Occupancy’s degradation is slowing. Despite the encouraging level of new lettings, ERVs were down in the UK. Both France and Ireland look safer.
Companies: Hammerson plc (HMSO:LON)Hammerson (HMSO:LON)
End market rents (ERVs) were down 11% in FY 20, i.e. a 17% three-year cut. The LTV of 46% will require further adjustment measures soon. The UK flagship has lost half of its value since December 2017.
Vacancy strongly increased in Q2 20. LTV surpassed the 50% mark on 30 June 2020 due to strong value destruction in H1 20. Hammerson announced a £550m cash capital increase coupled with a disposal of £270m. Its ex-post pro forma net debt should be £2.2bn, i.e. LTV of 42% on a proportionate basis. Too high?
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
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Negative revaluations accounted for £1bn in FY 19 (£828m once the positive contribution of Premium Outlets was included) vs. £10bn of gross assets in FY 18, or a c.9% loss of FY 18 GAV in a single year. As for all the British Property sector, keep in mind that FY 19 valuations do not account for the entire consequences of either 2019-nCoV or Brexit.
Hammerson has disposed of new assets in the UK at a price 22% below their June 2019 book value, or a yield of 8.7% from the buyer’s side. The crisis is not over.
There have been few structural shifts in the property sector as profound as the one currently taking place in retail. Consumer spending patterns have drastically changed over the past five years, with online sales now accounting for 19.7% of all retail spend in the UK (August 2019, source: ONS), compared to 11.5% in August 2014. When you look at fashion retailing specifically, online sales accounted for 26.8% of consumer spend on clothing in 2018 (source: Mintel).
Companies: CAPC HMSO CCRGF NRR SHB
There were both strong declines in rents (lfl) and negative revaluations in the UK. The yield decompression explained the bulk of the 7% NAV drop in H1 19 and the impact of the coming revenue decline is not fully accounted for in our view. As expected, the healthy Outlet asset pocket and the French cushion were insufficient to compensate the now worrisome context in the UK (Idea Kicker Hammerson, 22 May 2019). Another downgrade is to come.
Continental exposure protected Hammerson from a bloodbath (read Intu Latest). Nevertheless UK valuations are down by 9% on H2 2018.
Hammerson released its H1 18 results, with NRI down 3% yoy to £178.5m. It also posted a modest organic growth of 1.6%, mainly due to the negative influence of the UK assets (despite a high and stable occupancy at 97.2%). The company disclosed a “new” strategy: disposing of most of its underperforming retail parks and focusing on its stronger premium outlets and flagship retail destinations. Hardly a revolution.
Due to a change in sector focus Cenkos Securities plc has suspended coverage on the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
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The Board of Hammerson has rejected two different approaches from its French competitor Klépierre, claiming that the proposed offers were too low. The company also walked away from its planned merger with Intu Properties, after ongoing pressure from shareholders.
Hammerson recorded a £370m net rental income in FY17, up 6.9% yoy (+1.7% lfl). Its portfolio value amounted to £10.5bn (+5.9% yoy). The year was marked by the announced acquisition of Intu Properties (expected in Q4 18) to bulk up assets to £21bn with even more UK shopping centres and a degree of diversification in Spain. Our figures do not include Intu.
Hammerson has been buying properties overseas to seek more growth and cutting the proportion of its assets in the UK to about 60%. However, buying Intu would take this back to 75%. Adding to this, the extreme uncertainty caused by Brexit to the economy, people teare tending to show a more introverted attitude by staying at home and clicking on Amazon Prime. This might explain why Intu’s shares are trading at only half the value of its assets. Hammerson’s stock is less discounted. In a struggling
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Palace Capital has released a good trading update of for the 6 months to 30 September. The Group has achieved good progress both across the portfolio and in sales achieved at Hudson Quarter. With cash reserves rising, the Group continues to look for value creative opportunities to recycle capital which should realise value for shareholders. Buy
Companies: Palace Capital plc
We see the UK Government’s Net Zero Strategy as being overall helpful but not especially definitive. Amongst our coverage group, Drax Group (DRX LN) and Velocys (VLS LN) benefit from the Humberside CCS cluster prioritisation and Velocys from SAF support. The amount of renewables is likely to boost the need for flexibility solutions where Drax, Gore Street (GSF LN) and SIMEC Atlantis (SAE LN) can benefit. Hydrogen companies ITM (ITM LN) and Powerhouse Energy (PHE LN) are likely to find support. T
Companies: ADN DRX GSF ITM NESF PHE SAE SIT STRLNG TLG VLS
The third quarter continued to enjoy record CIB revenues and loan provision recoveries. Consensus expectations have now largely aligned with our projections, thus leaving limited upside potential in our view.
Companies: Barclays PLC
Non-Standard Finance (‘NSF’), one of the leading providers of unsecured credit to UK adults, published interim results for the half year to 30 June 2021 on 28 September. Overall, these showed a significantly lower loss before tax due to improved operational performance and lower below the line charges. The group also reported that current trading was ahead of plan primarily due to strong collections performance. Discussions with the FCA regarding the redress programme for guarantor loans custome
Companies: Non-Standard Finance Plc
NextEnergy Solar Fund’s investment in NextPower III opens up geographic opportunities in Latin America, Asia and other parts of Europe much earlier than could have been delivered by direct project investment. Additionally, the JV announcement with energy storage system (ESS) developer Eelpower is also an attractive way to accelerate portfolio diversity as well as opening up the door to further asset growth. By working with partners experienced in different geographies and the energy storage segm
Companies: Nextenergy Solar Fund
What’s new: Tatton’s interims trading update confirm it has “delivered strong growth in all its key metrics during the period including revenue, profits and assets under management” (AUM). It is “trading in line with expectations”.
Companies: Tatton Asset Management Plc
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Devolver Digital to join AIM, an award-winning digital video games publisher and developer in the indie games space. Recently awarded indie 'Publisher of the Year 2021' by GamesIndustry.biz. Offer TBA. Due early Nov.
Life Science REIT to join AIM raising up to £100m. This will be the first London listed real estate investment trust (REIT) focused on UK life science properties providing investors with exposure
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AuM pushed on in Q2, hitting £10.8bn – including the acquisition of the Verbatim funds (+13% in H1 organic only). Crucially, net inflows have remained strong through the whole of H1 at £109m avg pcm. This flow momentum underpins an encouraging outlook, both near and medium-term. We leave our forecasts unchanged although note risk to the upside heading into H2. We will review our model again at the Interims. Given the pace of growth and scale of opportunity from already established relationships,
Gore Street’s trading update confirms expectations of a strong trading environment for batteries in both the GB and Irish markets. Driven principally by high gas prices creating electricity market volatility and with tight capacity margins likely to remain, we see the company continuing to generate excess cash returns in this financial year at least.
Companies: Gore Street Energy Storage Fund PLC
Currently, Gore Street Energy Storage Fund (GSF) primarily relies on revenue from frequency response services, including Dynamic Containment (DC), to estimate near-term returns. The dislocation in the UK power market has led to a sharp rise in returns available from energy arbitrage leaving GSF’s assets well placed to benefit from this increased volatility. In September, those of GSF’s GB storage assets that participated in the actively-traded GB power markets generated revenues that were signif
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Arrow Exploration Corp. (AIM: AXL ; TSXV: AXL) , the oil and gas exploration and production company, has conditionally raised approximately £8.8m and is due to complete its dual listing on AIM on 25 Oct. Market cap c£13.1m.
Devolver Digital to join AIM, an award-winning digital video games publisher and developer in the indie games space. Recently awarded indie 'Publisher of the Year 2021' by GamesIndustry.biz.
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Companies: Chrysalis Investments Limited
Today's news & views, plus announcements from BHP, MGGT, RIO, BWY, MONY, BGO, YOU, AVAP, PCA & SOLG.
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TMT Investments PLC have provided a portfoloio update. We have published research on this which is attached and a snapshot of the research is below.
The venture capital company investing in high-growth technology companies has moved one step closer to its first IPO driven exit. In a portfolio update announced this week TMT noted that its portfolio company Backblaze, Inc. publicly filed with the SEC on 18 October 2021. TMT currently holds a 9.97% interest in Backblaze, Inc. (pre its expected fun
Companies: TMT Investments
Companies: Shaftesbury PLC