Shore Capital Markets has revised its stance on Warehouse REIT PLC (AIM:WHR), moving from a buy to a hold recommendation following a reassessment of the company's financial forecasts and valuation.
The broker re-evaluated its position in light of recent asset disposals and the prevailing financing costs.
Warehouse REIT's recent announcement of two asset disposals for a total of £13.4 million, slightly ahead of their September 2023 book value, was part of a broader strategy to offload £53 million worth of assets at a blended yield of 5.3%.
These disposals aimed to mitigate the impact of expensive debt, but the combined effect of these sales and higher interest costs in the second half of financial 2024 has led Shore Cap to lower its earnings forecast for the company.
Shore Cap’s forecast for the financial year has been adjusted from 5.7p per share to 5p, and for financial 2025 from 6.4p to 6p, leaving the dividend uncovered for an additional year.
Warehouse REIT’s decision to seek exit options for the Radway Green development site, despite its potential, reflects the broader market's cautious stance towards industrial assets and development projects.
That being said, “Warehouse has done well to find and advance the site through to planning approval on 1.8mln sq ft of prime logistics space and we would expect this site to generate decent interest from potential buyers”, said analysts.
Despite a structurally supportive market for Warehouse’s multi-let industrial assets wheelhouse, the company’s share price has suffered, according to Shore Cap, because of “the damage to earnings caused by a rapid increase in finance costs and former high exposure to floating=rate debt”.
Analysts have a 76p share price target on the stock against a current price of 75.3p.