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Currency in GBP
Last close As at 09/06/2023
GBP2.00
▲ 4.25 (2.17%)
Market capitalisation
GBP184m
Research: Real Estate
In an increasingly challenging environment, Phoenix Spree Deutschland (PSDL) has reported ongoing growth in rents and portfolio values for H122. Demographic trends within the Berlin residential market remain positive and the company continues to unlock reversionary rent potential. Rising interest rates and increased uncertainties have nonetheless slowed condominium notarisations. We will review our forecasts with the interim results that PSDL expects to release during the last week of September.
Phoenix Spree Deutschland |
Progress in a more challenging environment |
Portfolio valuation update |
Real estate |
8 August 2022 |
Share price performance
Business description
Analyst
Phoenix Spree Deutschland is a research client of Edison Investment Research Limited |
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In an increasingly challenging environment, Phoenix Spree Deutschland (PSDL) has reported ongoing growth in rents and portfolio values for H122. Demographic trends within the Berlin residential market remain positive and the company continues to unlock reversionary rent potential. Rising interest rates and increased uncertainties have nonetheless slowed condominium notarisations. We will review our forecasts with the interim results that PSDL expects to release during the last week of September.
Year end |
PBT* |
EPS |
NAV**/ |
DPS |
P/E |
P/NAV |
Yield |
12/20 |
37.9 |
30.0 |
5.28 |
7.5 |
13.1 |
0.75 |
1.9% |
12/21 |
45.3 |
39.0 |
5.65 |
7.5 |
10.1 |
0.70 |
1.9% |
12/22e |
42.0 |
37.0 |
6.04 |
7.5 |
10.8 |
0.65 |
1.9% |
12/23e |
43.7 |
38.0 |
6.44 |
7.5 |
10.3 |
0.61 |
1.9% |
Note: *As reported on an IFRS basis including realised and unrealised gains. **Measured as EPRA net tangible assets per share.
During the six months to 30 June 2022 (H122), the portfolio value increased 1.9% on a like-for-like basis or 1.4% (to €812.4m) after disposals. Compared with H121 the like-for-like increase was 5.7%. The valuation reflects a gross fully occupied yield of 2.8%, unchanged from end-FY21. Reported growth in the portfolio value reflects increases in rental values, more general valuation improvements in specific local areas, investment and portfolio splitting into condominiums. The €5.55m prepayment relating to the now completed Erkner forward funding acquisition is not included and will be carried in the balance sheet at cost. Ekner benefits from strong fundamentals and the purchase price of the development is fixed at €18.5m. Coming off a record €15.2m of notarisation in FY21, with a very strong H221, the H122 total was €3.0m (H121: €4.3m) at an average 20% premium to the book value of the assets sold and a 25% premium to the portfolio average value. As inflation, higher interest rates and the war in Ukraine began to bite, Q222 showed a marked slowdown.
Reflecting the board’s desire to manage the significant share price discount to NAV, an additional c 931k shares were repurchased during H122 (c €4.0m consideration) at an accretive c 24% discount to the end-FY21 EPRA NTA per share. Since the commencement of the programme in September 2019, 8.8% of the issued share capital has been repurchased. Although the discount remains high, we note that PSDL has outperformed large German-listed peers in H122, which now trade at significantly larger discounts (in most cases c 50%). The board says that future repurchases will be dependent on the level of sales of condominiums and other non-core assets. While we expect the market to remain robust, a feature of residential property, we anticipate some pressure on our forecasts from the slowdown in condominium sales. While this may slow the realisation of capital upside, there remains significant rent reversion embedded in the portfolio. Meanwhile, the balance sheet remains robust; we expect end-H122 net LTV to be little changed on the 35% at end-FY21, below peers, with most borrowings fixed with hedges that have a duration of more than four years.
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Research: TMT
Tinexta’s interim results were strong due to a combination of underlying growth and contributions from M&A. The completion of the disposal of its lowest-growth division, Credit Information and Management (CIM), leaves Tinexta with a significantly improved financial position, and therefore well placed to take account of recent weakness in equity markets to undertake further M&A. The reiteration of underlying guidance for FY22, despite the disposal of lower-growth CIM, indicates a little more caution by management for the rest of the year, likely due to the heightened macroeconomic risks. Our underlying forecasts for FY22 are unchanged. Our DCF-based valuation is €38/share, from €42/share previously.
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