13th Aug 2015 12:48
LONDON (Alliance News) - Analysts take slightly differing views on Derwent London raised its guidance for estimated rental value growth in 2015 due to "very good" demand from occupiers, and said it expects "voracious" investment demand to support firm property yields in the second half.
The FTSE 250 real estate investment trust said it has the potential to deliver more than one million square feet of developments between 2016 and 2019. The programme could potentially add GBP29.6 million per annum to estimated rental value by 2019, Derwent said.
Derwent London is known for buying properties in central London with the aim of improving them, making them bigger or regenerating them. It has become prominent in London's so-called Tech Belt, which is centred around the 'Silicon Roundabout' at Old Street and acts as a hub for media agencies and tech companies.
Panmure Gordon reiterates its Buy rating on Derwent London saying the company delivered "excellent results". The broker also thinks Derwent's trading environment is strong and reckons the development and refurbishing work it provides will continue to offer strong returns.
Derwent's current trading environment exists in London where office rents are sharply increasing because of a buoyant economy and the broker thinks the limited supply is perfect for Derwent.
The broker also keeps its price target at 4,233 pence. Derwent shares trade 1.1% higher at 3,703.00 pence.
"The group buys properties which need to be upgraded and achieves strong return on cost as a result of refreshing or redeveloping the site. We are very encouraged by the results and retain our Buy recommendation," says Panmure analyst Sue Munden.
Panmure acts as a market maker for Derwent.
Investec retains its Hold rating on Derwent and has an unchanged 3,767p price target on the stock saying the company reported good numbers which were marginally ahead of its expectations. Net asset value rose 10.9%, driven by 9.1% underlying portfolio growth, with the strongest performance coming from its ?Tech Belt? exposure, which Investec anticipated. However, the broker thinks the net asset value increase will be detrimental to the share price.
"We expect the shares to de-rate into this slowing net asset value growth. The shares trade on a 13.6% premium to NAV reported today." says Investec analyst Alison Watson.
By Arvind Bhunjun; [email protected]; @ArvindBhunjun
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