Palace Capital bags a Brexit bargain

TIP UPDATE Palace Capital PLC  (PCA)

Palace Capital (PCA) specialises in buying commercial property with a view to increasing rental income either through refurbishment or change of use. Working outside the London area, its performance has been less affected by the uncertainty generated in the wake of the EU referendum than those operating in the capital.

While a much reduced portfolio revaluation dented the headline numbers, recurring income grew from £4.5m a year earlier to £5.9m. Palace has been very astute in picking up assets, off-market wherever possible, but only 10 acquisitions have been made since 2010 when the current management team was put in place. And of those, six acquisitions have been made by purchasing the company holding the asset. This has the added advantage of not incurring stamp duty.

The most significant acquisition during the first half was the purchase of Boulton House in Manchester for £10.6m, after a number of potential buyers withdrew following the referendum vote, helping Capital to pick up an important office building just minutes from the railway station. And revised plans for the York railway site redevelopment are expected to be submitted in March 2017, following a decision to maximise returns by developing the whole site.

Analysts at Arden Partners are forecasting net asset value of 420p per share at the March 2017 year-end, up from 414p a year earlier.

Our previous tip

  • WE SAID: Buy
  • WHEN: 27 August 2015
  • PRICE: 370p
  • TIP PERFORMANCE TO DATE: -2%

 

PALACE CAPITAL (PCA)
ORD PRICE: 363p MARKET VALUE: £93m
TOUCH: 355-370p 12-MONTH HIGH: 378p LOW: 308p
DIVIDEND YIELD: 5.0% TRADING PROP: nil
DISCOUNT TO NAV: 13%
INVESTMENT PROP: £185m NET DEBT: 66%

 

Half-year to 30 Sep Net asset value (p) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2015 407 7.6 30.6 7
2016 419 3.9 13.4 9
% change +3 -48 -56 +29
Ex-div: 8 Dec

Payment: 30 Dec

 

IC VIEW:

Higher voids during redevelopment may hold back profits, but there is significant value locked up in the development arm, and the company is comfortably geared with a loan-to-value ratio of 39 per cent. So we’re sticking with our buy tip (370p, 27 August 2015).

Last IC View: Buy, 365p 7 Jun 2016

By | 2018-03-30T07:38:29+00:00 November 29th, 2016|News|0 Comments