US Edition Hammerson
472.5p
Questor says Buy
Against the backdrop of closing shops and poor returns in the sector, the owner of some of the UK's largest shopping centres reported rising rents and high occupancy levels.
True, the number of failures Hammerson is dealing with among its tenants is up. The company reported units in administration have increased from 32 to 52 but the vast majority of those are still trading and paying their rents.
Commercial property is witnessing a slow recovery. For some, the increase in investment prices – which are not currently being backed up by rising rents – is worrying. Overseas money is once again coming into the UK looking for a safe haven.
Questor last tipped Hammerson in January 2009 when it sold the company. Then it was trading at 574.5p. Since then the shares have fallen 17pc.
The market has not fully recovered. Indeed, bank lending is hard to come by. Without a steady supply of debt funding, it is hard to see a sustained recovery across the sector. However, Hammerson is doing well despite these headwinds.
It has good new management in place and is adopting a multi-track strategy. Unable to rely on rental growth in the market, the company is working on new lettings and rent reviews to drive income growth. It also has an active development pipeline.
The estimated dividend yield, according to Bloomberg, is 3.5pc – healthy if not overly generous.
Hammerson gets a mixed reaction from the analyst community. One fan is JP Morgan Cazenove. The investment bank draws particular attention to the development pipeline. Ranged across the UK and France, the new property offers a good spread, mitigating risk and allowing the company to draw on the positive movement in the French property market.
Investing directly in the property market, be it commercial or residential, remains problematic. However, investing in the right management that is invested in the right areas is attractive. Questor thinks it is time to get involved with Hammerson. Buy.