Chesterfield rise boosts property: Healthier net asset value and profit increase lift shares

SHARES in Chesterfield Properties, the heavily geared group, jumped 58p to 330p yesterday as it announced a higher-than-expected net asset value and a 17 per cent rise in profits for 1992.

The enthusiasm spilled over into other property shares such as Derwent Valley Holdings, which gained 17p to 445p, Hammerson, up 15p to 370p, and Slough Estates, 14p higher at 209p.

Chesterfield - whose interests include West End cinemas and theatres, and New City Court near London Bridge - said its net asset value fell from 534p to 398p. The City had feared that it would drop to as low as 320p. Excluding disposals, the portfolio's value dropped by 7.2 per cent.

Profits before tax rose from pounds 6.6m to pounds 7.6m, while earnings rose 31 per cent to 15.71p. The final dividend was cut by 4p to 7.5p after the interim payment was also halved, leaving the total down 40 per cent at 11p. The cut was, however, less severe than some had feared - Kleinwort Benson, for example, was forecasting 9.5p.

Chesterfield is the second property company to offer good news on asset values in less than a week. Last Thursday, Land Securities also reported a smaller drop in asset values than the City had feared and said that demand from British and overseas investors for top-quality City properties was pushing prices higher.

Its comments also boosted the sector, which has since outperformed the rest of the market by 5 per cent.

Spurred by Land's comments, and other evidence that property values are finally bottoming, a number of analysts are now recommending buying shares in the sector. A review earlier this week by James Capel, one of the more positive brokers, also sent prices sharply higher.

Chesterfield is the first company to report unexpectedly good figures for the end of December - Land's year-end is March, and it said that the improvement in values was largely in the first quarter of this year.

No one at Chesterfield was available to comment, but one analyst suggested that the surprise result may have been because of the group's high gearing, which meant it was forced to sell properties during 1992. That could have prompted valuers to be more pessimistic when assessing the portfolio.

Chesterfield is also likely to have been helped by its high borrowings - debt still stands at about pounds 165m, compared with net assets of pounds 104m, and it has a further pounds 30m of preference shares. 'Gearing now has more upside than downside (if asset values are rising),' said Robert Fowlds, of Kleinwort Benson. 'If you change net assets by 10 per cent, with 200 per cent gearing you increase net asset value by 40 per cent.'

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