Hardman & Co Research: Interim results on track - upside clear in FY'22

Palace Capital has a mix of real estate sector exposure, the largest four segments being offices, development assets, leisure and industrial. In each of the past four years, Palace Capital assets have outperformed the MSCI index. Regional offices' (43% of assets) returns have exceeded returns for London offices every year since 2016 and are clearly set to continue to do so.

The company's office leases are relatively short, but we are positive about this asset class' prospects. The development assets are set to show a 50% cash-on-cash return in calendar 2021. Palace Capital's asset management and capital recycling strategy works, and investors should take into account that development assets generate zero profits during the development phase, so profits are effectively understated at this point in time. Industrial assets are in a cycle of rising rents.

Turning to leisure, the leases average 11 years to break and, indeed, the tenants have extended some leases. Leisure tenants have all worked well with the landlord, bar the effect of two small CVAs. Overall, this is a REIT with plenty of upside potential, albeit dividends have been cut.

Our research sees scope, in due course, for a theoretical but achievable 90% upside to dividends from this reduced base.

Please click on the link below for the full report:

https://www.hardmanandco.com/research/corporate-research/interim-results-on-track-upside-clear-in-fy22/

If you are interested in meeting the company, you can register your interest by clicking on the above link

Hardman & Co Research can still be accessed for free after MiFID II. Please click here to read the statement.

About Hardman & Co: For the past 25 years Hardman has been producing specialist research designed to improve investors' understanding of companies, sectors, industries and investment securities. Our analysts are highly experienced in their sectors, and have often been highly rated by professional investors for their knowledge.  Our focus is to raise companies' profiles across the UK and abroad with outstanding research, investor engagement programmes and advisory services. Some of our notes have been commissioned by the company which is the subject of the note; this is clearly stated in the disclaimer where this is the case.

Hardman Research Ltd, trading as Hardman & Co, is an appointed representative of Capital Markets Strategy Ltd and is authorised and regulated by the Financial Conduct Authority; our FCA registration number is 600843. Hardman Research Ltd is registered at Companies House with number 8256259.

Our research is provided for the use of the professional investment community, market counterparties and sophisticated and high net worth investors as defined in the rules of the regulatory bodies.  It is not intended to be made available to unsophisticated retail investors. Anyone who is unsure of their categorisation should consult their professional advisors. This research is neither an offer, nor a solicitation, to buy or sell any security. Please read the note for the full disclaimer.