Local Shopping REIT's results don't look great at first glance, but look beneath the surface and investors will find a healthy income and growth story. Adjusted net asset value fell 6 per cent to 76p for two reasons. First, the company's portfolio of hairdressers and corner shops around the UK fell marginally in value to finish the year at £190m. Second, management has been converting a number of upper floors into flats to take advantage of the buoyant residential lettings market and, for arcane accounting reasons, flats are only held on balance sheet at 85 per cent of open market value.
The property writedown also explains the reported loss. Recurring income - stripping out revaluations - actually grew 10 per cent to £3.2m, or 4p per share, all of which will be distributed to shareholders. That was thanks to a reduction in voids from 11.3 per cent to 10.6 per cent, combined with decent increases on rents that came up for review. But joint chief executive Nick Gregory says the biggest driver of future income growth will be fee income from two joint ventures it has formed this year.
Analyst Michael Burt of brokerage Espirito Santo expects adjusted net asset value of 74p for 2012.
LOCAL SHOPPING REIT (LSR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 53p | MARKET VALUE: | £44m | |
| TOUCH: | 52-54p | 12M HIGH / LOW | 65p | 47p |
| DIVIDEND YIELD: | 7.5% | TRADING PROP: | nil | |
| DISCOUNT TO NAV: | 18% | |||
| INVESTMENT PROP: | £190m | NET DEBT: | 243% | |
| Year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007* | 156 | -4.30 | -20.0 | 3.42 |
| 2008 | 112 | -40.5 | -44.5 | 5.75 |
| 2009 | 71.0 | -31.0 | -37.0 | 3.50 |
| 2010 | 70.0 | 1.82 | 2.20 | 3.60 |
| 2011 | 65.0 | -0.71 | -0.90 | 4.00 |
| % change | -7 | - | - | +11 |
Ex-div: 7 Dec Payment: 31 Dec *From start of trading in May 2007 | ||||
