By ROBERT HARLEY 09/01/2009
Wichford, the property company, recently declared their year end results. Given the government backed nature of the underlying tenants and the fact that dividends are now covered by a secure rental income stream there might have have been some cause for some optimism. Unfortunately this has not been matched by share price performance.
The issue remains to be the level of gearing the company is currently carrying. At September 2008 NAVs this was 80% loan to value (LTV). Luckily for Wichford the bulk of its debt currently has no LTV covenants, however this will certainly change come 2012 when this debt is due for refinancing. In short, the company has 3 years to position itself according to the prevailing market conditions ahead of this event. Obviously markets move fast to price in these scenarios, but whilst the company might have the appearance of being a value opportunity, we believe this has to be balanced against uncertainties regarding the fundamental outlook and future availability of credit, combined with the current high level of gearing. As a consequence we have reduced our rating to a hold.