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Grainger to focus on the UK

Grainger is selling off its German assets to focus on the UK
November 20, 2015

Grainger (GRI) has taken another step towards becoming a UK-focused landlord in the private rental sector, with the sale of its German joint venture for a profit of £11m. All that remains in the country is a property portfolio worth around £142m, which chief executive Andrew Cunningham expects to be sold by the end of June next year.

IC TIP: Buy at 245.1p

Headline profit in the UK was dented by a number of one-off factors, but the key underlying metrics remained robust. Net rental income from UK residential assets grew by 7 per cent to £32.3m, while profit from the sale of reversionary assets rose from £60.6m to £68.4m. Mr Cunningham reckons the current portfolio will continue to generate cash from sales for the next 15 to 20 years.

As part of its drive to focus on the UK, Grainger bought 927 income-producing units, taking the total portfolio to 3,650 units. There are a further 1,500 in the pipeline for delivery over the next three years. Grainger has also renegotiated its finances, bringing down the average cost of debt from 5.4 per cent to 4.6 per cent.

Analysts at broker Peel Hunt are forecasting adjusted net asset value (NAV) of 284p per share by the September 2016 year-end.

GRAINGER (GRI)
ORD PRICE:245.1pMARKET VALUE:£1.02bn
TOUCH:245.1-245.5p12-MONTH HIGH:256pLOW: 180p
DIVIDEND YIELD:1.1%TRADING PROPERTIES:£1.15bn
PREMIUM TO NAV: 7%NET DEBT: 201%
INVESTMENT PROPERTIES*:£537m

Year to 30 SepNet asset value** (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201115326.19.51.8
2012157-1.70.11.92
201319564.313.12.04
201424281.118.12.5
201526350.010.42.75
% change+9-38-43+10

Ex-div: 24 Dec

Payment: 12 Feb

*Includes investments held in associates and joint ventures **Trading properties marked to market value (triple net NAV)