Berenberg lowers target price on Derwent London

Analysts at Berenberg lowered their target price on property investment and development business Derwent London from 2,800.0p to 2,450.0p on Tuesday, stating the group was "not immune" from market movements.

Berenberg said interim reporting from Derwent's London office peers and market data highlighted "a valuation decline" which was more significant, and happened more quickly, than its prior expectations.

The German bank stated that ahead of Derwent's full-year 2022 results statement, expected in February 2023, it had opted to amend its guidance, leaving earnings forecasts largely unchanged but net tangible assets projections 10.5% lower.

"Derwent remains a standout company, with a stand-out track record, a high-quality management team, sector-leading ESG disclosure, and significant future development optionality," said Berenberg, which maintained its 'hold' rating on the stock.

"However, despite all of this, it operates in the most cyclical sector of the UK real estate sector – London offices – where we forecast numerous near-term headwinds. As a result, despite a valuation multiple 38% below the long-term average, there are better risk-adjusted opportunities available elsewhere in the sector, in our view."

Reporting by Iain Gilbert at Sharecast.com