Hardman & Co Research: Palace Capital (PCA): Trading update and COVID-related dividend cut
FY20 results are due to be reported in June. PCA’s 2 April trading update stated FY20 results to be broadly in line with previous estimates. Loan-to-value (LTV) at 30 September 2019 stood at 34%; we expect this to increase to 37% as at March year-end, allowing for the drawdown at the York Hudson Quarter (HQ) development. With robust finances, PCA can weather COVID-related storms, including passing this quarter's dividend. A rent shortfall in FY21 looks likely. None of the diverse positive characteristics of the portfolio are negated. Indeed, we see scope for EPRA earnings to recover to the 19p per share historical dividend level once the HQ development has completed and funds have been redeployed into income-accretive acquisitions.
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