‘Bolder changes’ expected at BL and Landsec
Investors should view shares in British Land and Landsec as a bargain given their ongoing discount to asset value and an improving outlook in the retail market, according to a City analyst.
Stifel’s John Cahill has upgraded his recommendation on both REITs to “buy” from “hold”. That marks the first time the investment bank has pegged British Land with a “buy” rating since 2018 and the first time it has done so for Landsec since 2016.
The growth of industrial and alternative REITs had “greatly reduced the previous bellwether status of both companies” Cahill said. Nonetheless, he added, the upgrades were based on his team’s belief that “the nadir for retail property is either close, or already past in most sub-sectors”; the REITs’ own moves to reduce their exposure to retail in recent years; and the stocks’ continuing discounts to NAV.
Investors should view shares in British Land and Landsec as a bargain given their ongoing discount to asset value and an improving outlook in the retail market, according to a City analyst.
Stifel’s John Cahill has upgraded his recommendation on both REITs to “buy” from “hold”. That marks the first time the investment bank has pegged British Land with a “buy” rating since 2018 and the first time it has done so for Landsec since 2016.
The growth of industrial and alternative REITs had “greatly reduced the previous bellwether status of both companies” Cahill said. Nonetheless, he added, the upgrades were based on his team’s belief that “the nadir for retail property is either close, or already past in most sub-sectors”; the REITs’ own moves to reduce their exposure to retail in recent years; and the stocks’ continuing discounts to NAV.
He also highlighted management changes at both companies as a driver of values, with business strategies of each now being reshaped by new leaders.
“Mark Allan became chief executive of Landsec in April 2020, arriving during a period of great uncertainty and with the UK in its first lockdown,” Cahill said. “Simon Carter became chief executive of British Land in November 2020, likewise having to navigate the company through the pandemic rather than making any significant changes in strategy.
“Both CEOs now have the opportunity to press ahead with changes, and we expect May’s results announcements to be both more positive about the future and include bolder changes in strategy.”
Cahill expects Landsec to trade at a 15% discount to its full-year 2022 net tangible value forecast of 1,067p, with a target price of 900p. Its highest price over the past year has been 813.2p, which it recorded last month.
At British Land, the Stifel team forecasts shares trading at a 10% discount to 2022 NTA of 716p. The stock’s 12-month high came last month, at 556.4p.
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