The Royal Mail PLC (trading on the London Stock Exchange as LON:RMG) has enjoyed a boost in their share price estimate from Berenberg Bank following a re-estimation of the fair value potential of the shares.
The boost comes following the announcement of the sale of physical premises of the Royal Mail’s Paddington-based sorting office, which looks set to score a higher-than-anticipated price. Great Western Developments will buy the site for an announced £111-million, with an additional £20-million to come is planning permission is approved.
Matthew O’Keefe, speaking on behalf of Berenberg Bank said, ‘At the full amount, this is 85% above our own valuation for Paddington which was £71-million. Pre-planning permission it is 56% ahead of our valuation.’
O’Keefe went on to say that they were looking to acquire three major London Royal Mail sites that have been ‘recognised as surplus’. As well as Paddington, this group includes Nine Elms and Mount Pleasant.
The full Berenberg estimated valuation of these three sites comes to around £1-billion.
O’Keefe continued, saying, ‘The Paddington sale demonstrates the potential undervaluation of these sites and supports our Buy case.’
The revised price, including planning permission bonus, represents an additional 4p on every share to be issued according to Berenberg’s fair value pricing.
The current target price for shares in the Royal Mail currently sit at 700p.
Markets: Oil and equities on the decline
Markets are volatile in relation to three factors: reductions in oil prices, the same in sovereign bonds, and worries over a potential global downturn.
Crude oil fell further in response to a stronger US$ and imbalances in supply and demand, WTI prices dropped $2.71 to $82.28 per barrel after the International Energy Agency in Paris reduced estimated demands for next year by a quarter of a million barrels a day, according to Capital Spreads’ Johnathan Sudaria in a morning note to his customers.
FTSE recovery seems unlikely in the light of the market’s behaviour.
Chris Beauchamp at IG agreed, saying that news of various failed or at-risk deals had wiped some 30 points off the market, although the UK’s reduction in unemployment was held to be one of the few bright spots in the financial world although the gain in sterling is fragile in the face of a fluctuating US dollar, which is also impacting European markets – with Intel’s gains restoring momentary faith in the currency.
Nervousness amongst investors is seeing a lot of chatter about Q4 ahead of the release of firm statements from the Fed, much of these nerves caused by the concern that the economy is not self-sustaining, the result of perhaps too much damage during the recent global recession.