Derwent London Stock Downgraded by Kepler Cheuvreux

Key Factors Behind the Rating Change

Kepler Cheuvreux has revised its rating for Derwent London (LON:DLN), downgrading the stock from Buy to Hold while maintaining a price target of 2,050p. The decision is primarily driven by the stock's significant 17% rally since September and prevailing uncertainty surrounding the company's upcoming CEO transition, announced on January 22.

Situational Overview

Derwent London, the largest central London-focused REIT with a portfolio valued at approximately £5 billion, has seen its share price recover strongly. The stock has gained 11.9% year-to-date, trading at 1,946p. Kepler's analysis indicates that UK REIT shares often underperform during CEO transition periods, especially when a successor is not immediately named.

Financial Projections and Market Impact

Despite recent positive news flow in London's office market, Kepler sees challenges for Derwent. The firm's price target implies only a 5% upside, or 10% including the forecast dividend yield. Kepler maintains its financial forecasts, projecting a 7% decline in underlying EPS in 2025 before a 1% recovery in 2026, alongside 2.3% NAV per share growth in the second half of 2025.

Summary

The downgrade to Hold reflects a valuation call following a strong share price run-up, balanced against the risks associated with leadership uncertainty. Investors will closely watch the CEO selection process, as it could influence the company's future strategic direction.

FAQ

Q: Why was Derwent London's stock downgraded?
A: Kepler Cheuvreux downgraded the stock due to its recent 17% price rally, which limits further upside, and uncertainty surrounding the upcoming CEO transition.

Q: What is the new rating and price target for Derwent London?
A: The new rating is Hold, revised from Buy. The price target remains unchanged at 2,050p.

Source: Investing.com