More on Grainger Trust
Grainger Trust: H1 2006 results
Grainger Trust, a manager of residential property reported weaker figures for the half year to March 2006 – the first real-estate company to do so.
Grainger reported that Net Asset Value per share dropped to 459p from 475p at end September 2005. Upto now most real-estate managers have reported strong increases in NAV, due to the booming property market, particularly in retail and office space. Grainger’s portfolio is mainly residential and seems to have been hit by the slowing housing market.
Earnings before interest and tax on a like for like basis were flat at £41.8m compared to £41m in the same period last year.
The company says it remains confident in the prospects for the residential market in the longer term, however our concern is that in the shorter to medium term things are likely to get tougher.
The company claims house price growth will be underpinned by restricted supply (due to planning constraints), low new build volumes, as well as demand from an increase in the number of households.
With most house builders reporting difficulty in getting rid of their stocks, in the shorter term at least, Grainger’s views seem to be too sanguine.
The residential house prices have been more badly affected by the sluggish market than either retail or office space. Rising interest rates are likely to dampen demand further.
Given the gloomy short-term outlook and the structure of its portfolio, in the short term the company is likely to lag the sector.
The share trades at 470.5p, at a small premium to its NAV with a yield of 1.3%.
Random picks: BP | Body Shop | British Land | Easyjet | Dimension Data | Marshalls | Northern Rock | Renishaw | Rio Tinto | Yell