THE MONTHLY March 2020
Much of the UK’s privatisation programme took place between the early 1980s and the mid-1990s: subsequent sales have been few. Undoubtedly, privatisation attracted many private investors to the market, many for the first time.
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02 Mar 20
Hardman & Co Monthly: February 2020
We recently published a paper, Share ownership: For the many, not the few, based on a statistical survey of share ownership, produced jointly with Argus Vickers, the share analysis service. The Office for National Statistics (ONS) has now issued its equivalent survey. This paper compares its results with ours. Although there are, inevitably, differences in the detail, the two surveys reach the same conclusions.
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03 Feb 20
THE MONTHLY January 2020
The Office for National Statistics (ONS) is due to publish its most up-to-date survey on share ownership in mid-January, which identifies the beneficial owners and decision- makers of the stock market. Hardman & Co has worked together with the share analysis service, Argus Vickers, to jointly produce its own survey, which anticipates the conclusions of the ONS survey but goes into much greater detail. Our work does not use a sample of 200 quoted companies as the ONS historically has, but rather includes everyUK quoted company. The ONS samples share registers every two years; our study uses six-monthly data points. Our survey also extends to shareholders on NEX; the ONS does not.
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10 Jan 20
Palace Capital - Investing for growth
During H120, Palace stepped up its refurbishment and development activity aimed at improving the quality of the portfolio and enhancing its income and valuation potential over the longer term. The flagship Hudson Quarter development is making good progress and the initial tranche of the apartments offered for sale in June has been well received. Although refurbishment and redevelopment activity is dampening current income, DPS is being maintained in anticipation of future income growth and represents an attractive yield.
02 Dec 19
1H’20 results announced
1H’20 results were announced on 19 November. Seventeen lease events have been completed. Impressively, these were 25% above passing rent and 3% above ERV (i.e. previous estimated valuers’ levels). FY19 was struck 14% above passing rent. The total property return was 1.5%, outperforming the MSCI quarterly index. Early progress at the Hudson Quarter mixed-use development inside York city walls is slightly ahead of viability, with sales of 21 units in under 20 weeks (with seven additional under offer). This leads us to upgrade FY21E profits, NAV and cash significantly, but, with a view to the further delays to political certainty, we trim anticipated rental rises slightly.
27 Nov 19
H1 20 interims – on track to meet FY20 earnings; good progress at Hudson Quarter
Palace’s H1 20 interims reported net rental income of £7.9m (broadly flat y/y vs. our FY20e estimate of £15.2m; implied H1/H2 split of 52%/48%). Adj. PBT (excl. surrender premium, share-based payments and revaluation/impairments/other exceptionals) of £3.9m was down ~9% y/y due to lower management fees, higher property costs and admin expenses, but compares to our FY20e estimate of £7.8m (which we leave unchanged, implied H1/H2 split of 50%/50%). Adj. EPS of 8.5p was up 6.8% y/y due to favourable tax movements. The company has also declared an interim dividend of 9.5p (4.75 per quarter), in line with expectations. EPRA NAV fell to 391p from 407p (Mar 19) which we understand reflects a more conservative stance taken by the valuers on Palace’s refurbishment & development activity. Net debt as at Sept 19 amounted to £94m (34% LTV, unchanged since Mar 19). We make no significant changes to our core earnings, but adjust our CAPEX and EPRA NAV assumptions (detailed below). We lower our PT to 390p (from 415p) to reflect these changes, but maintain our Buy rec, seeing 37% upside at current levels.
19 Nov 19
THE MONTHLY November 2019
The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.
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04 Nov 19
Significant rental uplifts achieved during 1H 20
Palace Capital has released an encouraging trading update in advance of its interim results (due 19th Nov) reporting 12 lease renewals and 5 rent reviews since March 19, that have in aggregate generated an additional ~£0.4m in passing rents (+26% uplift), negotiated at an average 3% above ERV. We leave our forecasts unchanged at this stage, but see today’s announcement as building on positive momentum across the group following recent newsflow highlighting a successful start to Hudson Quarter, new leases at Sol Northampton, and the approved conversion to a REIT structure. At an 29% discount to FY19 NAV (407p), yielding 6.6%, we see substantial upside at current levels, reiterating our Buy recommendation.
24 Oct 19
Quarterly Research Outlook Autumn 2019
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
PCA ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PANR APP SRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
21 Oct 19
THE MONTHLY October 2019
Since their privatisation in 1989, the 10 water companies have faced a periodic review every five years; it is undertaken by Ofwat, and prescribes customer prices, along with the investment requirements. As part of the ongoing review, PR19, Ofwat will publish its Final Determination numbers on 11 December 2019; they will apply as from April 2020, although water companies do have the option to seek a reference to the CMA.
PCA AJB AGY ARBB CLIG DNL DPP FLTA GTLY GDR KOOV MCL MUR NSF PIN PHP RE/ RECI RMDL STX SCE SIXH TON SHED VTA W7L
03 Oct 19
THE MONTHLY September 2019
The challenges associated with value creation drive all investors. Any investment professional is eager to make their mark by picking organisations that are able to deliver superior returns. Increasingly investors look into how organisations are governed and how effective the top decision-making bodies of organisations really are. In this white paper, we shed light on research findings and reveal the seven hallmarks of effective boards. The seven hallmarks are proven to create more effective boards and are set to be the next lever in the value creation process. Better Boards has created advanced board evaluation tools designed to motivate and inspire and above all, contribute to superior value creation.
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03 Sep 19
Debt refinancing with NatWest supports growth
Palace Capital has signed a new £40m 5-year RCF with NatWest, replacing its existing £29.4m facility (Mar 21 maturity) with the same lender, initially lowering the group’s average cost of debt by 10bps to 3.2% (3.1% if fully drawn), and significantly extended the group’s average debt maturity from 3.6 years to 4.7 years. With our forecasted LTV still within the company’s targetted range of 30-40%, we believe Palace has sufficient financial flexibility to support its growth strategy. We post minimal changes to our numbers (outlined below), and retain our Buy recommendation.
07 Aug 19
THE MONTHLY August 2019
The introduction of IFRS 2 in 2004 generated considerable debate about the best approach for handling ‘share-based payments’ (SBP). While it is clearly a cost to shareholders, which should be included in the statutory reporting lines through the P&L account, the question arose as to whetherit should be part of our underlying EBIT calculation.
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01 Aug 19
Another letting at Sol Northampton
Palace Capital has announced the letting of 23,500 sq ft of space at its Sol Northampton leisure centre, building on current momentum following the opening of its recently-let Soo Yoga unit in June this year. On the back of this, we estimate that the vacancy rate at Sol will reduce from c.24% to 10%, with scope to bring this down further given the family-focused offering that Sol Northampton now represents (with existing tenants including Vue Cinema, Accor Hotel, Fitness for Less, as well as Soo Yoga). We leave our forecasts unchanged and retain our Buy recommendation.
01 Aug 19
Quarterly Research Outlook - Summer 2019
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
PCA AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE CYAN DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR HYR IBPO IOG INDI JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO PANR PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG SOM TWD TRAK TSG TRI VNET VTC ZOO ZTF
23 Jul 19
Palace Capital - A wealth of asset management opportunities
Palace Capital recently reported FY19 results and announced plans to convert to REIT status, approved by shareholders at the AGM. The results showed further growth in recurring earnings and positive like-for-like valuation growth but they also reflected the deferral of some letting activity to pursue refurbishment and redevelopment opportunities. Our revised forecasts now include the impact of the Hudson Quarter development in York, which we expect to be a key driver of returns over the next two years.
15 Jul 19
Positive AGM statement; strong interest at Hudson Quarter
Palace Capital has released a positive statement in advance of its AGM later today, reporting a strong start to its upcoming Hudson Quarter development in York. With the project on track to complete in early 2021, we see significant scope for value-accretive growth in coming years which we now reflect through the introduction of FY22e forecasts showing material YoY adj. EPS growth of 21.2%, a dividend cover of 1.09x, EPRA NAV of 448p and LTV of 33%. At a 31% discount to FY19 NAV and 6.7% yield, we reiterate our Buy.
12 Jul 19
THE MONTHLY July 2019
When advisers first start looking at business relief (BR) products, there is much to take in: the rules governing such products; the investment strategies being used; and what the investment risk is. It is easy to lose sight of the fact that, for non-AIM products, the investment is being made directly into a company or partnership, rather than a fund. It is, therefore, essential that governance is part of the diligence process.
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02 Jul 19
Conversion to REIT status; FY19 results announced
Palace Capital’s results (4 June) show 37 new leases were completed. Most importantly, these were 14% above ERV (i.e. the level which previous valuers had estimated). This is one of several factors underpinning significant medium-term expansion in capacity to pay growing dividends. Further, the REIT status enhances the capacity for investment and for dividend payment, through the elimination of corporation tax payable. Total property return was 7.1%, ahead of the MSCI UK Index figure of 4.6%. Like-for-like valuations edged ahead by 0.5%, compared with MSCI UK index capital growth at 0.1%. Cost of debt fell to a competitive 3.3%.
07 Jun 19
FY19 results: PBT 3% ahead; proposed REIT conversion
Palace’s FY19 earnings have come in marginally ahead of expectations, reporting net rental income of £16.4m (Arden: £15.9m, +3.3% var) and adj. PBT of £8.9m (Arden: £8.7m, +3.4% var). EPRA NAV was reported at 407p with the group recording a +0.5% LFL valuation increase. Net debt was £96.7m (34% LTV) vs. our estimates of £96m (33% LTV). Of note, the group has proposed a conversion to a REIT structure (subject to shareholder approval at the July AGM). This results in savings of 2.2p in annualised earnings, while also aligning the company’s structure with that of its peer group, potentially gaining interest from a wider investor base. We adjust our forecasts to reflect this (detailed in this note). At an 34% NAV discount and 7% yield, we see attraction relative to peers (trading at a c.10% disc, c.5.5% yield), particularly given a track record of sector-leading total returns. We reiterate our Buy and leave our 415p PT unchanged.
04 Jun 19
Portfolio and trading update
Palace Capital’s portfolio and trading update of 2 May showed underlying values up year- on-year. A lease event, resulting in a profit and cash upgrade, was announced on 7 May. This showed a cash premium being agreed to be paid by the tenant. The loan-to-value (LTV) stood at 33%. Palace Capital took the “strategic decision to hold back on letting some of our vacant space where we see the opportunity to drive value and income potential.” Construction has recently commenced for the Hudson Quarter, York, mixed residential-commercial development inside the city walls. This is one of several factors underpinning significant medium-term expansion in capacity to pay growing dividends
16 May 19
Palace Capital - Earnings deferred to unlock potential
Palace Capital (PCA) has confirmed that FY19 independent property valuations are marginally up on the prior year, although adjusted earnings will be lower than previously expected. This is due to the deferral of some near-term lettings, as part of its asset management-driven total return strategy. Management has reiterated its commitment to the current level of dividends, expecting these and other asset management initiatives, including the flagship Hudson Quarter development in York, to deliver future income and capital growth.
15 May 19
Lease surrender in Birmingham
Palace Capital has successfully negotiated a lease surrender at Priory House in Birmingham (63,000 sq ft), and will be receiving £2.85m in cash at the end of this month, officially ending the sublease (which was due to run to December 2027 at a rent of £322,000 p.a). We update our earnings forecasts (further detail later in this note) and highlight the dividend cover significantly improving to 1.08x in FY20E and 100bps reduction in our LTV in FY21E. Given the property has been unoccupied since 2012, we see this as providing the company with added flexibility to extract further value through potential redevelopment, refurbishment or the sale of the leasehold interest. We maintain our Buy recommendation and target price of 415p seeing good upside at current levels (32% NAV discount, 6.7% yield).
07 May 19
Trading update; PBT rebased but DPS maintained
Palace Capital has released a trading update anticipating adjusted PBT to be “slightly below expectations” for FY19 leading us to rebase our earnings by 7%-12% for FY19-21E. We draw positives from the maintained dividend (19p, 6.3% yield) demonstrating the company’s confidence in delivering total returns from the valueaccretion potential arising within its strong development pipeline. With a stable balance sheet (33% LTV) and strong fundamentals underpinning the regional property market, we maintain our Buy recommendation and TP of 415p seeing upside at current levels (28% NAV discount).
02 May 19
Quarterly Research Outlook
We’re just over three months in to 2019 and we’ve seen a 10% UK market rally, retracing much of the Q4 decline, such is the nature of fickle market sentiment. That said, many of the issues we wrote about three months ago that were impacting markets remain: notably Brexit, trade wars, geopolitics and global monetary policy. The 2019 rally thus far feels somewhat fragile, with competing forces of optimism on a potential trade deal which could underpin the rally, against the deterioration in underlying economic data that could ultimately undermine the recent market gains. In this context, we look at what the lead indicators and the market are telling us about the industrial cycle and the stocks most exposed to various industrial trends. The Q4 derating in short cycle industrials and autos had been vicious and while these sectors have seen a more solid footing in 2019, with earnings downgrades being priced in, it will likely take a trough in lead indicators before short cycle stocks can start to perform again and re-rate relative to the market.
PCA ARS CYAN HYR LIT SOM ABBY AMS AMER ANX ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE DTG DEMG EMR FPO FST GTLY GENL INCE GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO INDI JHD JOG KEYS KCT KGH LAM LOK MACF MNO MANO MOD MKLW OXIG PANR APP PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TRAK TRI VNET VTC ZOO ZTF
11 Apr 19
The Monthly April 2019
Although the focus of Hardman & Co is predominantly on companies in the smallto mid-sized market capitalisation range, when writing research reports, it is important to position them relative to the industry in which they operate. Apart from Japanese companies, all the major global pharmaceutical companies have reported full-year results for 2018 over the past few weeks; therefore, we have taken the opportunity to update our industry database and generate the first cut of global rankings for 2018. For an industry that requires a long investment cycle – it still takes, on average, 10 years from discovery to launch of a new drug – decisions made many years ago have important consequences on current financial results. Therefore, looking back at operational performance over 20 years reveals how different company strategies have panned out.
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03 Apr 19
Hudson Quarter, York, development commences
Palace Capital is a real estate investor. It has recently commenced construction of its mixed residential and commercial development at Hudson Quarter, having secured a new £26.5m debt facility and fixed price contract. Supply in this location is tight and the projected gross development value of £65m would thus appear robust. The current site book value is £16.8m. The building contract is £35m (part of a total projected cost of £37m, pre-interest). We note that the full benefit of Hudson Quarter is derived during FY22, when Palace Capital will receive significant free cash. This is one of several factors underpinning significant medium-term expansion in capacity to pay growing dividends.
21 Mar 19
Small Cap Feast
United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 28 Feb Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Polemos, to be renamed Digitalbox plc, has agreed to acquire Digitalbox Publishing Holdings Limited for c.£10m through a share for share exchange. The acquisition constitutes a RTO. Polemos has also agreed to acquire the entire issued share capital of Mashed Productions Limited, a digital media business which owns the online satirical news website "The Daily Mash", for a maximum total consideration of up to £1.2m. Market cap on admission £12.4m, expected 28 February
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19 Feb 19
Hudson Quarter £35m construction contract signed PCA.L 312p
Key Points. Palace Capital has signed a £35m construction contract with a renowned contractor, Caddick Construction Ltd (part of Yorkshire-based Caddick Group) to undertake its development in Hudson Quarter, York. We see the appointment of a renowned operator as being the first step towards derisking the project, adding further momentum for the company following its £26.5m loan facility agreed last week. We reiterate the analysis from our last note showing the potential for c.£11m of development profits (adding c.24p to the NAV) and c.5p of additional earnings post FY21 (implied dividend cover of 1.2x), all upside to our current numbers, highlighting the positive returns to be made from Hudson Quarter. At a c.25% NAV discount and 6.1% yield, we reiterate our Buy rating. PT 415p.
11 Feb 19
Small Cap Feast
United Oil & Gas (UOG.L) an oil and gas exploration and development company brought to the Official List (Standard Segment) in July 2017 by way of a reverse takeover of Senterra Energy plc. No capital to be raised, expected market cap of £17m and expected 28 Feb Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m.
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11 Feb 19
New debt facility for Hudson Quarter, York
Key Points. Palace Capital has signed a new £26.5m loan facility with Barclays Bank to part-finance the development of Hudson Quarter in York (total estimated CAPEX of c.£37m). The remainder will be funded by the group using existing cash reserves of £13.8m (Sept 18). We see this as being positive news for the company as it seeks to unlock the potential for NAV accretion in coming years. We present a scenario whereby the group could generate c.£11m in development profits by FY21- 22, adding c.24p to the NAV. We make a number of changes to our forecasts (trimming our DPS and increasing our CAPEX and net debt estimates), positioning these in line with the group’s plans for Hudson Quarter. We also publish numbers for FY21. We maintain our Buy recommendation and continue to see the shares as being undervalued at current levels (25% discount, 6.1% yield). PT 415p.
07 Feb 19
THE MONTHLY February 2019
This Investment Research Paper addresses the issue of renewable power generation in the UK and in mainland Europe, which – after the deep-seated financial crisis of 2008/09 and the ensuing recession – now has better prospects of achieving critical mass. It also considers investment perspectives.
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05 Feb 19
Quarterly Research Outlook
The market has not faced quite so many conflicting challenges for a number of years, whether related to global geopolitics, trade wars, ongoing Eurozone issues or the “will they, won’t they” saga of Brexit. In our Best Ideas, we sought to highlight stocks that present investors with interesting opportunities following recent market moves. Those stocks, we believe, warrant investor attention, in many cases for uncorrelated or stockspecific reasons, regardless of the near-to-medium term market direction. These stocks, in general, represent attractive and well-managed businesses or assets, with share price catalysts and where valuations or recent stock performance provide investors with a good entry point.
PCA 7DIG ABBY AMS ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KEYS KCT KGH LAM MACF MOD MKLW OXIG APP PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF
31 Jan 19
Small Cap Feast
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m. Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019. Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan medium-sized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
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28 Jan 19
THE MONTHLY January 2019
The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. 2018 was a difficult year; however, the index still outperformed its comparative London indices, falling 10.0% to 393.2, compared with -13.0% and - 18.2% for the Allshare index and the AIM index, respectively. Furthermore, several (17) companies in our index increased their capital base – 15 of our 50 constituents raised new funds, two issued shares as part consideration for acquisitions, and two had share buybacks – all factors that influence the performance of the index. Even allowing for both capital increases and share buybacks, the 12.5% fall in the index still represented a modest outperformance compared with the decline in the Allshare index. With active industry consolidation, shareholder returns remain attractive.
PCA OPM AVO AGY APH ARBB AVCT BUR CLIG DNL DPP GTLY GDR HAYD KOOV MCL MUR NSF OXB PHP REDX SCE SIXH TRX TON VAL VTA
11 Jan 19
£14m acquisition refocuses portfolio on core sectors
Palace Capital added a substantial mixed commercial property in Liverpool to its portfolio at the end of December. That put it ahead of our year-end portfolio growth target, and progressed a refocus on core activities and higher yield commercial property.
04 Jan 19
Palace Capital - Positive reinvestment of residential proceeds
Following the agreed £18.2m sale of most of the non-core residential assets acquired with the RT Warren portfolio last year, Palace Capital (PCA) has acquired a quality, mostly office building, in the heart of Liverpool for c £14m. The transactions represent a significantly positive yield arbitrage, enhancing existing strong reversionary potential. Further opportunities reposition and grow the portfolio, including the Hudson Quarter development in York, and are positive indicators for future growth.
04 Jan 19
Palace Capital - Significant potential for income and capital growth
Palace Capital (PCA) has published its interim results for the six months to 30 September 2018 and has also exchanged contracts for the sale of 50 low-yielding, non-core residential units, acquired as part of last year’s RT Warren acquisition. After a year of significant developments at PCA, preparing the ground for the next stage of growth, H119 has been a period of consolidation, although the company has continued to deliver income and capital growth, generating a NAV total return of 4.0% in the period.
03 Dec 18
Solid first half driven by asset management
A steady first half demonstrates the resilience of PCA’s portfolio. Aside from small acquisitions/disposals, performance was driven by continuing asset management with contributions from new lettings, rent reviews and lease renewals.
29 Nov 18
Interim results to September 2018 reported
Palace Capital reported 1H’19 (six months to September 2018) results on 26 November, in line with expectations. We reduce our forward estimates due to disposal and minor trimming of some 2020 income. The strategy of being overweight offices (48% assets in offices in regional hub locations), well underweight retail continues to deliver, with total returns (5.3%) once again ahead of market benchmarks (of 3.3%). Palace Capital is an active manager: in the six months there were 22 lease events, 9% ahead of ERV (estimated rental value). Since period-end, further capital has been recycled out of assets purchased as part of the 2017 RT Warren acquisition, creating value going forward and capturing a modest value uplift.
28 Nov 18
H119 Interim Results
Palace’s interims show the RT Warren acquisition delivering scale, with gross rental income increasing by 29% YoY to £9.2m and adjusted PBT by 17.5% to £4.4m. EPRA NAV increased marginally from 415p (Mar 18) to 421p benefitting from a 1.7% LFL valuation gain, although we see this falling back to 415p by the year-end due to the crystallisation of latent deferred tax upon the sale of 50 residential assets for £18m announced last week. However, we see further upside from development projects such as Hudson Quarter (formerly known as Hudson House) which could add c.20p in the NAV over the coming years.
26 Nov 18
Small Cap Feast
Kropz, an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana, is looking to join AIM. Offer TBC, expected late Nov Titon holdings—international manufacturer and supplier of ventilation systems and window and door hardware. No capital raise. Due 10 Dec. Mkt cap c.£22m. Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected early December. Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA. Due early Dec Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is investigating the possibility of AIM admission. The Company is proposing to raise up to £2.25 million before the end of December, conditional on Admission. The Panoply parent company of a digitally native technology services group founded in 2016 with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses across Europe, is looking to join AIM. Offer TBC, expected late November 2018.
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23 Nov 18
Quarterly Research Outlook
The June IPO of Knights Group Holdings, a Top-100 regional law firm, marked the fifth entrant to the burgeoning UK-listed legal sector. Following recent expansion of our coverage across all five listed legal firms, complemented by coverage of three broader support services peers with exposure to the sector, we revisit and build upon our views on this rapidly evolving sector.
PCA ARS GTLY GENL KEYS KGH MNO RBGP TWD 7DIG ABBY AMS AMER ANX ARS ATYM AVON BLVN PIER CGS CAML CALL CSRT TIDE DTG DEMG ELM EMR FPM FPO FST GTLY GENL GRI GEEC HDY HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KEYS KGH LAM MACF MNO MKLW NAH OXIG APP CAKE PDG RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG TWD TRAK TRI VNET VTC ZTF
23 Oct 18
A Hidden Treasure
Palace’s shares have fallen by c.15% since the end of June and with the shares trading at a significant discount of c.27% to FY18 NAV (compared to a c.10% discount amongst a selected peer group), we view there to be considerable share price upside of 39%, alongside an additional benefit of a 6.4% FY19E dividend yield (next quarterly dividend of 4.75pps to be paid to all shareholders on the register as at 5 th October 2018). Recent investor feedback has indicated several factors which have contributed to recent share price weakness. As we seek to address these concerns, we also reiterate the underlying fundamentals supporting the investment case for Palace Capital. We believe that at current levels, the shares have largely priced in downside risks associated with Brexit, and should now be assessed more on fundamentals. Buy, Target Price 421p.
03 Oct 18
Lease Renewal with Aldi
Palace Capital has announced that it has agreed a new 20 year lease with Aldi at its 16,500 sq ft property in Gosport, Hampshire, increasing the rental by 17.4% to £291k p.a. and extending the lease by an additional c.8 years to September 2038 (previously August 2030). The revised lease now includes a small amount of additional land for car parking, and is subject to a rent review to be undertaken every 5 years (based on RPI with a 1% collar and 2.75% cap, compounded annually).
02 Oct 18
Small Cap Feast
PetroTal (TAL.TO) - The exploration and production company focused on oil assets in Peru is seeking a secondary AIM quoting before the end of 2018. Path Investments— First acquisition of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m raise. Due early Oct Green Man Gaming—pure play e-commerce and technology company in the digital video games industry. revenue CAGR growth of 26.7% in the last three years to £47.5m. Due Mid October 2018. EBITDA Profitable. Offer TBA Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
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02 Oct 18
Initiation of coverage
Palace Capital (PCA) has almost doubled NAV since the initial investment in October 2013. Good income generation is evidenced by the EPRA EPS and the DPS track record, whilst undertaking incremental refurbishments and development. The investment portfolio is 90% occupied and generates strong cashflows: with a focus on regional city centres, offering occupiers value for money. Development opportunities are optimised. 6% of the portfolio value is in a recently demolished and cleared two-acre site in the heart of York, due to be redeveloped, which will generate a step rise in NAV and in group income, once completed end 2020.
28 Sep 18
Quarterly Research Outlook
In Q2, UK equities regained some of their poise after the draw down in Q1, although uncertainty around Brexit continued to grab the headlines. On the back of this, investor concern about the UK economy has been understandable in recent months given a number of negative data points. However, we see reasons for optimism for UK Plc with wage growth supporting an improving outlook for the consumer and business investment holding up. That said, continuing UK political disruption clearly remains a risk going forward.
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18 Jul 18
A year of significant development and growth
The year ended 31 March 2018 was one of significant development and growth for Palace, including the £68m acquisition of RT Warren, its largest acquisition to date, a £70m capital raise, and a move to trading on the Main Market of the LSE. The shares will join the FTSE Small Cap Index and FTSE All Share Index on 18 June. The portfolio, enlarged by the RT Warren acquisition, offers significant asset management opportunities, while management seeks further accretive acquisitions, neither of which is reflected in our estimates. The shares offer an attractive yield and trade at a significant discount to NAV.
12 Jun 18
2018 Finals – A transformational year
Palace Capital has reported a strong set of results for the year to March 2018, with net rental income increasing by 22% to £14.9m (Arden: £14.1m) and adjusted PBT, which excludes revaluation gains and one-off items, increasing by 27% to £8.5m (Arden: £8.3m). EPRA NAV decreased from 443p to 415p reflecting the dilution effects following the £70m fundraise in October 2017. However, from a proforma base of 389p post-fundraise, EPRA NAV increased by 7% to 415p (Arden: 395p) driven by revaluation gains of £5.7m (FY17: £3.1m) and 3.5% LFL growth in its portfolio. As a result, the company has declared a final dividend of 4.75p, increasing the total dividend for the year by 2.7% to 19.0p, maintaining its progressive dividend policy.
11 Jun 18
Planned sales and acquisitions to build on active FY18
Better than forecast FY18 results reflect PCA’s focus on intensive asset management. That continues to drive underlying property returns (rent and asset values), while profitability is benefiting from recent debt refinance on better terms. The shares stand at a 14% discount to FY18 EPRA NAV/share of 415p and a 11% discount to basic NAV of 400p/share (12%). We forecast 417p by end FY19.
11 Jun 18
Continuing to move ahead
With its move to the Main Market of the LSE completed, Palace recently provided an update on trading for the year to March 2018, ahead of preliminary results on 11 June. Management expects to report adjusted earnings (excluding revaluation movements and other one-offs) ahead of market expectations. Looking forward, the portfolio, enlarged by the RT Warren acquisition, offers significant asset management opportunities, while management seeks further accretive acquisitions, neither of which is reflected in our estimates. The shares offer an attractive yield and trade at a significant discount to NAV.
21 May 18
Asset management, refinancing driving result
The group’s portfolio and trading update confirmed that FY17/18 results will be slightly ahead of expectations. The statement illustrates how effectively intensive asset management continues to drive underlying rent and asset values, with margins also enhanced by recent debt refinance on improved terms.
25 Apr 18
Palace Capital’s trading update reports high levels of activity across the portfolio, reflecting the company’s active management strategy, with a number of property sales and progress on several refurbishment & redevelopment projects as detailed further below. The company has stated that adjusted PBT for FY18 is likely to be ahead of market expectations.
24 Apr 18
Small Cap Breakfast
Hydrominer GmbH, An Austrian cryptocurrency miner, is considering an initial public offering (IPO) on the London Stock Exchange AIM during 2018 according to an article on Bloomberg. Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Offer raising £30 at 165p with market cap of £100m
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26 Jan 18
Strong first half, acquisitions to boost H2
As the RT Warren acquisition was completed in October 2017, post the half year end, the interims were unaffected by PCA’s largest purchase to date. That deal will make a material difference to future results as it added c 34% to the value of the group portfolio, funded by a £70m placing at 340p/share. The interims did, however, provide further evidence of how intensive management is enhancing underlying portfolio performance. Lettings, lease renewals and reviews drove up net rent and capital values. The next 12 months is likely to be at least as active. Management is already getting to grips with what’s needed to bring what it regards as an undermanaged portfolio (RT Warren) up to speed. It has lined up the non-core residential assets for disposal, will continue to work new and existing assets and seek opportunities to invest spare cash.
08 Dec 17
Palace Capital’s interim results reflect a strong performance during the period with reported PBT up 25.6% at £4.9m (HY2017: £3.9m) largely driven by a £1.4m revaluation gain. Adjusted PBT (which excludes revaluation gains and profit/(loss) on disposal) increased by an impressive 22.5%. This translated into an Adjusted EPS of 12.8p, an increase of 18.5%. EPRA NAV increased to 451p (FY2017: 443p) as a result of Palace’s active asset management approach. We continue to support a Buy recommendation with a revised target price of 395p which represents our forecast FY2018 EPRA NAV – further upside scenarios are outlined below. Following a decision to move to quarterly dividends from 2018, shareholders on the register by 8th December 2017 will benefit from an annualised dividend yield of 7.0% thanks to an interim dividend of 9.5pps and three quarterly dividends of 4.75pps over the next 12 months.
04 Dec 17
Income and NAV growth in H1
Palace Capital has announced its interim results for the six months ended 30 September 2017. These show good progress in income, earnings, and NAV. The interim dividend had been previously announced, showing growth of 5.6% to 9.5p per share. The significant acquisition of the RT Warren portfolio and accompanying capital increase came after the period under review and is not reflected in the results. Our forecasts reflect the near-term dilution from the acquisition but not the upside from asset management, due to uncertainty as to the timing and impact. Despite that, Palace offers a highly attractive yield and discount to NAV, while the increased market capitalisation and intention to seek a Main Market listing are likely to broaden Palace’s appeal to a wider investor base.
04 Dec 17
Small Cap Breakfast
Totally (TLY) - Sch 1 for £11m RTO of Vocare, a provider of integrated urgent care services to the NHS throughout the UK. £76.8 million rev in the year ended 31 March 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. Central Asia Metals (CAML) -RTO of Lynx Resources. Anticipated market capitalisation at Admission: £404.8m. Raising £113m at 230p. Acquiring the SASA zinc-lead mine in Macedonia from Solway Industries. Due 15 Dec. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. Orogen plc, to be renamed Sosandar plc on Admission. Sosander is an online womenswear brand specifically targeted at a generation of women who have graduated from younger online and high street brands, and are looking for affordable clothing with a premium, trend-led aesthetic. Offer to raise £5.3m with market cap of £16.1m, expected 2 November 2017 OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected late October . SolGold—Publication of prospectus regarding transfer from AIM. Due 6 Oct ContourGlobal LP— contracted wholesale power generation businesses, with 69 thermal and renewable power generation assets in Europe, Latin America and Africa. In the year ended 31 December 2016 it generated $905.2 million of combined revenue and $440.4 million of Adjusted EBITDA. Raising c.$400m. Expected November. TI Fluid Systems—Maybe second time lucky? Pulled last October. global manufacturer of automotive fluid storage, carrying and delivery systems seeking to raise €425m to reduce financial leverage (to approximately 2.0x net debt to Adjusted EBITDA by the end of FY 2017). Possible partial sale by Bain. Revenue for FY 2016 was €3.3 billion and Adjusted EBIT was €362.1 million M7 Multi-Let REIT—Intends to raise up to £300m at 100p. Aims to acquire and hold a portfolio of UK regional light industrial and regional office assets diversified by geography, asset type and tenants that is expected to generate stable income returns and, where appropriate, offer the potential to leverage and enhance returns through active asset management initiatives. Due 13 Nov. Bakkavor Group - Provider of fresh prepared food intends to float in November. FY 16 Revenue: £1,763.6 million FY 16 Adjusted EBITDA: £146.4 million (13.7% CAGR FY 14-FY 16). Part vendor sale and primary raise of c. £100m. Price TBA. Russia’s En+, owned by Russian aluminium tycoon Oleg Deripaska, has assets in metals and energy, including hydropower. reported to be seeking dual London and Moscow listing raising $1.5bn TMF Group , which provides tax, admin and legal support services, reported to be seeking London IPO to raise c. £200m. People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance.
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16 Oct 17
Transformational acquisition of £72m portfolio
PCA has completed the acquisition of RT Warren, its largest to date. The transaction will transform results this year, and have a full impact from FY19. We have updated our forecasts for the addition of the acquired £72m portfolio, and the dilutive impact of shares issued to finance the purchase. The £70m placing at 340p/share reduces projected NAV/share by c 13%, but dividends on the enlarged equity base should still be fully i.e. 1.1x covered (1.2x previously) by underlying EPS, based on estimates of initial net rent from the new assets.
12 Oct 17
Aiming high with acquisition and placing
Palace Capital shareholders have approved the significant acquisition of RT Warren, with a mixed use investment portfolio valued at £71.8m, and the issue of shares to fund it. Management has built a strong track record of value creation from previous acquisitions and expects its management of these newly acquired assets to yield similar results. That potential is not reflected in our revised estimates with the effect that earnings and NAV are diluted. Our dividend forecasts remain the same, and fully covered, such that Palace retains a highly attractive yield and discount to NAV. The increased market capitalisation and intention to seek a Main Market listing are likely to broaden Palace’s appeal to a wider investor base.
11 Oct 17
New Jewel for the Palace
Following the completion of the Open Offer & General Meeting on 7th October 2017, Palace Capital has successfully raised £70m of new equity to fund the acquisition of R.T. Warren. R.T. Warren contains 21 commercial properties, comprised of 15 office buildings, 4 retail properties and 2 industrial holdings as well as 65 residential properties. The portfolio was valued by Cushman & Wakefield at £71.8m and Palace is paying £68m (£53.3m cash, £14.5m debt). Consistent with Palace’s strategy the properties are located outside London in high value areas such as York, Winchester, Southampton, Beaconsfield, Brighton, Gerrards Cross, Uxbridge and Thame. The acquisition completed on 9th October 2017.
11 Oct 17
Small Cap Breakfast
City of London Group (COLG) - Sch 1—RTO of Milton Homes Limited, an equity release provider which has a UK residential property portfolio of 586 properties with a market value of approximately £77 million as at 30 June 2017. Offer TBA. Due 5 Oct | Springfield Properties—Scottish housebuilder. Intention to float. Offer TBA “Our turnover exceeded £100 million for the first time this year and now we employ around 500 people. This IPO is the next step in our growth.” | Warehouse REIT - The Company will invest in a diversified portfolio of UK warehouse assets located in urban areas. The Company is targeting a dividend yield of 5.5p equivalent to a yield of 5.5 percent. for the year ending 31 March 2019. Issue price 100p. Offer raising £150m at £1 with market cap of £166m. Due 20 Sep | OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. |People’s Investment Trust—Objective of sustainable wealth creation. Also to list on the Social Stock Exchange. Targeting £125m raise on 17 Oct. No performance fees or executive bonuses in order to focus on long term rather than short term performance. | Charter Court Financial Services Group—Intention to float. Specialist lender serving the UK residential mortgage market. The net mortgage loan book stood at £4.4 billion as at 30 June 2017 growing at a compound annual growth rate of 92 percent since 31 December 2014. Part vendor sale and £20m primary raise. | ContourGlobal LP—Report on Bloomberg that the thermal energy power generator is considering a London listing. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 Sep.
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19 Sep 17
Approval granted for Hudson House plans
York City Council has approved Palace’s planning application to demolish Hudson House and replace the existing office building with a mixed-use development comprising residential, office and commercial areas. While we have not changed our estimates, pending further information on the costs and timings of the project, the approval removes one risk associated with the asset and may have a positive effect on its next valuation.
21 Aug 17
Make it York
Palace Capital has announced it has been granted planning consent subject to conditions by the City of York Council for the redevelopment of Hudson House. Management has not yet decided how to best take the project forward and is exploring all options which maximise shareholder value, with the least amount of risk. Suffice to say management is likely to extract the most value possible for investors. The carrying value of Hudson House is £14.9m and while it is still early days it seems likely that this will be revised upwards at the next revaluation date at the end of September. H1 results will be announced in November.
18 Aug 17
Small Cap Breakfast
Destiny Pharma—A clinical stage biotechnology company - lead asset (XF-73) targets antibiotic-resistant bacterial infections in hospitals. Offer TBA. Due early September.| Avingtrans (AVG.L) Sch1 on its Reverse Takeover of Hayward Tyler (HAYT). Combined market cap of c.£75m. Expected 01 September 2017 | OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. | Kosmos Energy— Secondary listing, currently on NYSE. Oil and gas exploration and production company focused on frontier and emerging areas along the Atlantic Margins. During the first half of 2017, gross sales volumes from Ghana averaged approximately 132,000 barrels of oil per day (net: 26,900 bopd). Due 21 August. No offer. NYSE:KOS. Mkt Cap £2.54bn. | Myanmar Strategic Holdings—Intention to float from the independent developer and operator of consumer-focused businesses in Myanmar, one of the fastest growing economies in the world. Expected Mkt Cap $22.7m at $10 per share. $4.2m gross raise. Due 22 August. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
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18 Aug 17
Royal investment returns
In the last four years, Palace has grown the value of its portfolio of regional property from £2m to over £200m, through a combination of astute acquisitions and an active management strategy that has delivered sector-leading growth in NAV/share of 103%. With recently completed and ongoing asset management initiatives at several of the group’s larger properties, we believe that there is significant scope to improve future income and capital values. Standing at a 14.2% discount to NAV/share and offering a 5% yield, the shares are attractively valued on an absolute and sector relative basis.
10 Aug 17
Palace Capital has completed the previously announced £20m acquisition via a corporate deal, more than replacing rental income from disposals made in FY17. The new assets are fully let at a higher yield than our previous estimates. This leads us to raise our forecasts slightly and provides scope for rental and valuation uplifts in future, in line with Palace’s strategy of providing capital growth as well as stable income.
07 Aug 17
At the time of portfolio update in May 2017, Palace Capital reported that it had agreed the corporate acquisition of a fully let office building for £20m. The company has now announced that it has completed the acquisition of SM Newcastle OB Ltd (“SM Newcastle”) for £20m.
07 Aug 17
Right on track
FY16/17 results were better than forecast. Outperformance was driven by asset sales above book value, intensive asset management and stable underlying investment and occupational markets. These figures reiterate the defensive characteristics of a portfolio which is well-balanced geographically and by sector. The proposed 18.5p full year dividend is 1.2x covered by adjusted EPS.
08 Jun 17
Income and capital growth beat estimates
Palace Capital has published strong FY17 results, with rental income of £14.3m feeding through to adjusted EPRA earnings of 22.2p per share (FY16: 18.9p). EPRA NAV of 443p per share was 3.5% ahead of our forecast (431p) and 7% higher than at 31 March 2016 (414p), driven by asset management initiatives, selective disposals at above book value and modest yield contraction. The regional occupier market is reported to be healthy and we continue to expect Palace’s geographic and sector focus, as well as the relatively high yields on the portfolio, to provide some protection from macroeconomic headwinds, including the effects of Brexit, when compared with property in London.
07 Jun 17
Finals – Active management driving NAV growth
Palace Capital’s final results reflect continued high levels of activity across the portfolio, with a large number of property sales and progress on several refurbishment & redevelopment projects. Reported results demonstrate the benefits of this active management strategy, with adjusted PBT up 20% to £6.7m (Arden forecast £6.6m) and adjusted EPS up 17% to 22.2p. Reported PBT, including £3.2m of profits on property disposals and the £3.1m revaluation gain, was £12.6m (FY 2016: £11.8m). Despite the weaker market background, EPRA NAV/share increased by 7%, from 414p to 443p (436p including deferred tax). Given the progress during the year, the final dividend has been increased to 9.5p giving a total of 18.5p for the year, up 15.6% on the 16.0p for FY 2016.
06 Jun 17
Portfolio Update – NAV ahead of market expectations
Palace Capital’s update reports continued high levels of activity across the portfolio, reflecting the company’s active management strategy, with a large number of property sales and progress on several refurbishment & redevelopment projects. The company also reports that the year-end NAV/share is expected to be ahead of market expectations (Arden forecast 431p), which we believe reflects the progress made since the half year against an improving market background.
02 May 17
Net asset value growth
Palace Capital (Palace) has released a positive portfolio and trading update detailing disposals made in FY17, significant ongoing projects at ten properties and the possible acquisition of a fully let office building for c £20m, which would more than replace rents at properties sold in the year. These developments demonstrate Palace’s ability to add shareholder value through active management and to recycle capital efficiently. We have revised our estimates and note that management expects the March 2017 NAV to beat market expectations.
02 May 17
York – Major planning application submitted
Hudson House, York is a 1960s office building of 103,000 sq ft, situated inside the city walls and a short walk from York Railway Station. It was acquired as part of the Sequel Portfolio in 2013 and since then Palace Capital has been working to enhance the value of the property with two planning approvals for conversion to residential/offices having already been obtained. At the 30 September 2016 the property was valued at £14.9m.
22 Mar 17
Another NAV-accretive disposal
Palace continues to demonstrate its ability to grow NAV per share through its strategic recycling of assets. The disposal of a property in Maldon has realised value created through recent asset management initiatives. As with two other recent sales, this is in line with the company’s strategy to increase shareholder value through active management of the investment portfolio. We have adjusted our forecasts for the £1.56m gain in value and, although we have not assumed any additional acquisitions, would expect Palace to reinvest the proceeds in other regional property assets at attractive yields and with further scope for capital gains.
14 Mar 17
Palace Capital (Palace) has announced the disposals of two properties: one in Leeds and one in Stockport. The rationale for each is clear and in line with the company’s strategy to deliver shareholder value through capital and income growth. The disposals, totalling £3.7m, will crystallise value from active asset management, free capital to be recycled, increase the portfolio’s average unexpired lease term to first break and reduce void costs. We have adjusted our forecasts accordingly and expect Palace will reinvest the proceeds in other regional property assets in due course.
28 Feb 17
Letting of converted Dartford residential units
The Copperfields, a small shopping centre in Dartford, Kent, with offices above, was acquired by Palace Capital from Quintain plc as part of the Sequel Portfolio acquisition in October 2013. Soon after the property was acquired, the tenant occupying circa 10,000 sq ft of office space served notice to vacate.
12 Jan 17
Interims overview. The results reflect the considerable changes in the portfolio over the last 18 months. Rental income increased 31% from £5.36m to £7.01m reflecting a full period contribution from Sol Central, Northampton and the acquisitions of 249 Midsummer Boulevard, Milton Keynes and Broad Street Plaza, Halifax, partly offset by reduced income from the existing portfolio due to property sales and lease expiries, in particular at Hudson House York, ahead of its potential redevelopment. Reported revenue of £7.08m was down from £8.36m, reflecting the £3m surrender premium on the Gala units at Sol Central, received in H1 last year.
21 Nov 16
Income and capital growth outside London
Palace Capital seeks commercial real estate investments in towns and cities outside London that present the opportunity to grow rental income and capital value. It achieves this through active asset management to increase value, as evidenced by Hudson House in York where value has increased from £3.8m to £14.9m since acquisition in October 2013. EPRA NAV grew 1.2% in H117 to £107.6m and the shares trade at a considerable discount to the 419p NAV per share value.
21 Nov 16
FastForward Innovations (FFWD.L) | Elegant Hotels (EHG.L) | Nektan (NKTN.L) | Scancell Holdings (SCLP.L) | 4D Pharma (DDDD.L) | Safeland (SAF.L) | Palace Capital (PCA.L) | Image Scan Holdings (IGE.L) | MBL Group (MUBL.L) | 365Agile Group (365.L)
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22 Aug 16
Manchester office purchase
The company has announced that it has exchanged contracts for the purchase of the freehold of Boulton House, Chorlton Street, Manchester for a consideration of £10.95m, subject to a downward adjustment of up to £0.4m for rent guarantees and other costs. Completion is set for 30 September 2016. The acquisition is being funded by a new debt facility from one of Palace Capital’s existing lenders.
14 Jun 16
£24.2m Property Acquisition & New Bank Facility
Looking at our FY 2017 forecasts, the acquisition of Broad Street Plaza will add significantly to the Group’s rent roll. In light of this, together with the financing costs assumed with the acquisition and with the additional costs of the new larger bank facility, we have increased our forecast adjusted PBT by £0.9m to £6.8m.
14 Mar 16
£7.2m Office Purchase
Palace Capital has announced that it has purchased 249 Midsummer Boulevard, Milton Keynes for a consideration of £7.2m, in an off market transaction. This office building was built in 1990 and comprises 49,000 sq ft of net lettable space and is situated on a large site a few minutes walk from Milton Keynes Central Station.
29 Feb 16
Interims – Investing for growth
Interim results reflect a busy period for the company, with the completion of the £10m purchase of Bank House, Leeds, the £1.25m disposal at Burgess Hill, the £20.7m acquisition of the Sol Central leisure scheme in Northampton and the associated £20m equity placing, the £3.9m property purchase in Sutton and the surrender of the Gala lease for £3m.
30 Nov 15
£3.8m Casino Payout!
In June 2015 Palace Capital acquired the Sol Centre for £20.7m, on an initial yield of 8.86%. The centre is anchored by a 10 screen Vue cinema and a 151 bed Ibis hotel and is let on long leases (WAULT of 13.5 years) to good covenants. However, 2 units on parts of the ground, mezzanine and first floors totalling 27,917 sq ft, originally let to Gala Casinos and another unit let to a pub operator are unoccupied and there are no restaurants at the centre, providing a major opportunity to revitalise the centre through the company’s active management strategy.
26 Aug 15
Acquisition of Bank House, Leeds
Palace Capital has exchanged contracts to buy Bank House in the centre of Leeds for a cash consideration of £10 million. The building comprises a net floor area of 88,000 sq ft. and is currently 90% let, producing a gross rental income of £910,310 per annum and a net income of circa £864,000 per annum. This represents a net yield of 8.1% after taking transaction costs into account.
09 Mar 15
A sequel to Sequel!
The £39.25m purchase of the Sequel portfolio has been spectacularly successful, underlining the rationale of the company’s investment strategy and the ability of the company to identify undervalued secondary assets and improve their performance through active management. Whilst much remains to be done with Sequel, the recent £32m acquisition of PIH and £20m placing provide additional opportunities for value creation and leaves scope for further acquisitions. Combined with the high exposure to regional secondary property, which we believe is still in an early phase of its recovery, this creates a highly attractive investment case.
18 Sep 14
Crystal clear property opportunity
The acquisition of the Sequel properties has given Palace Capital critical mass and creates a combined portfolio with an income yield of over 11%, a return on equity of 14% and supporting a 5.2% dividend yield. There is significant scope to increase both income and asset values through more active management of the portfolio. With growing evidence of an improvement in both occupier and investment markets, we believe that the timing within the property cycle is favourable. In combination, these factors present an exciting investment opportunity.
25 Nov 13