Hammerson and INTU shares on big discount

EdGasketTheSecond

Both currently priced at about 60% of property NAV value and paying 5.5% and 6.5% in dividends. Hammerson had good results yesterday and yet the share price drifts lower. I can see there might be some risk with shopping centres vs. online but they both seem to be turning in good results regularly and HMSO say occupancy is up with more leisure offerings in their centres. Are they the bargain they seem? Brokers don't think so but according to AJ Bell's research you do better by doing the opposite of what brokers say; at least for larger companies.

bowlhead99

EdGasketTheSecond wrote: »

Both currently priced at about 60% of property NAV value and paying 5.5% and 6.5% in dividends. Hammerson had good results yesterday and yet the share price drifts lower. I can see there might be some risk with shopping centres vs. online but they both seem to be turning in good results regularly and HMSO say occupancy is up with more leisure offerings in their centres. Are they the bargain they seem? Brokers don't think so but according to AJ Bell's research you do better by doing the opposite of what brokers say; at least for larger companies.

Times this morning said:

...... And maybe Mr Atkins has a point that the share price fall reflects wider fears over consumer spending, not least if interest rates go up.

Yet underlying net rental income growth of 1.7 per cent was still down on 2016`s 2.2 per cent - and "below the group's 2 per cent target", as Liberum analysts put it. And same-store sales at the UK shopping centres, such as Brent Cross and the Bullring, fell by 2.7 per cent.


With online shopping showing no sign of going away, it might not be the ideal time to be doubling down on something as last millennium as shopping centres. Mr Atkins is having none of it, of course. He says 85 per cent of retail is still in store. And that buying Intu, whose investors will own 45 per cent of the merged group, will enable the pair to focus on better-quality centres. That's where retailers will showcase new products - one reason for his 'not all retail is equal' mantra.


Even so, the deal also depends on getting shot of the merged estate's £2 billion tail, where achieving net asset value looks tricky - whatever Mr Atkins' success with the first £100 million of disposals. And the mooted £25 million of synergies look pitiful. So, no big shock that Mr Atkins is yet to convince. His deal looks even less fun than actually going to a shopping centre.

450p today is a far cry from the 700p people paid in 2015 for a share. That was before all the Brexit uncertainty that followed the year after and the ongoing uninspiring performance. Shopping centres are not the coolest thing in the world to invest in, and with debt now getting more expensive (which can affect retail purchasing power and thus prospective rents, just like it affects the ability to leverage the portfolio). Whether you fancy some depends on what else you already have in your commercial property portfolio and shares generally.

I tend to agree they will face some losses in the parts they are trying to exit so you wouldn't expect zero discount to NAV, and it is not a booming sector otherwise INTU wouldn't have been on such a discount when Hammerson agreed to pay £££ as a premium over the then share price to buy it.