Derwent London (LSE:DLN) - Share price, News & Analysis

DLN fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	1/6
Past Performance	1/6
Financial Health	3/6
Dividends	4/6

DLN Stock Overview

Rewards

Trading at 25.5% below our estimate of its fair value

Earnings are forecast to grow 3.84% per year

Became profitable this year

Risk Analysis

Unstable dividend track record

Large one-off items impacting financial results

Derwent London Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Derwent London
Historical stock prices
Current Share Price	UK£27.66
52 Week High	UK£38.50
52 Week Low	UK£27.00
Beta	0.58
1 Month Change	-8.47%
3 Month Change	-14.39%
1 Year Change	-19.45%
3 Year Change	-11.23%
5 Year Change	4.22%
Change since IPO	1,039.66%

Shareholder Returns

	DLN	GB REITs	GB Market
7D	-0.4%	0.01%	2.3%
1Y	-19.5%	-5.7%	-8.6%

Return vs Industry: DLN underperformed the UK REITs industry which returned -5.7% over the past year.

Return vs Market: DLN underperformed the UK Market which returned -8.6% over the past year.

Price Volatility

Is DLN's price volatile compared to industry and market?
DLN volatility
DLN Average Weekly Movement	3.6%
REITs Industry Average Movement	3.3%
Market Average Movement	5.5%
10% most volatile stocks in GB Market	10.8%
10% least volatile stocks in GB Market	2.8%

Stable Share Price: DLN is less volatile than 75% of UK stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: DLN's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
n/a	163	Paul Williams	https://www.derwentlondon.com

Derwent London plc owns 83 buildings in a commercial real estate portfolio predominantly in central London valued at £5.4 billion (including joint ventures) as at 30 June 2020, making it the largest London-focused real estate investment trust (REIT). Our experienced team has a long track record of creating value throughout the property cycle by regenerating our buildings via development or refurbishment, effective asset management and capital recycling. We typically acquire central London properties off-market with low capital values and modest rents in improving locations, most of which are either in the West End or the Tech Belt.

Derwent London Fundamentals Summary

How do Derwent London's earnings and revenue compare to its market cap?
DLN fundamental statistics
Market Cap	UK£3.11b
Earnings (TTM)	UK£252.30m
Revenue (TTM)	UK£227.20m

12.3x

P/E Ratio

13.7x

P/S Ratio

Is DLN overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
DLN income statement (TTM)
Revenue	UK£227.20m
Cost of Revenue	UK£52.80m
Gross Profit	UK£174.40m
Other Expenses	-UK£77.90m
Earnings	UK£252.30m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

Aug 11, 2022

Earnings per share (EPS)	2.25
Gross Margin	76.76%
Net Profit Margin	111.05%
Debt/Equity Ratio	28.1%

How did DLN perform over the long term?

See historical performance and comparison

Dividends

2.8%

Current Dividend Yield

67%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is DLN undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for DLN?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for DLN. This is calculated by dividing DLN's market cap by their current preferred multiple.
What is DLN's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	UK£3.11b

DLN key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	19.2x
Enterprise Value/EBITDA	31.7x
PEG Ratio	3.2x

Price to Earnings Ratio vs Peers

How does DLN's PE Ratio compare to its peers?

DLN PE Ratio vs Peers

The above table shows the PE ratio for DLN vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	14.4x

Forward PE

Price-To-Earnings vs Peers: DLN is good value based on its Price-To-Earnings Ratio (12.3x) compared to the peer average (14.4x).

Price to Earnings Ratio vs Industry

How does DLN's PE Ratio compare vs other companies in the U.K. REITs Industry?

Price-To-Earnings vs Industry: DLN is expensive based on its Price-To-Earnings Ratio (12.3x) compared to the UK REITs industry average (7.7x)

Price to Earnings Ratio vs Fair Ratio

What is DLN's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

DLN PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	12.3x
Fair PE Ratio	17.2x

Price-To-Earnings vs Fair Ratio: DLN is good value based on its Price-To-Earnings Ratio (12.3x) compared to the estimated Fair Price-To-Earnings Ratio (17.2x).

Share Price vs Fair Value

What is the Fair Price of DLN when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: DLN (£27.66) is trading below our estimate of fair value (£37.13)

Significantly Below Fair Value: DLN is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: DLN is poor value based on its PEG Ratio (3.2x)

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Future Growth

How is Derwent London forecast to perform in the next 1 to 3 years based on estimates from 9 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

3.8%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: DLN's forecast earnings growth (3.8% per year) is above the savings rate (0.9%).

Earnings vs Market: DLN's earnings (3.8% per year) are forecast to grow slower than the UK market (11% per year).

High Growth Earnings: DLN's earnings are forecast to grow, but not significantly.

Revenue vs Market: DLN's revenue (3.5% per year) is forecast to grow slower than the UK market (4.1% per year).

High Growth Revenue: DLN's revenue (3.5% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: DLN's Return on Equity is forecast to be low in 3 years time (2.9%).

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Past Performance

How has Derwent London performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-11.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: DLN has a large one-off gain of £146.0M impacting its December 31 2021 financial results.

Growing Profit Margin: DLN became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: DLN's earnings have declined by 11% per year over the past 5 years.

Accelerating Growth: DLN has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: DLN has become profitable in the last year, making it difficult to compare its past year earnings growth to the REITs industry (129.6%).

Return on Equity

High ROE: DLN's Return on Equity (5.7%) is considered low.

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Financial Health

How is Derwent London's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: DLN's short term assets (£265.6M) exceed its short term liabilities (£193.0M).

Long Term Liabilities: DLN's short term assets (£265.6M) do not cover its long term liabilities (£1.3B).

Debt to Equity History and Analysis

Debt Level: DLN's net debt to equity ratio (26.6%) is considered satisfactory.

Reducing Debt: DLN's debt to equity ratio has increased from 22.9% to 28.1% over the past 5 years.

Debt Coverage: DLN's debt is not well covered by operating cash flow (10.1%).

Interest Coverage: DLN's interest payments on its debt are well covered by EBIT (4.9x coverage).

Balance Sheet

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Dividend

What is Derwent London current dividend yield, its reliability and sustainability?

Dividend Score

4/6

Dividend Score 4/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.77%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: DLN's dividend (2.77%) is higher than the bottom 25% of dividend payers in the UK market (1.88%).

High Dividend: DLN's dividend (2.77%) is low compared to the top 25% of dividend payers in the UK market (5.18%).

Stability and Growth of Payments

Stable Dividend: DLN's dividend payments have been volatile in the past 10 years.

Growing Dividend: DLN's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (67.1%), DLN's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonable cash payout ratio (68.3%), DLN's dividend payments are covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

2.8yrs

Average management tenure

CEO

Paul Williams (60 yo)

3.08yrs

Tenure

UK£1,262,000

Compensation

Mr. Paul Malcolm Williams has been the Chief Executive Officer of Derwent London Plc since May 17, 2019 and has been its Executive Director since 1998. Mr. Williams served as a Property Director of Derwent...

CEO Compensation Analysis

Compensation vs Market: Paul's total compensation ($USD1.55M) is below average for companies of similar size in the UK market ($USD3.04M).

Compensation vs Earnings: Paul's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: DLN's management team is considered experienced (2.8 years average tenure).

Board Members

Experienced Board: DLN's board of directors are considered experienced (6.8 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/26 00:00
End of Day Share Price	2022/06/24 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31