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Diversity pays off for CLS

A diversified portfolio and high quality tenants are just two reasons why the shares look cheap
August 18, 2017

CLS Holdings (CLI) delivered a forecast-busting performance for the six months to June, pushing adjusted net asset value ahead by 9.3 per cent to 268.5p a share. Operating a diversified portfolio based in the UK, Germany and France continues to pay off.

IC TIP: Buy at 215p

In the UK, which comprises 58 per cent of the group portfolio, the valuation rose by 2.5 per cent reflecting increased rental income and marginal yield compression. The highlight came with the disposal of the Vauxhall Square site for £144m; that’s 39 per cent ahead of its December 2016 valuation. Crucially, the disposal removed any potential obligation to build 1.6m sq ft of mixed-use development that would have cost over £700m.

The German portfolio accounts for around a quarter of assets, and the valuation rose by 4.4 per cent in local currency terms, driven by rental growth, while in France (18 per cent of the portfolio) rents were flat, but yield compression pushed the valuation ahead by 4.8 per cent.

Net rental income was down slightly partly as a result of disposals and also the end of a single tenant lease in Germany which CLS is now developing on a multi-tenant basis, although around three-quarters still remains vacant.

Analysts at Peel Hunt are forecasting adjusted net asset value at the December 2017 year end of 261p (from 246p a year earlier).

CLS HOLDINGS (CLI)   
ORD PRICE:215pMARKET VALUE:£876m
TOUCH:214.9-219.8p12-MONTH HIGH:222pLOW: 135p
DIVIDEND YIELD:2.8%TRADING PROP:£34.4m
DISCOUNT TO NAV:9%   
INVESTMENT PROP:£1.5bnNET DEBT:60%
Half-year to 30 JunNet asset value (p*)Pre-tax profit (£m)Earnings per share (p*)Dividend per share (p*)
2016195337.1nil
201723711924.52.05
% change+21+261+245-
Ex-div:tba   
Payment:tba   
*Adjusted for 1-for-10 share consolidation on 8 May 2017