Unlike some other real-estate investment trusts (Reits), Derwent London (DLN) seems to be looking beyond the next couple of years and working on the assumption that the London property market will be stronger for longer. The obvious risk is that rising interest rates eventually choke off the real-estate recovery - which in London is now in its fifth year. But veteran chief executive John Burns doesn't seem worried. After completing projects in 2013 covering 248,100 square feet, he has another 586,000 under construction, a further 1.0m sq ft with planning permission and an additional 900,000 sq ft under active appraisal.
Even without this full development programme, Derwent is benefiting from rising rental income and property values. Passing rents within the portfolio are low, which opens up a potential reversion of £71m - up from £55m in 2012 and 56 per cent above current passing rent - which should be crystallised as old leases gradually expire. With Mr Burns expecting rental growth of 5-7 per cent this year, in line with last year's 6 per cent increase, the reversion is likely to grow further.
Analysts at JP Morgan Cazenove are forecasting EPRA NAV in the current year of 2,478p (from 2,264p in 2013).
| DERWENT LONDON (DLN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,740p | MARKET VALUE: | £2.81bn | |
| TOUCH: | 2,736-2,742p | 12-MONTH HIGH: | 2,810p | LOW: 2,101p |
| DIVIDEND YIELD: | 1.3% | TRADING PROP: | £53.5m | |
| PREMIUM TO NAV: | 22% | |||
| INVESTMENT PROP: | £3.24bn | NET DEBT: | 40% | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1117 | -35 | -27 | 27 |
| 2010 | 1432 | 352 | 340 | 29 |
| 2011 | 1636 | 233 | 225 | 31.4 |
| 2012 | 1824 | 228 | 223 | 33.7 |
| 2013 | 2248 | 468 | 446 | 36.5 |
| % change | +23 | +105 | +100 | +8 |
Ex-div: 7 May Payment: 13 Jun | ||||
