A shortage of prime office space in London and the south east were again the principal drivers behind another strong half-year performance from real estate investment trust McKay Securities (MCKS). The combination of growing demand for space and a trickle of new construction meant that both capital values and rental income remained firmly underpinned.
Pre-tax profit more than doubled, thanks to a 13 per cent valuation uplift on the portfolio to £399m, together with a 23 per cent jump in net rental income to £8.9m. Raising £87m in early 2014 to invest in office and commercial assets has proved timely, and within the portfolio there is considerable rental income yet to be realised. In fact, the estimated rental value on McKay's properties - the rent they would fetch at current market rates - rose nearly 6 per cent to £31.9m. That gives a reversionary potential, which is the difference between that figure and current rental income, of nearly £10m, implying a potential 45 per cent uplift.
With demand for office space showing no signs of slowing, there are two refurbishment and construction projects in Reading and Redhill due for completion in the first half of next year, and a further site in Lombard Street which will complete in mid-2018.
Analysts at Stifel forecast net asset value of 278p for March 2016.
| MCKAY SECURITIES (MCKS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 268p | MARKET VALUE: | £248m | |
| TOUCH: | 268-275p | 12-MONTH HIGH: | 278p | LOW: 220p |
| DIVIDEND YIELD: | 3.3% | TRADING PROPERTIES: | nil | |
| PREMIUM TO NAV: | 1% | NET DEBT: | 49% | |
| INVESTMENT PROPERTIES: | £396m | |||
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 215 | 13.9 | 15.1 | 2.7 |
| 2015 | 263 | 34.6 | 37.3 | 2.7 |
| % change | +22 | +149 | +147 | - |
Ex-div: 26 Nov Payment: 7 Jan | ||||
