LIBERUM: COVID-19: Real Estate themes emerging - The preservation of liquidity is key
Eleven companies across our coverage universe have now released COVID-related statements. The number one theme across all is to preserve liquidity. We think ICR ratios are the most important metric to be stress-testing. It helps that, on average, UK property companies now have twice the interest cover as they did pre-GFC. We think the industry might be able to withstand six months with zero revenue. We are beginning to see evidence of how landlords may approach rent holidays; 2020 will see lots of accrued income, some of which may inevitably be impaired. The government could be the ultimate backstop for landlords in distress. As ever, there are diamonds in the rough. CLS (c.35% discount to NNNAV) and Shaftesbury (34% discount) stand out as particularly oversold.
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30 Mar 20
LIBERUM: VIDEO: Real Estate 20:20 vision
In these 6 short videos, Real Estate Analysts Tom Musson and Chris Spearing discuss the sector outlook for 2020, with a focus on the relative attractiveness of Real Estate as an asset class, the nuances in the UK Retail and Industrial markets, and why PHP and Workspace are two key picks. Click the image below to watch the videos.
12 Feb 20
LIBERUM: UK Small & Mid Cap Dispatches
Consumer Discretionary Sector In-Depth, Strategy Quarterly Style Review, Alternative Funds Portfolio 2020, Big Yellow, Clinigen, 4imprint, Judges Scientific, Ten Entertainment, Vertu Motors, Kier Group, Non Standard Finan...
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16 Jan 20
LIBERUM: Real Estate - The state of the London Real Estate market
Our visit to the London State of the Market conference in Nine Elms was insightful. The key message we took away was that there is still plenty of opportunity in London, across all property asset types.
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18 Nov 19
LIBERUM: Workspace Group - Strong first half growth
Workspace’s first half results confirm good LFL growth enhanced by strong demand at newly completed refurbishment and redevelopments. NAV +2.7% to 1,115p was 1.0% ahead of our forecast, with EPRA EPS +6.8%. Demand levels are robust, with enquiry levels averaging 1,109 per month.
13 Nov 19
Small Cap Feast
AMRYT PHARMA PLC— a biopharmaceutical company focused on developing and delivering innovative new treatments to help improve the lives of patients with rare or orphan diseases have raised $60m before expenses and will relist on the AIM Market on the 25/09/2019
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24 Sep 19
LIBERUM: Workspace Group* - Sustained demand and good scheme progression
Sustained good demand for new and existing space through Q1, despite wider uncertainty, provides reassurance in our full year forecasts. Enquiry levels remain robust at ~1,000 per month. LTV remains stable providing the basis for continued progression of the group’s refurbishment and redevelopment schemes, on which good progress was made in Q1.
11 Jul 19
LIBERUM: Workspace* - Significant profits growth potential
Workspace offers significant profits growth potential as market rents are achieved and its substantial pipeline of schemes is completed. We see ~23% upside to the rent roll which, with a continued high drop-through, could prompt ~36% upside to profits.
07 Jun 19
LIBERUM: Workspace Group* - Flexible focus & schemes driving profits growth
Workspace delivered good returns in FY19, aided by its focus on the growing market for flexible business space, and enhanced by newly completed refurbishment and redevelopments. FY19 NAV +5% to 1086p was 2% below our forecast, with strong earnings growth +10% and 2% ahead of our forecast.
05 Jun 19
LIBERUM: UK Real Estate - Second wind
The UK real estate sector is up 10% year to date, aided by an increased likelihood of an orderly Brexit as well as softer bond yields, as opposed to expectations of better performance. We expect a continuation of current trends in capital values at results season (Industrial +ve, Retail –ve & Offices flat) and see the greatest scope for surprise in those with mixed portfolios where sector weights may have been overlooked.
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23 Apr 19
LIBERUM: Morning Comment
Analyst Best Ideas, Consumer Staples Weekly, Ericsson, easyJet, The Gym Group CEO Video, Workspace, DP Eurasia, Market Highlights
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02 Apr 19
LIBERUM: Workspace Group* - CEO departure
The departure of Workspace’s CEO is disappointing news, but we are confident that the business can continue to deliver strong returns. Workspace has created significant value-add by its focused strategy of providing flexible work space.
02 Apr 19
LIBERUM: Real Estate - Soft conditions ahead
Results season predictably confirmed a correction in retail asset values, sustained buoyancy for industrial real estate and stability for London offices. However, forward looking indicators suggest softer conditions lie ahead.
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12 Mar 19
LIBERUM: Workspace - Outperforming Offices
Workspace continues to deliver strong profit growth. Unlike traditional leased office space, Workspace is confident in the positioning of its product, direct customer relationships, and rising diverse customer base to support its returns. A 70% retention rate demonstrates this is working.
16 Nov 18
LIBERUM: Workspace Group* - Strong first half growth
Workspace’s first half results confirm good LFL growth enhanced by strong demand at newly completed refurbishment and redevelopments. NAV +3.7% to 1075p was 1% ahead of our forecast, with earnings +13% and 9% ahead of our forecast.
14 Nov 18
LIBERUM: Workspace Group* - Three levers for growth
Workspace’s property tour focused on the growth still to be achieved from its assets with a visit to a recent acquisition with rental growth upside, a completed refurbishment which is letting up strongly and an asset with significant redevelopment potential. Ahead of Workspace's first half results, we expect current trading to have remained good and comfortably supportive of our full year forecasts.
11 Oct 18
LIBERUM: Workspace - Strong growth from flexible workspace
Workspace continues to deliver strong profit growth reflecting rising business demand for flexible space. Its equity placing provides firepower to continue to expand, through delivery of an extensive pipeline of redevelopments and refurbishments as well as acquisitions.
12 Jun 18
LIBERUM: Workspace* - 9.96% placing to fund pipeline of schemes
Workspace has announced a 9.96% placing to fund redevelopment, refurbishment and acquisition opportunities as well as the recently acquired Centro buildings. FY18 results confirm +9% NAV growth to 1037p, +20% profits growth and a +30% increase in the DPS to 27.4p.
06 Jun 18
LIBERUM: Workspace Group* - Disrupting traditional offices
Three potential bidders for IWG highlight the depth of capital seeking to gain exposure to the flexible work space market, with positive read-across to Workspace. While leasehold providers to this market are rapidly building share, we continue to prefer the added control and flexibility of Workspace’s freehold approach.
14 May 18
LIBERUM: Workspace Group* - Active final quarter enhances growth potential
Workspace’s £77m acquisition of Centro 1 & 2 consolidates its ownership in Camden and provides immediate opportunity to let vacant space and reposition the estate for higher rents over time. The purchase follows an active final quarter for Workspace which saw two notable planning consents add to its significant pipeline of refurbishments and redevelopments.
23 Apr 18
LIBERUM: Workspace Group* - Sustained strong growth
Workspace’s Q3 confirms sustained strong demand, supportive of current market forecasts. While Q3 enquiry levels were slightly lower, this is not a concern with conversion higher and strengthening again evident in January.
18 Jan 18
LIBERUM: Workspace Group* - Sustained strong demand
Workspace’s Q1 confirms sustained strong demand through the first quarter, supported by robust enquiry levels. As expected LTV has increased to 21%, but still provides firepower to progress further acquisitions and the development pipeline.
14 Jul 17
LIBERUM: Workspace - Unique position for strong growth
Workspace remains extremely well positioned to benefit from the continued evolution of occupational demand towards shorter, flexible leases. Its combination of freehold model, established scale and customer service focus mean it also offers a unique, lower risk, means to play this trend.
08 Jun 17
LIBERUM: Workspace Group* - Evolving trends support strong profit growth
Workspace has delivered another year of strong profit progression as occupational trends towards flexible working continue. Double-digit LFL rental growth has resulted in earnings +14%, ahead of our expectation, and a +40% increase in the dividend.
07 Jun 17
LIBERUM: Workspace Group* - Embracing technology
Workspace’s investor event set out its use of technology to maximise occupational demand and limit the pace of obsolescence within its buildings to the benefit of long-term returns. The event also reaffirmed the increasing competitive advantage of its scale, operational platform and freehold model.
01 Mar 17
LIBERUM: Workspace Group* - Sustained rental growth
Workspace continues to deliver good rental growth, with no sign of slowdown. Q3 LFL rent +3.5% and +14% YoY was ahead of the momentum achieved in the first two quarters and is trending ahead of our full year expectation. Enquiry levels remain robust and occupancy high at 90.6%, aiding steady pricing growth.
19 Jan 17
LIBERUM: Workspace - The future, oversold
Workspace has one of the most transformed portfolios through this cycle, a flexible lease model which continues to gain traction and is a key part of the future of office occupation, lower direct Brexit occupier risk, low financial risk with LTV at 14% and a significant refurbishment pipeline which could catapult income. A 28% discount to NAV is overdone, with an asset backed 21x P/E and fast growing 4% dividend yield.
11 Nov 16
LIBERUM: Workspace Group* - Robust rental growth, resilient value
Robust rental growth has driven strong profit progression through H1 and supported NAV with only a marginal correction in value to date. H1 NAV was -0.9%, 2% below our expectation as the valuer adopted a more cautious approach to underway refurbishments.
09 Nov 16
LIBERUM: Workspace Group - Well positioned
Q1 LFL rental growth +11% YoY was good, although it is too early to ascertain the likely impact of the referendum. Irrespective with the lowest LTV in the sector at 12% and one of the most improved portfolios through this cycle, Workspace is in an exceptionally strong position to navigate any change in demand and capitalise on pricing dislocation.
14 Jul 16
LIBERUM: Workspace* - Sector leading returns at a discount
Workspace's opportunity to sustain sector leading returns remains well supported by rising rents still at a low base, prospective gains on a significant project pipeline and a service offering positioned for changing trends towards flexible office occupation.
08 Jun 16
LIBERUM: Workspace Group - Sector leading performance
Stellar rental growth drives another year of outperformance. NAV +31% is 4% ahead of our forecast and EPS +56% is 6% ahead. LFL rental growth of +15% is enhanced by strong lettings on completed projects and operational gearing.
08 Jun 16
Value enhancing disposal & trading reassurance
Workspace’s disposal of 5 industrial properties for £64m continues to realise value from its non-core portfolio at cycle low yields and a 12% premium to book value, while also lowering LTV to a sector low level of 17.4%. Confirmation that the business continues to see strong demand for its core flexible office offering also provides reassurance in current trading. With LFL rental growth still trending at the top-end of the sector, a significant pipeline of refurbishment potential in smaller schemes across Greater London, financial leverage at an all-time low and yields which have not compressed to the extent seen in other real estate asset uses we believe a relative valuation premium remains justified. The shares are down -22% over 3months vs. the sector -12%. The shares now trade on a CY16E P/NAV of 0.72x vs. the UK Real Estate sector 0.88x.
11 Feb 16
Good growth on course for the full year
Workspace continues to deliver good rental growth +2.3% on a LFL basis through Q3 and +15.0% YoY; on track to hit our unchanged full year expectation. Occupancy remains stable at 91.2% and continues to support pricing increases, with rent +1.9% in the quarter to £20.58psf. Demand at newly completed space is strong and lettings evidence would suggest Workspace’s budgeting assumptions remain overly cautious. We make no change to our forecasts, which factor 60% NAV growth in the three years to March 18E, the highest in the UK Real Estate sector. The shares trade on a CY16E P/NAV of 0.83x vs. the UK Real Estate sector 0.89x. We maintain a BUY rating.
22 Jan 16
Divide and conquer
High demand, low availability, conservative valuations and an established operating platform should drive significant total returns across our forecast period. Workspace’s freehold flexible lease model lets smaller spaces at a premium, whilst heightened demand and short lease lengths result in a rapid flow-through to passing rents. Returns are enhanced by acquisitions and a significant pipeline of refurb & redevelopment schemes. BUY.
01 Dec 15
Accelerating income return
Strong demand allied with an established operating platform is now driving strong profit growth. We upgrade our earnings forecasts by over 25% and FY16E NAV by 5%. We expect 25% p.a. dividend growth to be sustained in the near-term. The prospect for continued strong growth is underpinned by organic progress, acquisitions and a significant pipeline of refurb & redevelopment schemes lifting low average rents. We maintain a BUY rating.
12 Nov 15
Significant income growth
First half figures are ahead of our forecasts with a significant increase in earnings and the rate of dividend growth. EPRA NAV was +13% on year-end to 792p, 2% ahead of our 779p forecast and EPS was +49% YoY to 12.5p, 34% ahead of our 9.3p forecast. In turn, the dividend was increased +25%. This performance reflects the combination of strong LFL organic growth with completed redevelopments and refurbishments well ahead of budget. We believe there is upside risk to consensus forecasts. On our existing estimates Workspace trades on a CY16E P/NAV of 0.97x in line with the sector average. We maintain a BUY rating.
11 Nov 15
Accretive capital recycling
Workspace has agreed to acquire two office properties in London for £24m at low capital values per square foot, in areas close to existing group assets and with medium term regeneration potential. These purchases, in effect, recycle £23m crystallised yesterday through the disposal of a non-core industrial estate at a 25% book gain and low 4.8% yield. Workspace remains our preferred pick in Real Estate with a significant pipeline of value enhancing refurbishment & redevelopments supplementing high spot exposure to strong rental growth across London. Workspace trades at a CY16E P/NAV of 0.97x vs. the UK sector 0.99x. We maintain a BUY rating.
23 Oct 15
The £26.1m acquisition of the former Mecca Bingo at Wandsworth re- stocks Workspace’s redevelopment pipeline and provides opportunity to extract marriage value with its adjoining ownership. Having tracked this London asset for several years, Workspace can now commence discussions with the Local Council to explore opportunities for wider redevelopment, which should offer attractive long-term value enhancement. Workspace trades at a CY16E P/NAV of 0.97x vs. the UK sector 0.99x and offers one of the highest total returns at the lowest LTV, substantially underpinned by value enhancing redevelopment and refurbishment schemes. We maintain a BUY rating.
30 Sep 15
Strong growth continues
Strong momentum in rental growth has continued into Q1 ‘16, with LFL rent +17.7% YoY. Business centres continue to drive performance with stable occupancy at 90.3% and rent psf +5.8% in the quarter to £23.26. Take up at newly completed space is also strong with rent +21.3% in the quarter. Workspace has amended its banking facilities, extending maturity by 2 years and reducing borrowing cost by 50bps. We make no change to our forecasts, which factor 61% NAV growth in the three years to March 18E, the highest in the UK Real Estate sector. The shares trade on a FY16E P/NAV of 1.08x vs. the UK Real Estate sector 0.99x. We reiterate our BUY rating.
15 Jul 15