Grainger, one of Britain's largest residential landlords, still looks undervalued. Its UK portfolio continues to outperform the wider housing market, with an average valuation uplift of 2.8 per cent over the six months to 31 March. That's mainly thanks to a strong and growing bias towards London and the South East, which now account for 62 per cent of its UK properties – up from 53 per cent three years ago.
Grainger owns two types of properties: those subject to regulated tenancies or equity-release agreements, which trade at a discount, and market-rented flats. It sells off the former when the tenants leave or die; these asset sales totalled £112m over the period, up from £90m last year. It also earns rental income, which was up 16.4 per cent to £31.8m, and modest fee income from joint ventures. Overall, adjusted operating profits were 7.9 per cent higher, with the gains offset by lower development profits.
The group paid back £42m of borrowings over the period, but a loan-to-value ratio looks high at 59 per cent. The debt is also expensive, at an average rate of 6 per cent, including hedges.
Brokerage Peel Hunt expected adjusted year-end net asset value (NAV) of 179p (193p at the half-year), including a “precautionary” 4 per cent valuation decline.
GRAINGER (GRI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 99p | MARKET VALUE: | £410m | |
| TOUCH: | 98.4-98.6p | 12-MONTH HIGH: | 134p | LOW: 77p |
| DIVIDEND YIELD: | 1.9% | TRADING PROP: | £1.09bn | |
| DISCOUNT TO NAV: | 56% | |||
| INVESTMENT PROP: | £796m | NET DEBT: | 350% | |
| Half-year to 31 Mar | Net asset value (p)* | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 210 | 65.2 | 11.8 | 0.53 |
| 2011 | 224 | 15.1 | 3.1 | 0.55 |
| % change | +7 | -77 | -74 | +4 |
Ex-div: 6 Jun Payment: 6 Jul *Including revaluation of trading properties to market value | ||||
