Circle Property’s (LON:CRC) recent trading update ahead of December’s interim results prompts us to revise our forecasts. 11% growth in the portfolio value to £103.5m, reflecting asset management progress rather than valuation yield, takes NAV per share to more than 200p. Circle also reports letting progress and lease renewals across the portfolio, including at recently refurbished assets. The latter have the potential to drive earnings and valuation significantly higher. Even before that, the shares trade at a hefty 24% discount to FY18e NAV and yield of more than 3%.
Letting progress driving valuation uplift
The external valuation of the investment property portfolio has increased from c £93.0m at end-FY17 to c £103.5m as at 30 September 2017. The 11.3% gain over the six-month period follows 20% in the FY17, and brings the total gain since Circle was admitted to AIM in February 2016 to 40%. Occupancy remains at a high level in the let investment portfolio and the development portfolio, consisting of two recently refurbished office buildings and one nearing refurbishment completion, has secured a number of new tenants and lease renewals, while talks are at an advanced stage with a number of potential occupiers for vacant space throughout the portfolio. We have also reviewed our estimates for property and administrative costs, reducing both, lifting forecast adjusted earnings significantly (page 3).
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