Grainger sees 10.4 per cent rise in value of residential UK portfolio

16th May 2014 10:44

Residential property owner and manager Grainger, the country's largest, registered a net asset value (NAV) increase of 12.4 per cent to reach 272p over the six months ending on March 31st. Triple net asset value (NNNAV) grew 16.9% to 228p. It came on the heels of a continued outperformance by its residential UK portfolio, which recorded a 10.4% rise in valuation as compared to an increase of 4.6% across the combined Nationwide and Halifax house price indices.Said valuation gain was mostly the result of underlying inflation but also due to a narrowing in the vacant possession discount, mainly reflecting the strength of the London market, broker Numis explained. Recurring profits before tax increased by 55% to reach £23.1m, while profits before tax more than tripled to hit £49.8m.During the same period the company continued reducing its consolidated loan-to-value ratio, which dropped to 45.2% versus 48% as of September 2013."In our view, this statement highlights both the high level of gearing NAV has to rising house prices, Grainger's ability to outperform the market and the fact the group is back on the front foot for acquisitions. "Post the upgrade Grainger is trading at a 17% discount to September 2014 NNNAV per share which seems unjustified given the momentum in both the business and the underlying market," the broker added.Numis upgraded the stock to 'buy' with a price target of 278p following the above interim results.As of 11:20 shares of the firm were 1.44% higher at 218.1p.AB