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Investing.com - Citizens JMP analyst Mitch Germain has reiterated a Market Perform rating on Orion Office REIT Inc (NYSE:ONL), currently trading at $2.56, following a second acquisition bid from the company’s top shareholder, Kawa Capital Management. According to InvestingPro data, the stock has shown strong momentum with an 11.3% return over the past week.
The new proposal values ONL shares 10% above Kawa’s original offer, representing an additional $15 million in equity value, according to the analyst’s note. The bid was delivered in a letter as part of a 13D filing with regulators. With a current market capitalization of $144 million and a price-to-book ratio of just 0.19, InvestingPro analysis suggests the stock is currently undervalued.
Citizens JMP acknowledged that ONL has struggled as a public company, with its single-tenant office portfolio negatively impacted by space rationalization efforts. The REIT’s shares have declined approximately 90% since its initial listing in November 2021.
Despite noting some positive shifts in business momentum, the research firm described the economics behind Kawa’s proposal as "underwhelming" and maintained its neutral stance on the stock.
The Market Perform rating reflects concerns about continued office rationalization efforts and risks associated with changing the portfolio composition to more critical office/flex properties, which Citizens JMP expects will dilute earnings. The firm views ONL’s current valuation of just under 4x 2025 estimated FFO per share as fair, despite representing a significant discount to net-lease REITs (mid-13x) and office REITs (approximately 10x).
In other recent news, Orion Properties Inc. reported its first-quarter 2025 earnings with a revenue of $38 million, surpassing the forecast of $36.8 million. Despite the revenue beat, the company posted a net loss of $0.17 per share, an improvement from the previous year’s loss. Orion’s management has provided guidance for 2025, projecting Core FFO between $0.61 and $0.70 per diluted share. In another development, Orion Properties rejected an acquisition proposal from Kawa Capital Management, which valued the company at $2.50 per share. The board stated that the offer undervalues the company and is not in the best interests of its stockholders. Additionally, Citizens JMP maintained its Market Perform rating on Orion, suggesting that the proposed offer does not adequately value Orion’s portfolio. The company continues to focus on its strategic shift towards Dedicated Use Assets to enhance long-term growth prospects.
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