Results Review of LSE listed PRS REIT (THE) Plc and TR European Growth Trust Plc

Results Review of LSE listed PRS REIT (THE) Plc and TR European Growth Trust Plc

          

PRS REIT (THE) Plc

PRS REIT Plc (PRSR) is a United Kingdom based Real Estate Investment Trust (REIT). It is a closed-ended investment trust. It was set up to invest in the Private real estate in the Rented Sector. It aims to reward shareholders with sufficient income as well as with a potential of capital gains and growth of income. It had been able to raise a total of £500 million at the gross level through its IPO, on May 31,2017 as well as  by a follow-up placement in February 2018. Both the capital raising events were supported by the United Kingdom’s Government's Homes England by means of direct investments.

The REIT is listed on the main market segment of the London Stock Exchange where it trades with the ticker name PRSR.

Financial Review

The company on 25 September 2019 came out with its Audited full year results for the period ending on 30 June 2019.

  • The company’s revenue surged by 233 per cent to £6.0 million in FY19 from £1.8 million in the 13 months ended 30 June 2018. The company’s net rental income was up by 227 per cent to £4.9 million in FY19 from £1.5 million in the 13 months ended 30 June 2018.

  • The company’s operating profit surged by 441 per cent to £14.6 million in FY19 as against £2.7 million in the 13 months ended 30 June 2018. The company’s profit after taxation was up by 356 per cent to £14.6 million in FY19 from £3.2 million in the 13 months ended 30 June 2018.

  • The company’s basic EPS was up by 190 per cent to 2.9 pence per share in FY19 as against 1 pence per share in the 13 months ended 30 June 2018. The company’s net assets were valued at £474 million on 30th June 2019 as against £486 million on 30th June 2018.

  • The company’s annual dividend stood at 5 pence per share in FY19, same as in the previous year.

  • The company added 768 new rental homes to its portfolio during the year. The company’s estimated annualized rental income stood at £10.7 million on 30 June 2019 against £3.6 million, which was the annualized estimated rental income as on 30 June 2018.

Source – company’s audited full year results statement published on 25 September 2019.

Stock performance at the London Stock Exchange

Price Chart as on 14 October 2019, before the market close (Source: Thomson Reuters)

On 14 October 2019, at the time of writing the report (before the market close, GMT 8.28 AM), PRSR shares were trading on the London Stock Exchange at GBX 89.00.

The stock has a 52-week High of GBX 102.50 and a 52-week low of GBX 86.00. The total market capitalization of the company was £436.83 million.

Outlook

By the end of August of 2019, the company had a portfolio of completed homes of 1,289. The pace of completion of homes over the years is increasing for the company, reflecting the growing number of sites under construction. Over the next few months the remainder of our £900 million of gross funds that were raised in 2018 will be fully deployed. When all the houses are completed the portfolio is expected to grow to 5,400 residences across 75 locations, covering most of the major regions of England outside of London.

The Demand for good quality family houses on rental basis remains high and the company’s completed housing dwellings are renting out well.   The company is pleased to note and report that 98.5 per cent of its tenants who had responded to a survey it had conducted 10 months into their tenancies reported that they were satisfied with their dwellings. However, the underlying structural drivers of demand for homes in the United Kingdom remains unchanged despite the uncertain economic climate, with a short supply of rental residential dwellings and more households entering the private residential housing renting sector.

TR European Growth Trust PLC

TR European Growth Trust PLC (TRG) is a United Kingdom domiciled investment management company. The main objective of investment of the company is to achieve growth of capital by investing primarily in small and medium sized companies in Europe. The company invests in a portfolio of sectors including technology, retail, financial services, consumer goods, natural resources etc. Henderson Investment Funds Limited are the alternative investment fund managers of the Company.

The shares of the company are listed on the London Stock Exchange where they trade with the symbol TRG.

Financial Review

The company on 03 October 2019 came out with its full year Financial results for the year ending on 30 June 2019.

  • The share price of the company generated a total return of negative 10.4 per cent. However, the five-year performance of the company remained notably ahead of the benchmark with a NAV total return of 73.3 per cent, which is 7.2 per cent ahead of that of the benchmark.

 

  • The European market in the second half of the company’s fiscal year 2019 continued its roller coaster ride amid Brexit uncertainty and trade tensions. Hence, the company’s performance was not up to the mark, which resulted in a net asset value per share total return of -7.3% for the year ended 30 June 2019.

  • The company’s net assets were recorded at £521,023 thousand as on 30 June 2019 as against £574,591 thousand as on 30 June 2018. The company’s NAV stood at 1,039.79 pence per share as on 30 June 2019 as against 1,146.70 pence per share as on 30 June 2018.

 

  • The company’s net revenue profit was recorded at £12,068 thousand in FY19 as against £11,025 thousand in FY18. The company’s net capital loss stood at £54,863 thousand in FY19 as against loss of £1,089 thousand in FY18.

 

  • However, the company has recommended a final dividend of 14.5 pence per share which has not been finalized yet and awaits approval from shareholders. The company’s annual dividend stood at 22 pence per share in FY19 as against 19 pence per share in FY18.

Source – company’s full year financial results statement published on 03 October 2019

Stock performance at the London Stock Exchange

Price Chart as on 14 October 2019, before the market close (Source: Thomson Reuters)

On 14 October 2019, at the time of writing the report (before the market close, GMT 9.06 AM), TRG shares were trading on the London Stock Exchange at GBX 842.10.

The stock has a 52-week High of GBX 924.18 and a 52-week low of GBX 760.00. The total market capitalization of the company was £422.41 million.

Outlook

The company currently operates in an environment of low global economic growth, exacerbated by the escalating China-American trade war. This had an adverse impact on the economic environment in Europe and as a result on the fortunes of the company. The lack of political clarity in the continent and also the uncertainties regarding Brexit in the UK has subdued business confidence in the region. This has resulted in smaller companies in Europe being very much out of favor. This is what is reflecting in the widening of the discount to NAV.

However, despite the current period of political and economic uncertainty, a combination of supportive monetary policy measures adopted by some countries in conjunction with supportive fiscal policy could ameliorate the global economic recession environment to a large extent. As an asset class, the European smaller companies have often seen periods of unpopularity; however, in the long run, historical performance has suggested time and again that this is one of the most rewarding asset classes for the patient investor.

The company hopes to perform better when the larger politico-economic environment improves, and it will be able deliver good return to its investors then.

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