Optiva Summary following Announcement - 50 Year Agreement-to-Lease. Expected to receive £1m
- Demonstrating execution and near term profitability: This is exciting news from DKE because they are a step closer to delivering profits of at least c.£1m from their first transaction. This demonstrates excellent execution from the management. It is important to highlight that the DKE could own the properties on a freehold basis thereby strengthening their balance sheet and underpinning the value of company.
- Favourable market dynamics: There is an imbalance between demand and supply for long-dated income. The demand for long-dated income could be in the magnitude of £1.6 trillion, which is almost 5 times the current market value and the supply is expected to lag behind demand for long-dated income. Therefore, we are confident that there will be institutional appetite for these type of properties because the majority continue to seek alternative inflation linked investments in a low yield environment.
- Valuation: DKE benefits from a flat expenditure structure and if we assume a conservative P/E multiple of 8x, with net earnings of £1m, it will imply a market value of at least £8m or 2.3p as the target price over the next 12 months
Interview with Paul Gazzard, Non-Executive Director, May 2017 - Vox Markets Podcast
Interview with Geoffrey Dart and Timothy Le Druillenec, March 2017 - Vox Markets Podcast
(interview starts at 30 minutes and 20 seconds)