A string of new lettings in the year to March 2018 virtually eliminated the risk element from the property portfolio of McKay Securities (MCKS). The only speculative development left is a 134,150 sq ft warehouse scheme, but as this is located just off the M4 motorway, there is likely to be keen interest from logistics operators.
Key successes included letting the entire 30 Lombard Street development to St James’s Place ahead of completion later this year. The two other developments in Reading and Redhill have also been let, with the Redhill office development achieving record rents for the town of £30-£31 per sq ft.
Realising reversionary value involved the sale of three assets at a combined surplus over March 2017 book value of 27.3 per cent, while the £26.8m of net proceeds went towards cancelling the last remaining £33m legacy swap agreement. The cancellation cost was £13.35m, but there will be a significant reduction in interest costs.
Headline profits were boosted by a valuation uplift and this, together with gains in rental income, helped to boost adjusted net asset value (NAV) by 13 per cent to 322p a share. Refurbishment work is expected to accelerate, given over half the buildings within the broader Investment Property Databank (IPD) index are at least 25 years old.
Analysts at Stifel are forecasting adjusted NAV at the March 2019 year end of 327p.
| MCKAY SECURITIES (MCKS) | ||||
| ORD PRICE: | 271p | MARKET VALUE: | £255m | |
| TOUCH: | 271-280p | 12-MONTH HIGH: | 289p | LOW: 192p |
| DIVIDEND YIELD: | 3.7% | TRADING PROPERTIES: | £11.9m | |
| DISCOUNT TO NAV: | 17% | NET DEBT: | 47% | |
| INVESTMENT PROPERTIES: | £460m | |||
| Year to 31 Mar | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 206 | 38.3 | 75.0 | 8.6 |
| 2015 | 233 | 33.3 | 36.1 | 8.7 |
| 2016 | 280 | 53.2 | 57.2 | 8.8 |
| 2017 | 289 | 17.6 | 18.8 | 9 |
| 2018 | 326 | 43.4 | 46.3 | 10 |
| % change | +13 | +147 | +146 | +11 |
| Ex-div: | 31 May | |||
| Payment: | 26 Jul |
