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Zloty knocks First Prop share price

RESULTS: First Property is a canny property investor but its share price has been knocked by a weak zloty.
November 29, 2011

After rising steadily since the start of 2009, First Property's share price has fallen by almost 25 per cent in the past three months. This slide seems due to the weakness of the Polish zloty against the euro, but also against sterling. A 10 per cent fall in the zloty since the eurozone debt crisis erupted over the summer has adversely affected Polish tenants; they pay rents in euros so in effect this equates to a rent increase.

IC TIP: Buy at 16.88p

The company's main Polish business manages properties for institutions led by the University Superannuation Scheme. But it has direct exposure through its new Fprop Opportunities (FOP) fund and two fully-owned properties in Warsaw. To date, FOP has acquired £22.7m of property, but a lack of institutional interest means that First Property currently owns 84 per cent of the fund. The good news is that FOP contributed maiden income of £1.31m and generated £724,000 of profits, of which £609,000 was attributed to First Property.

First Property made its name by exiting UK commercial property between 2005 and 2007, but now it's back and an ungeared UK fund for pension investment established in February 2010 – primarily invested in retail warehouses at low rents on long leases – is now close to its target of £106m under management.

Broker Arden upgraded its forecasts and now expects full-year pre-tax profits to rise by £0.8m to £3.8m and EPS to rise from 2p to 2.5p.

FIRST PROPERTY (FPO)

ORD PRICE:16.88pMARKET VALUE:£18.7m
TOUCH:16.75-17p12-MONTH HIGH:24.5pLOW: 15.5p
DIVIDEND YIELD:6.3%PE RATIO:6
NET ASSET VALUE:15pNET DEBT:101%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20102.961.421.080.32
20114.592.541.700.33
% change+55+79+57+3

Ex-div: 7 Dec

Payment: 29 Dec