Analysts at Berenberg downgraded real estate firm Empiric Student Property from ‘buy’ to ‘hold’ on Wednesday, stating that normalisation had been delayed.
Berenberg said Empiric’s first-half results highlighted not only the progress the company had made in refining its portfolio but also operational risks that were “increasingly likely” to affect its full-year performance in 2022.
“The current booking rate stands at just 70%, less than six weeks ahead of the new academic year,” said Berenberg. “As such, while we expected the booking cycle to be back-end-loaded, there is now the very real risk that higher vacancy rates will persist, delaying the company’s operational recovery from Covid-19.”
The German bank, which kept its 100.0p target price on the stock unchanged, also added that Empiric’s rebased dividend, coupled with a valuation in “the upper quartile of its long-term range”, may present a headwind for the company in light of its income-biased shareholder register.
“With the shares up by circa 30% since we upgraded to ‘buy’ in March 2021, near-term earnings lowered, the dividend rebased and shares now at our price target we lower our recommendation to ‘hold’,” concluded Berenberg.
