H1: impressive rental growth, dividend now covered

IQGeo has achieved the rarest of occurrences among UK tech companies having built a better product than larger competitors, and successfully displaced these competitors (who have typically been in place for more than a decade) in some of the largest telecoms providers globally (e.g. AT&T, Brightspeed, Deutsche Telekom). IQGeo’s big idea was to disrupt a c.20+ year old market (in telecoms/utilities) by providing the first integrated platform, a break from the historic reliance on integration amon

Strong rental growth in Q2 as delivery in final stage

The key positive is sustained strong rental growth: 9%+ since the start of FY24e. All asset performance metrics are unchanged. Demand for these assets is strong and sustained. A further 135 homes were completed and let taking the estate to 5,264 homes with £60m ERV. Delivery is now 95% complete as expected. We leave forecasts unchanged with the dividend close to being covered (FY25e first full year covered). We continue to see an attractive total return from rental growth driving NAV with potent

EPRA NAV in line, 50% discount pricing unrealistic risk

FY23 EPRA NAV is in line at 120.1p (+3% yoy, vs SCMe 121.6p) with sustained rental growth offsetting higher interest costs and wider NIY valuation (+34bps). Strong rental growth is expected to continue. PRSR’s income quality is solid; weathering inflation with 98% occupancy and 2% arrears. The current market cap implies a 6.0% NIY a full 150bps wider vs FY23. We feel this implied 50% discount to EPRA NAV is pricing unrealistic risks alongside a 6% dividend, expected to be all but fully covered.

Q4: Rental growth accelerates, DPS cover from FY24e

Rental growth accelerated to +7.5% from +5.7% yoy in Q3, benefiting from inflation and sustained demand. Asset performance is strong, with full occupancy and rent collection demonstrating affordability and quality of the tenant base. Long term favourable structural supply-demand imbalance remains. We update our model for the recent refinancing and, as flagged, reduce outer year EPS forecasts on higher interest costs (-8% FY24e, -13% FY25e) noting the 4p baseline dividend remains covered in both

Debt facility refinanced, optimising cost vs flexibility

The PRS REIT (“PRSR”) has refinanced its maturing £150m RCF with a 15yr fixed rate and a £75m 2yr floating facility. This optimises cost and retains flexibility to refinance as rates fall. This has also improved the maturity profile of the debt funding. Asset performance remains strong with all KPIs unchanged and rental income growth accelerating. We refrain from updating our forecasts with the FY/Q4 update due shortly, although continue to expect the dividend to be fully covered by earnings in

High five! Milestone 5,000th PRS home completed

The PRS REIT has completed its 5,000th PRS home, with the estate now totalling 5,010 homes at the end of Q3 (updating from 4,981 on 10/3 at the recent interims). The construction programme is now 89% complete, en route to 5,600 homes with £58m ERV. Notably, asset performance remains strong with 5.7% lfl annualised rental growth, 98% occupancy, 101% rent collection (6m trailing 100%) and negligible arrears. We make no change to our forecasts at this stage. We think the current ~30% discount to EP

Interims in line, undervalued high quality income stream

Income quality stands out here: lfl rental growth continues, occupancy is full and rental collection is strong. The asset class is demonstrating the ability to perform in challenging conditions, reflecting the structural undersupply of high quality PRS homes in the UK. Pre-announced, EPRA NAV was largely unchanged at 117p in H1 with no yield compression and all rental earnings distributed. We make no changes to forecasts at this stage. We see an attractive total return with the shares trading at

Positive read across: GS/Pitmore sells Thistle portfolio

Goldman Sachs/Pitmore has sold the 918 home Thistle portfolio it bought from Sigma Capital in early 2021. Although there are no details disclosed, we think the portfolio has been transacted at a high-3s NIY (plus some near term reversion), which compares favourably to PRSRs 4.3% (Dec-22) valuation. Whilst we cannot assume that this will drive a change to PRSRs valuation, we think it will certainly support it/push it in the right direction. Yet again, the fundamental quality of these assets has b

NAV ticks up, rental growth/performance still strong

PRSR has seen modest NAV growth in H1, with continued strong rental growth partially offset by some softening yields. There has been no deterioration in the fundamental demand or rent roll quality across the portfolio (aided by very attractive affordability), however, the independent valuer is taking a more cautious view. Whilst we do not assume shifting yields, rental growth is better than expected so we leave forecasts unchanged. We continue to see positive long term demand dynamics underpinni

Strong rental growth continues, sustained demand

At Q223, PRSR has achieved +5.7% lfl yoy rental growth across the estate; this is a blend of inflationary renewals and catching up with market rent on new lets. The demand for PRS homes has been sustained, with rental collection and occupancy still strong, despite cost of living pressures. Delivery of new homes continues although at a slower pace given fewer sites and a development tail. We do not change forecasts at this stage, although we are encouraged by the rental growth performance. PRS pr

Finals: strong rental growth drives valuation forward

PRSR has seen positive +5% lfl rental growth yoy, including impressive relet performance (+10% lfl) which is driving the overall rental income base. Occupancy remains full and bad debts low. The portfolio now comprises >4,800 units with nearly £50m income. The remaining development activity has slowed given the macro picture and interest costs are ticking higher. Both of these impacts are mitigated by expectations of continuing rental growth supported by growing demand for PRS as a substitute fo

NAV steps up on rental growth and tighter yields

With results two weeks away, PRSR has flagged that it now expects EPRA NAV will be “no less than 116p”. This is +11% in H2 alone and 10% ahead of our 106p forecast; driven by +5% rental growth and tightening valuation yields. There has been further development progress in Q1’23 to date, with 55 homes completed taking the estate to >4,800 homes. We note a strong rental performance against a more challenging macro-economic backdrop. The shares trade on a 25% discount to reported FY22 EPRA NAV with

4Q Update – Good Portfolio & lfl Rental Growth

PRSR’s like-for-like rental value growth on stabilised sites rose further to 5.1%, from 4.8% in the previous quarter. Overall asset performance was very strong with high rent collection, 98% occupancy rates and another 1.1% of homes reserved. ERV of £47.6m as well as the Group’s announced 1p interim DPS are in-line with our estimates forecasts and we leave our forecasts unchanged at this stage. PRSR trades on 1.0x P/B to FY23E NAV with a 3.7% dividend yield. We reiterate our Buy recommendation o

Q3 Update: Like-for-Like RVG hits 4.8%

In Q3 PRSR’s like-for-like rental value growth on stabilised sites rose to 4.8% as the increases from re-lets (c+10% RVG) and renewals (c+4%) flowed into the numbers. The company’s key messages are that 1) the Q3 data is consistent with their position outlined in their (recent) interim results roadshow and 2) that they expect RVG to track close to inflation overtime. Reflecting this, we leave forecasts unchanged. Trading on 1.06x p/b to FY22e NAV with a 3.6% yield, we see further NAV progression

Interims in line, scaling up drives significant growth

The PRS REIT (“PRSR”) has reported in line interim results, which show a marked step up in income and earnings from a portfolio which has grown materially in the past 2 years to ~4,600 (from 1,617 just prior to the onset of COVID). Earnings for H1 are already more than generated in the whole of FY21. Delivery continues albeit slowing into the deployment tail. Asset performance is sustained, with strong demand. Valuations are improving, benefiting from lfl rental growth and tightening yields. We

LIBERUM: Plus500: Strategic progress pays dividends

Tatton Asset Management (TAM LN) - Record net inflows

Tatton, the leading on-platform discretionary fund manager (DFM) and IFA support services Group has released a trading update ahead of its results to 31 March 2024, due on 18 June 2024.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Ondo InsurTech FY24 Trading Update

Ondo InsurTech has released a brief post-YE update revealing its good progress continued through 2H24 and consequently FY24 will be in line with market expectations.

BlackRock World Mining

BRWM’s managers: we see all the classic signs of high commodity prices...

Foxtons Group (FOXT LN) - 1Q24 IMS shows real momentum

Foxtons Group plc first quarter revenue rose 9% to £35.7m (1Q23: £32.9m) with growth delivered across all business segments. Trading is in line with management's expectations.

Morning Note – 18 April 2024

NextEnergy Solar Fund - Attractive Refinancing

The refinancing of a £135m revolving credit facility and the extension of a similar £70m facility gives NESF firepower as development opportunities for new solar are especially attractive thanks to lower module prices in Europe. They give the fund key financial flexibility at a critical time as it pursues its capital recycling programme.

Foxtons Group - FY24 underpinned by market share gains

Foxtons Group’s Q1 revenue grew by 9%, supported by growth in all three divisions as the strategic initiatives continue to gain significant momentum, driven by investment in staff, best-in-class bespoke IT and data platforms. This implies that Foxtons’ medium-term targets are now coming into focus. Market share is being gained in all divisions, which puts Foxtons in a good position as the sales market stabilises. We maintain our valuation of 132p/share and believe that if interest rates stabilis

NextEnergy Solar Fund – High- and growing-income opportunity?

NextEnergy Solar Fund (NESF) is almost 10 years old. Since launch, it has built a £1.2bn, 933MW portfolio of 100 operating solar assets, powering the equivalent of over 330,000 homes, declared dividends totalling £333m, and avoided the emission of about 2.2 Mt CO2e. NESF is on track to pay 8.35p in dividends, with forecast dividend cover of about 1.3x. Share price weakness that has afflicted the whole sector means that dividend translates to a yield of 11.1%, one of the highest in its sector, a

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Initial Equity Trading Comments - 19 February 2024

M Winkworth+ (WINK, House Stock at 163p) - Solid FY23A results, well placed to grow

Hybridan Research: Sector Review: Artificial intelligence in UK cybersecurity: the human uplift 17/04/2024

Artificial intelligence (AI) is a double-edged sword in cybersecurity. Whilst new AI models, architectures, and innovations are emerging to protect the security posture of organisations, attackers are also benefiting from deepfakes, sophisticated phishing, and automation of malicious codes. To ensure the impact of AI on cybersecurity to be a net-positive, we need to pit good AI against bad AI. Point solutions enhanced with machine learning: Global cybersecurity has been built with point soluti

Resilient FY24, confident long-term outlook

Vp’s full year update highlights sector-leading results, once again benefiting from the diversity of its end markets and the quality of its specialist businesses. With results expected to be broadly in line with expectations, we trim our FY24 PBT forecast by c.5% to £39.0m, a shade below the FY23 outturn (£40.2m). We consider this an impressively resilient performance set against a mixed market backdrop. Under new leadership, a strategic refresh is underway and management is confident in long