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McKay forges ahead

McKay Securities has a strong development pipeline and has increased its debt facilities for further investment.
May 27, 2015

Real estate investment trust McKay Securities (MCKS) raised nearly £87m of new capital in February last year to invest in a fast-improving property market in the south east of England. The results have been little short of prolific.

IC TIP: Buy at 245p

Thanks to a string of refurbished properties and strong demand from tenants wanting quality office space, contracted rental income rose by a quarter to £20.5m. Meanwhile, the estimated rental value of McKay's properties - the rent they would fetch at current market rates - jumped by nearly 60 per cent to £30.2m. The difference between these two figures is the company's so-called 'reversionary potential', which rose more than threefold to £9.7m.

A £42.7m valuation uplift on the portfolio helped boost adjusted net asset value by 18.9 per cent to 270p a share at the year-end. However, this falls to 256p if you factor in an overhaul of the debt portfolio earlier this month, including cancellation of some legacy swap agreements at a cost of £13.1m. The refinancing also increased the loan portfolio by £25m to £175m and its average maturity from 1.6 years to 9.1 years, with no debt due for repayment until December 2017.

Analysts at Stifel are forecasting adjusted net asset value of 267p for March 2016.

MCKAY SECURITIES (MCKS)
ORD PRICE:245pMARKET VALUE:£226m
TOUCH:243-246p12-MONTH HIGH:260pLOW: 211p
DIVIDEND YIELD:3.6%TRADING PROPERTIES:nil
PREMIUM TO NAV:5%NET DEBT: 42%
INVESTMENT PROPERTIES:£350m

Year to 31 MarNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20111974.510.08.3
2012162-11.6-25.28.4
20131571.73.88.5
201420638.375.08.6
201523333.336.18.7
% change+13-13-52+1

Ex-div: 4 Jun

Payment: 30 Jul