market-wide repricing of property assets seen at the end of last year, in response to financial market volatility, may have run its course. The external portfolio valuation (£766.2m) at end-FY23 was 1.2% lower than at end-Q323, a significant improvement on the 9.0% like-for-like decline registered in the previous quarter, with increasing rents providing a cushion to some further yield widening. Over the same periods, quarterly, the all of market capital returns for the MSCI monthly data index were -1.2% and -14.5%, respectively. The industrial and retail warehouse sectors, in which Picton is strongly weighted, saw capital growth for the first time since June 2022. Occupancy increased to 91% (end-Q323: 90%), reflecting several leasing transactions, offsetting space that became available, at new rents that were in line with or above end-Q3 estimated rental value.
Capturing opportunities to grow income
Through leasing events in industrials, Picton made progress in capturing rent reversion (market rents were c £6m above passing rent in H123) and letting the small amount of vacant space. In retail, the focus was on maintaining the relatively high existing occupancy while, on average, sector rents are a little ahead of market levels. In H123, office occupancy was 83% and, having been slow to build post-pandemic, Picton is exploring alternative uses at several assets. In particular, at Angel Gate in London EC1, the largest single void in the portfolio (c £1m in H123). Permitted development rights for residential use have been secured on 27% of the total space and applications are progressing in respect of a further 18%, offering the potential for capital gains and income accretive reinvestment.
Valuation: DPS fully covered with surplus for growth
The current annualised rate of DPS (3.5p) represents a prospective yield of 4.6% and we currently forecast further growth, fully covered in FY24. The FY23e P/NAV is c 0.78x, below the five-year average of c 0.94x and a peak of c 1.1x.
Exhibit 1: Financial summary
Year end 31 March (£m), IFRS |
2020 |
2021 |
2022 |
2023e |
2024e |
PROFIT & LOSS |
|||||
Rental income |
37.8 |
36.6 |
40.1 |
42.0 |
43.3 |
Other income |
1.2 |
1.5 |
0.2 |
0.5 |
0.5 |
Service charge income |
6.7 |
5.3 |
6.2 |
8.0 |
8.3 |
Revenue from properties |
45.7 |
43.3 |
46.5 |
50.5 |
52.0 |
Property operating costs |
(2.3) |
(2.4) |
(2.5) |
(3.0) |
(3.0) |
Property void costs |
(3.0) |
(2.2) |
(2.4) |
(3.0) |
(2.7) |
Recoverable service charge costs |
(6.7) |
(5.3) |
(6.2) |
(8.0) |
(8.3) |
Property expenses |
(12.0) |
(9.9) |
(11.1) |
(14.0) |
(14.0) |
Net property income |
33.6 |
33.5 |
35.4 |
36.5 |
38.0 |
Administrative expenses |
(5.6) |
(5.4) |
(5.8) |
(6.0) |
(6.6) |
Operating Profit before revaluations |
28.1 |
28.1 |
29.7 |
30.5 |
31.4 |
Revaluation of investment properties |
(0.9) |
12.9 |
129.8 |
(125.1) |
0.0 |
Profit on disposals |
3.5 |
0.9 |
0.0 |
0.0 |
0.0 |
Operating Profit |
30.7 |
41.8 |
159.5 |
(94.6) |
31.4 |
Net finance expense |
(8.3) |
(8.0) |
(8.5) |
(9.4) |
(9.8) |
Debt repayment fee |
(4.0) |
||||
Profit Before Tax |
22.4 |
33.8 |
147.0 |
(104.0) |
21.6 |
Taxation |
0.1 |
0.0 |
0.0 |
0.0 |
0.0 |
Profit After Tax (IFRS) |
22.5 |
33.8 |
147.0 |
(104.0) |
21.6 |
Adjust for: |
|||||
Investment property valuation movement |
0.9 |
(12.9) |
(129.8) |
125.1 |
0.0 |
Profit on disposal of investment properties |
(3.5) |
(0.9) |
(0.0) |
0.0 |
0.0 |
Exceptional income /expenses |
0.0 |
0.0 |
4.0 |
0.0 |
0.0 |
EPRA earnings |
19.9 |
20.1 |
21.2 |
21.1 |
21.6 |
Fully diluted average Number of Shares Outstanding (m) |
546.2 |
546.8 |
547.3 |
545.4 |
545.2 |
EPS (p) |
4.14 |
6.20 |
26.93 |
(19.07) |
3.96 |
EPRA EPS (p) |
3.66 |
3.68 |
3.88 |
3.86 |
3.96 |
Dividend declared per share (p) |
3.25 |
2.93 |
3.45 |
3.50 |
3.60 |
Dividends paid per share (p) |
3.500 |
2.750 |
3.375 |
3.500 |
3.575 |
Dividend cover (x) EPRA EPS/DPS declared |
1.13 |
1.26 |
1.13 |
1.10 |
1.10 |
Dividend cover (x) - paid dividends |
1.05 |
1.34 |
1.15 |
1.10 |
1.11 |
Total return |
4.4% |
6.6% |
27.9% |
-15.8% |
4.2% |
EPRA cost ratio including direct vacancy costs) |
28.3% |
26.9% |
26.0% |
28.1% |
28.0% |
BALANCE SHEET |
|||||
Non-current assets |
654.5 |
669.5 |
834.4 |
734.9 |
740.8 |
Investment properties |
654.5 |
665.4 |
830.0 |
730.6 |
736.4 |
Other non-current assets |
0.0 |
4.1 |
4.4 |
4.3 |
4.3 |
Current assets |
41.2 |
42.9 |
61.4 |
44.3 |
42.2 |
Debtors |
17.6 |
19.6 |
22.9 |
26.2 |
26.2 |
Cash |
23.6 |
23.4 |
38.5 |
18.1 |
15.9 |
Current Liabilities |
(20.4) |
(19.9) |
(20.3) |
(20.4) |
(20.4) |
Creditors/Deferred income |
(19.5) |
(18.9) |
(19.3) |
(19.3) |
(19.3) |
Current borrowings |
(0.9) |
(0.9) |
(1.1) |
(1.1) |
(1.1) |
Long Term Liabilities |
(166.0) |
(164.4) |
(218.4) |
(225.2) |
(226.1) |
Non-current borrowings |
(164.2) |
(162.7) |
(215.8) |
(222.7) |
(223.6) |
Other non-current liabilities |
(1.7) |
(1.7) |
(2.6) |
(2.6) |
(2.6) |
Net assets |
509.3 |
528.2 |
657.1 |
533.6 |
536.4 |
NAV per share (p) |
93 |
97 |
120 |
98 |
98 |
EPRA NTA per share (p) |
93 |
97 |
120 |
98 |
98 |
Operating cash flow |
21.4 |
26.0 |
28.1 |
27.3 |
32.1 |
Net Interest |
(7.9) |
(7.5) |
(8.1) |
(8.0) |
(8.9) |
Tax |
0.1 |
0.1 |
0.0 |
0.0 |
0.0 |
Net cash from investing activities |
25.0 |
(1.3) |
(33.8) |
(25.7) |
(5.9) |
Ordinary dividends paid |
(19.0) |
(15.0) |
(18.4) |
(19.1) |
(19.5) |
Debt drawn/(repaid) |
(27.2) |
(1.8) |
52.2 |
6.1 |
0.0 |
Net proceeds from shares issued/repurchased |
6.1 |
(0.6) |
(0.7) |
(1.1) |
0.0 |
Other cash flow from financing activities |
(4.0) |
||||
Net cash from financing activities |
(40.1) |
(17.5) |
29.0 |
(14.1) |
(19.5) |
Change in cash |
(1.6) |
(0.2) |
15.2 |
(20.5) |
(2.2) |
Opening cash |
25.2 |
23.6 |
23.4 |
38.5 |
18.1 |
Closing cash |
23.6 |
23.4 |
38.5 |
18.1 |
15.9 |
Debt as per balance sheet |
(165.1) |
(163.7) |
(216.8) |
(223.8) |
(224.7) |
Un-amortised loan arrangement fees |
(2.3) |
(2.6) |
(2.0) |
(1.4) |
(0.5) |
Closing net (debt)/cash |
(143.9) |
(142.8) |
(180.3) |
(207.1) |
(209.2) |
Net LTV |
21.7% |
20.9% |
21.2% |
29.0% |
29.1% |
Source: Picton Property Income historical data. Edison Investment Research forecasts
|
|
Research: TMT
Having completed its transition to a subscription-based revenue model during the year, Checkit grew recurring revenue by 41% and total revenue by 22% in FY23. Year-end annual recurring revenue (ARR) was 28% higher y-o-y as the company successfully executed on its land-and-expand strategy. As flagged last year, the focus on accelerating profitability has slowed cash consumption. Management anticipates meeting current market expectations for FY24; our FY24 forecasts are substantially unchanged and we introduce forecasts for FY25.
Get access to the very latest content matched to your personal investment style.