Market's view on CLS Holdings
Published on April 2024
- A stock watcher mentioned that the dividend is currently covered by free cash flow, highlighting that CLS was not originally a REIT and hence retained higher levels of free cash. Despite increased interest rates adding to financial burdens, the company has maintained its dividend payouts. However, concerns about increasing vacancy levels and upcoming refinancing needs could diminish this financial cushion, although these risks are reflected in the currently declining share price.
- Another watcher noted the patience required when holding CLI stock, which offers a covered yield of 9.6%, suggesting that the return compensates for the waiting period during market fluctuations.
- There is a mention of technical indicators such as RSI & MACD showing improvement, with the stock trading below its 50-day and 200-day moving averages, indicating a potentially undervalued status.
- A discussion about the structure of property ownership within the company revealed that most properties are ring-fenced in their respective Special Purpose Vehicles (SPVs) with non-recourse lending, which could be advantageous for securing better loan terms. However, not all properties follow this one-to-one SPV to property ratio, which could impact the financial stability of the company.
- Concerns were raised about the potential overvaluation of certain company assets, such as office spaces in locations like New Malden, which might not be prime real estate markets.
- The potential conversion of office spaces into residential properties was discussed as a strategy that could potentially increase property values, although it was noted that not all office spaces might be suitable for such conversions.
- It was highlighted that the company owns a significant property portfolio, which includes properties that are currently advertised for rent, though it was unclear how much of this is actually available for lease.
- Peel Hunt adjusted their rating on CLS to ‘add’, indicating a positive outlook on the stock, despite a recent target price reduction to 105p, which still represents a significant increase from current levels.