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GBP382m
Research: Real Estate
Ahead of interim results covering the six months to 30 September 2023, to be published in November, Picton Property Income has published a portfolio and asset management update. The company expects the continued progress with a range of initiatives, across all sectors, including leasing, asset enhancement and non-core disposal, to be accretive to NAV and income. Ahead of the results, our forecasts are unchanged.
Picton Property Income |
Value-enhancing asset management |
Portfolio update |
Real estate |
11 October 2023 |
Share price performance
Business description
Analyst
Picton Property Income is a research client of Edison Investment Research Limited |
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Ahead of interim results covering the six months to 30 September 2023, to be published in November, Picton Property Income has published a portfolio and asset management update. The company expects the continued progress with a range of initiatives, across all sectors, including leasing, asset enhancement and non-core disposal, to be accretive to NAV and income. Ahead of the results, our forecasts are unchanged.
Year end |
Net property income (£m) |
EPRA |
EPRA |
DPS |
NAV** per share (p) |
P/NAV |
Yield |
03/22 |
35.4 |
21.2 |
3.9 |
3.38 |
120 |
0.55 |
5.1 |
03/23 |
36.3 |
21.3 |
3.9 |
3.50 |
100 |
0.66 |
5.3 |
03/24e |
38.4 |
21.8 |
4.0 |
3.58 |
101 |
0.65 |
5.4 |
03/25e |
39.2 |
22.4 |
4.1 |
3.68 |
102 |
0.65 |
5.6 |
Note: *EPRA earnings exclude revaluation gains/losses and other exceptional items. **NAV measure is net tangible assets (NTA), currently the same as IFRS NAV.
A broad range of new lettings, regears and rent views in the quarter to end-September (Q224), across each of the industrial, retail and office sectors, builds on the progress that was reported in Q124. In virtually every case these were completed ahead of, or in line with, March externally estimated market rental value (ERV) or passing rents where appliable. A number were supported by property enhancements, including energy performance upgrades.
Active asset management, including capex to enhance the quality, sustainability and occupier appeal of assets, is key to unlocking the strong organic growth opportunity embedded in the portfolio. End-FY23 ERV of £55.8m was £12.5m or 29% ahead of passing rent. In industrials (58% of Q1 portfolio value), Picton is maintaining a high level of occupancy and capturing rental upside. In the office sector (31%), the upside from void reduction is significant, a blend of increased income and/or reduced costs. In a challenging sector, Q2 included positive lease events but, more significantly, progress with the repurposing plans for a number of assets. In Cardiff, contracts have been exchanged to sell a part-vacant office building to an experienced student accommodation developer, subject to planning consent. The sale price is dependent on the exact planning consent obtained, particularly the number of rooms, subject to a collar and cap. In all scenarios, Picton expects the transaction to be NAV accretive. Further planning consents have been secured at Angel Gate, EC1, to now convert over 30,000 sq ft of office space to residential use. The retail sector is also facing headwinds from lower disposable incomes and increased interest rates, evidenced by the closure of Wilko with 400 stores. However, within Picton’s retail and leisure portfolio (11%), vacancy is minimal and its ability to reassign the lease on a retail unit (at its Covent Garden property), upon the bankruptcy of the existing occupier, to a new tenant, with a stronger covenant, at no loss of income, is a positive indicator that rents are set at an appropriate level.
The support that asset management provides for property valuations, as well as income, provides a counterweight to continuing, moderate (low-single-digit percent) market weakness. Fundamental support for industrial assets is generating modest gains, offset by offices and, to a lesser extent, retail and leisure.
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Research: Healthcare
Newron has announced encouraging interim six-month data from its Phase II trial (study 014/015) of evenamide in 161 patients with treatment-resistant schizophrenia (TRS). The six-month interval data for treatment at all dose levels showed evenamide was well-tolerated and efficacious, with statistically significant responses (p-value <0.001) across the key efficacy measures (PANSS, CGI-S and LOF). The interim data also provide inputs for the potentially pivotal Phase III trial (study 003), which we expect to start in Q124. We note that one-year data was reported on the first 100 participants of study 014/015 in May 2023, and we now await the complete one-year data from the full 161-patient cohort, expected in Q124. If favourable, this could be a significant inflection point for the company.