CLS Holdings 1575p Mkt Cap £643m

I wrote up my thoughts on CLS shortly after the BREXIT vote when the shares had fallen to 1200p and I felt there was a very attractive risk reward. http://www.stockopedia.com/content/cls-holdings-illiquidity-inversion-and-efficient-markets-its-a-buy-141845/

The share price is now 1575p but I think the risk reward still looks favourable and current trading remains positive.

In terms of today's update :

Disposals since the first of July (these have already been announced separately)
Disposal of Chancel House, NW10 for £18.7 million, 39% above its value at 31 December 2015 and representing a net initial yield of 3.3%

Disposal of Chorus, Antibes for €9.4 million, marginally above its value at 31 December 2015, and at a net initial yield of 7.6%

Acquisitions (also already announced)
Parsevalstrasse 11, Dusseldorf for €43.6 million, at a net initial yield of 7.1%

Acquisition of Harburger Ring 35, Hamburg for €5.9 million, at a net initial yield of 6.4%

So the disposals and acquisitions look good but this isnt new news. The Group continues its active asset management, recycling capital from lower yielding assets into higher yielding assets. Property in Europe now accounts for 40% of gross assets.

The new news is in the lettings where 286,384 sq ft (26,606 sqm) vacated or expired since 1 July 2016, and 5,952 sq ft (553 sqm) of vacant space was acquired at Parsevalstrasse 11. But this has all been let, with 295,760 sq ft (27,477 sqm) of new leases, lease renewals and extensions completed at an average of 4.5% above ERVs of 31 December 2015. The overall Group vacancy rate since 30th June has fallen from 3.7% to 3.4%. Again this is a positive.

The key is that the vacant space has been let at 4.5% above 31st Dec ERVs, so this would imply to me that unless there has been material outward yield shift then the valuers will take this into account and overall valuations are likely to still be rising. For those worried about inflation 52% of portfolio is subject to indexation.

Finally the Group weighted average cost of debt has fallen to 3.08% (30 June 2016: 3.27%), a record low for the Group and the weighted average loan to value of property loans looks comfortable at 50.5%…

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