Join our community of smart investors

Mucklow has hidden value

There is plenty of rental income yet to be crystallised
February 12, 2019

Demand for industrial and warehouse space in the Midlands remained as strong as ever for A&J Mucklow (MKLW) in the six months to December 2018. While a lower valuation uplift dented headline profits, gross rental income grew by 4 per cent to £12.5m.

IC TIP: Buy at 504p

Occupancy rose to a record 97.6 per cent, with another 1 per cent reserved. However, Brexit uncertainty meant that occupiers with unsatisfied requirements were more cautious about committing to new developments on a pre-let basis.

No investment properties were acquired in the first half, although reduced competition for assets means that investment opportunities are becoming more attractive.

A total of 11 new lettings were agreed as well as two lease renewals and four rent reviews generating new rent of £1.36m a year. However, there is also considerable reversionary value yet to be crystallised because the industrial portfolio, some 70 per cent of the portfolio, currently generates gross rental income of around £5.73 per square foot, whereas the estimated rental value if all rents were charged at current market rates equates to £6.14 per square foot. And further rental increases are expected; one letting has already been secured at £8.25 per square foot.

Analysts at Stifel are forecasting adjusted net asset value (NAV) per share at the June 2019 year-end of 591p, from 559p a year earlier.

A&J MUCKLOW (MKLW)  
ORD PRICE:504pMARKET VALUE:£319m
TOUCH:504-520p12-MONTH HIGH:574pLOW: 477p
DIVIDEND YIELD:4.6%TRADING PROPERTIES:£5m
DISCOUNT TO NAV:12%NET DEBT:19% 
INVESTMENT PROPERTIES:£432m  
Half-year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
201750429.947.410.18
201857217.227.110.48
% change+13-42-43+3
Ex-div:14 Mar   
Payment:15 Apr   
*Dividends paid quarterly. Ex-div and pay date refers to 1st dividend. 2nd dividend Ex-div on 13 Jun payable on 15 Jul