Songbird Estates

HOLD

23/09/2011 Ben Jaglom

Canary wharf landlord Songbird Estates (SBD) has reported an 8.1% increase in net assets to £1.89bn, noting that it has pre-let half of 25 Churchill Place.

The AIM 50 constituent, the third largest company on the junior market by market cap declared a 3.7% increase in its NAV per share to 194p over the six months to June. The market value of its property portfolio stood at £5bn (2010: £4.9bn) while the weighted averaged equivalent yield of its office portfolio was 5.3% (2010: 5.2%.) Rental income fell from £153.5m to £124.6m. Cash stood at £945.3m.

Chairman David Pritchard argued that its new development 25 Churchill Place had demonstrated 'confidence in the market at Canary Wharf' having pre-let half of the 500,000 square feet to the European Medicines Agency. However he warned that in the 'face of turbulent macro economic conditions' and 'concerns on the levels of sovereign debt in Europe and the US' the outlook for the second half is 'less certain'.

Analysts at Evolution Securities are forecasting an adjusted NAV per share of 203.7p with EPS of 1.96p a share for the year to December 2011. In 2012 a NAV of 221.9p a share with EPS of 3.52p are expected.

With a non-executive board including various representatives of the Qatar Investment Authority Songbird is unlikely to run out of cash for the foreseeable future. Nonetheless downward pressure amidst the current financial crisis may put pressure on rents. At the current price, shares in the AIM behemoth look fairly valued. Hold.