UPDATE: Stifel Starts Parkway Properties (PKY) at Sell
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(Updated - October 18, 2016 8:57 AM EDT)
Stifel initiated coverage on Parkway Properties (NYSE: PKY) with a Sell rating and a price target of $17. Analyst John W. Guinee is cautious on the Houston market.
"We are initiating coverage of Parkway, Inc. (initially called HoustonCo) with its 8.7mm SF, 100% Houston portfolio with a Sell rating. Most valuation metrics lead us to believe the shares are overvalued," said Guinee.
"Our net asset value (NAV) estimate is $16.72 – $18.18 per share, based upon a 9.5% - 10.0% cap rate range. Our 2017 FFO/FAD/share estimates of $2.17/$1.12 and trade at 8.6x/16.7x the current share price. PKY currently trades at an implied NOI cap rate of 9.3% and a total enterprise value of roughly $182/SF relative to our gross and adjusted replacement cost estimates of $322/SF and $204/SF," continued the analyst.
Guinee added, "Based on our 'on the ground' discussions, we think: 1) the Houston office market is a long way from bottoming; and 2) hard asset investors will stay away until they can effectively touch the bottom of the oil filled pool and underwrite rental rates."
Shares of Parkway Properties closed at $18.67 yesterday.
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