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Workspace works up divi increase

Small business landlord Workspace has confidently increased its interim dividend by 10 per cent thanks to increased occupancy and rental income on its London property portfolio.

Rental income rose 4.1 per cent to £22.9m year-on-year, and the value of Workspace's portfolio crept up 2 per cent, nudging net asset value (NAV) up to 28p a share from 27p in March. Like-for-like occupancy has risen to 85.6 per cent; not far off the 90 per cent figure that has triggered meaningful rental uplifts in the past.

Workspace currently has property disposals of £18m under offer, and subject to residential planning applications going through, these will be achieved at a 29 per cent surplus to September's book values. These are estates where planning uses are being converted to residential and student accommodation, showing the latent value of Workspace's portfolio. "There will be more sales in the next six months, and I would hope we will continue to see an improvement in occupational and rental growth," says chief executive Harry Platt. "London's population continues to grow, house building rates are low, and there's a squeeze on residential rents. This is all good news, but we don't have to sell too early in the cycle."

Broker Execution Noble has marginally upgraded its March 2011 NAV forecast to 29.8p.

WORKSPACE (WKP)
ORD PRICE:24.5pMARKET VALUE:£ 282m
TOUCH:24-24.5p12M HIGH:25.5pLOW: 19p
DIVIDEND YIELD:3.2%TRADING STOCK:NIL
DISCOUNT TO NAV:12.5%
INVEST PROPERTIES:£728mNET DEBT:139%

Half year to 30 SepNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200922.0-39.3-3.700.250
201028.018.01.600.275
% change+27 - -+10

Ex-div:12 Jan

Payment:09 Feb

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IC View

We have long rated the charms of Workspace's "income earning landbank", noting recent director buying. The shares are now up 18 per cent on our buy tip (20.75p, 18 June 2010) and trading 18 per cent below year-end NAV estimates, they continue to rate a buy.

Last IC view:Buy, 22.5p, 14 Oct 2010

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