Source: Sharecast
Berenberg said CLS' share price has underperformed the wider UK real estate sector by 20% over the last 12 months, reflecting both ongoing negative sentiment towards offices, as well as pricing in execution risks associated with needing to restore balance sheet strength in a "challenging market".
Yet the German bank said CLS' interim results on 13 August confirmed the progress the company was making against its strategic priorities, which in time will rebase the business to deliver "a more focused portfolio" with higher-quality, faster-growing properties, and deliver future earnings growth.
"Management has entered H2 with cautious optimism, having seen signs of improving market fundamentals. While we understand the market's negative sentiment, we believe the share price reaction is overdone," said Berenberg, which reiterated its 'buy' rating on the stock.
Berenberg added that CLS currently trades at a roughly 73% discount to its estimate of spot net asset values, offering a prospective 7.0% dividend yield.
"Our updated price target implies a circa 60% discount to our trough net tangible asset of 208p. Execution risk remains while there is more deleveraging to do in a tough market, but history suggests successful execution may be rewarding," said the analysts.
Reporting by Iain Gilbert at Sharecast.com