Bottom Line: Cautious approach

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The Independent Online
IN THE case of Capital Shopping Centres, pricing the issue at a 13 per cent premium to net assets may look bold to investors used to seeing property companies trade at a discount to their underlying worth. But it is, if anything, cautious in the current market where the top seven quoted companies trade at premiums of between 10 and 20 per cent.

It is also more than justified if you believe the company's plausible argument that current valuation methodology discriminates against shopping centres. It fails to acknowledge the vastly greater potential income growth they offer compared with mature investments such as office blocks.

They do so because rents are determined by tenant shops' turnover, which benefits not only from economic recovery but from the long climb, often up to 10 years, to full penetration of a region.

As a result CSC's assets are probably worth considerably more than the surveying profession is allowed to say. Even if not, values should rise faster than at the company's peers thanks to tighter planning regulations that will add scarcity value to out-of-town centres. Worth backing.