Picton Property Income’s yield remains attractive

One tenant break undermined what was otherwise a reassuring set of interim results from Picton Property Income (PCTN). The tenant in question had occupied a 300,000 square foot warehouse and accounted for about 3 per cent of Picton’s rental income in the previous financial year. The resulting uncertainty around the company’s earnings outlook could be mitigated if the property is let out for 50 per cent more rent than the previous tenant was paying, which the company thinks is feasible.

Picton estimates that it can realise £10mn of additional rental income – equivalent to 25 per cent of its FY2025 total – through filling vacancies and bringing contracted rents in line with estimated market rates.

The company’s adjusted earnings fell by around 6 per cent versus the prior year to £10.5mn, partly due to the disposal of its largest office asset for £35mn during the period. Its £700mn property portfolio is now 68 per cent weighted to industrial assets, 20 per cent to offices and the remainder to retail and leisure.

The balance sheet is even more robust following the disposal, with a loan-to-value ratio of 22 per cent. Its total debt pile of £200mn comes with a low average interest rate of 3.7 per cent and a weighted average maturity of six years.

Picton is taking advantage of its 25 per cent discount to net asset value to repurchase shares. Its ongoing £12.5mn buyback, announced in September, equates to 3 per cent of its market cap. The shares, which also yield a 5 per cent dividend, have recently slowed after outperforming the sector during a strong first half of the year, creating an attractive entry point. Buy.

Last IC view: Buy, 73p, 22 May 2025