Interactive Investor

CLS Holdings target implies 22% upside

8th March 2017 17:42

Graeme Evans from interactive investor

A landmark day for CLS Holdings, the property company with office lets in France, Germany and London, helped boost its profile in the FTSE 250 Index.

The sight of the group’s first dividend payment, having previously distributed funds to shareholders through tender offer buy-backs, contributed to the strong performance by the company, whose shares rose by as much as 7%.

As well as the proposed final dividend of 40p a share for 2016, CLS gave an upbeat assessment of its markets in the face of Brexit uncertainty.

Its net asset value per share - a key industry measure - rose 19% to 2,151p, with the value of its property portfolio up to £1.57 billion.

This was based on a 4.8% rise in the value of its French properties, 3.8% in Germany and 2.5% in London. The only decline was in the rest of the UK, which makes up 6% of its portfolio.

CLS, which has been listed on the main market of the London Stock Exchange since 1994, has more than 500 tenants, including blue chip corporations and governments. The company’s focus is on investing in high-yielding properties in major cities, with a broad tenant base and diversified sources of funding.

It said the UK investment market demonstrated resilience to the prospect of the UK leaving the EU, while the rise in the relative value of the euro further emphasised the benefits of the group’s geographical diversity.

CLS announced in February that future distributions to shareholders would be through a twice-yearly dividend.

It believes the change will make it more easily comparable with other listed property companies and a more attractive investment proposition for new shareholders. The move should improve liquidity and broaden the shareholder base.

Panmure Gordon analyst Barrie Cornes said the shares remain undervalued, given that they trade at a 31% discount to net asset value.

He said: "We believe that a discount of no more than 12% is realistic and achievable and so we have increased our target price from 2,052p a share to 2,161p a share."

Cornes added that the patience of investors had been rewarded with an attractive dividend yield and the prospect of a 10-for-1 share split in the first half of this year.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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