Kepler Cheuvreux has downgraded its recommendation on Derwent London from Buy to Hold but left its price target unchanged at 2,050p. The research house said the decision reflects the stock's 17% advance since September and fresh uncertainty tied to the group's forthcoming CEO transition.
Derwent London announced on January 22 that its chief executive will retire, and the board has started the formal process of appointing a successor. In its note, Kepler drew on comparative analysis of previous UK REIT management changes, finding that shares in the sector often lag during leadership transitions - a dynamic that appears more pronounced when there is a longer interval before a replacement is named.
Kepler acknowledged an uptick in positive news flow around London office markets, but the firm cautioned that Derwent may face hurdles in matching the performance it delivered in prior cycles. The broker's retained 2,050p target implies approximately 5% upside from the stock's current price of 1,946p, or about 10% when a forecast dividend yield is included.
The research house is not altering its core forecasts for the company. Its projections include 1% underlying earnings per share growth in 2026 following a 7% decline in 2025, and 2.3% half-on-half growth in net asset value per share for the second half of 2025. Kepler said its target price is derived half from NAV forecasts and half from a discounted cash flow valuation.
Derwent London, described by Kepler as the largest REIT focused on central London, has a property portfolio valued at roughly £5 billion. The group's share price has recovered from a low of 1,608p to the current level, which Kepler notes represents an 11.9% year-to-date gain.
By moving to Hold while preserving its price objective and underlying forecasts, Kepler signalled that its primary concerns are valuation - given recent share price strength - and the near-term governance uncertainty tied to the CEO change. Investors watching Derwent will likely be monitoring both the pace of the management replacement process and any further developments in London office market sentiment that could alter the firm's outlook.
Contextual note - Kepler's guidance and the company's announced leadership change are the factors explicitly cited in the broker's rating revision and in the projections referenced above.