We have had results today from a stock I have mentioned earlier this year, namely Picton Property Income Ltd (PCTN). This is a Guernsey based self managed income focused Investment Company which is listed on the LSE. It paid a dividend of 3 pence in the last twelve months which on a share price of 62 pence gives a yield of 4.84% gross which is covered 1.24x by earnings after the dividend was reduced after a refinancing last year.
The underlying total return on the portfolio was 21.6% while the NAV was up 14.3% outperforming the IPD quarterly benchmark. Voids or vacant properties decreased to 9% of the portfolio while the gearing or loan to value reduced to 48% from 55% after the rise in assets and some fund raising that they have undertaken. They say they are aiming for this to be around 35% in the medium term / mid cycle.
The shares delivered a 50% return as the share price moved from a discount to a premium to NAV over the last 12 months as investors anticipated better times ahead for commercial property and re-rated the sector. Indeed they note in the announcement that according to IPD All commercial property remains some 33% below its peaks from 2007. Thus it is not unusual at the moment for this type of fund to be trading close to or at a premium to NAV and a number of them have been using this demand to tap the market for new shares to bolster and enhance their portfolios.
Going forward the recovery in commercial property seems to be continuing and spreading out more to the regions and secondary property which should continue to benefit the likes of Picton. However, It is unlikely to provide such a strong total return in the year ahead as this will now be driven by the underlying NAV change and the yield. Nevertheless it still seems worth sticking with for the yield and some growth prospects and is a good way for private investor to access a diversified portfolio of commercial property with a good yield, where the lot sizes would normally be too large for most people to access it in a diversified fashion. If that is of interest you can download a copy of the full results announcement.