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Office demand boosts Derwent London

Investor worries have hurt the share price, but Derwent London is well-placed to benefit from continued demand for office space in London.
February 26, 2016

London office landlord Derwent London (DLN) ticked all the right boxes last year, and the combination of a £650m valuation uplift, together with a 7.8 per cent rise in net rental income to £138.7m, pushed adjusted net asset value (NAV) ahead by an impressive 21.6 per cent to 3,535p a share.

IC TIP: Buy at 2998p

New lettings of £27.1m were achieved at 10.8 per cent ahead of December 2014 estimated rental values (ERV). For existing lettings, there was also a significant reversionary element of £141m, which is what rental income would be if all rents were charged at the current going rate.

On the development side, additional capital expenditure of £569m will be needed over the next four years to complete current projects, which will have an ERV of £78.9m on completion. Derwent has also worked well to recycle capital, with disposals of £277m outweighing acquisitions of £246m.

Analysts at Peel Hunt are forecasting adjusted NAV of 3,691p a share for the December 2016 year-end.

 

DERWENT LONDON (DLN)
ORD PRICE:2,998pMARKET VALUE:£3.33bn
TOUCH:2,995-2,998p12-MONTH HIGH:3,891pLOW: 2,904p
DIVIDEND YIELD:1.4%TRADING PROPERTIES:£10.5m
DISCOUNT TO NAV:15% 
INVESTMENT PROP:£4.83bnNET DEBT:23%

Year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20111,63623322531.4
20121,82422822333.7
20132,24846844636.5
20142,93175471939.7
20153,52878069543.4
% change+20+3-3+9

Ex-div: tba

Payment: tba