Workspace slumps on Berenberg downgrade
Workspace Group
497.50p
16:45 23/04/24
Workspace was under the cosh on Thursday as Berenberg downgraded its stance on the office space provider to ‘sell’ from ‘hold’ as it said the stock’s re-rating was overdone.
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16:59 23/04/24
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The bank said Workspace’s share price recovery, up by 40% over the last three months - versus the UK real estate sector up 7% up - fails to account for the significant operational risks, reduced demand and increased competition facing the company.
The bank lifted its price target on the shares to 670p from 590p to reflect greater certainty in light of vaccine developments.
"However, with operations likely to remain challenged and both earnings and net tangible assets (NTA) unlikely to recover to pre-pandemic levels over our forecast horizon, we downgrade our recommendation," it said.
Berenberg said it expects the headwinds that have arisen from the pandemic to be most pronounced in the flexible workspace sector and persist for longer versus traditional office peers.
"Our view is based on a number of reasons, including Workspace’s higher level of operational gearing, the lower covenant quality of tenants, reduced enquiry rates - which we expect to persist - challenges of social distancing within Workspace’s co-working offices and increased competition."
At 1250 GMT, the shares were down 5.4% at 730p.