Investment Column: Great Portland builds on London demand

888 Holdings; Howden Joinery


Our view: Buy

Share price: 436.1p (-3.5p)

The last time we looked at Great Portland Estates, we decided to keep backing the property firm.

Our continued confidence was down to what we saw as a robust half yearly update that evidenced rising valuations thanks to the company's strength in the capital's West End.

Fast forward to yesterday, and Great Portland issued its valuations for the quarter to the end of June. And the result, once again, was encouraging, with the portfolio valuation up a healthy 3.8 per cent since the end of March. That works out to an nice uplift of nearly 15 per cent since the end of June last year.

Rental value growth was also strong, and was the growth in net asset values, which, at 375p, were up by 27 per cent in year-on-year terms on the European Public Real Estate Association benchmark.

The figure beat some analyst forecasts, and confirmed Great Portland's strengths.

The gains reflect the appetite for central London commercial property, with chief executive Toby Courtauld saying that investor demand had "continued unabated during the quarter".

Echoing the view among others in the sector, he added that "with limited supply, we expect much of it to remain unsatisfied for some time to come". "A key mainstay behind this demand is investor expectations for further rental growth as the supply of available space to let falls faster than its rate of replenishment," he explained.

All this suggests that, far from running out of steam, Great Portland remains well placed to keep notching up gains. But is the stock now too expensive to keeping buying?

Evolution Securities, for instance, has a net asset value forecast of 400p for March next year, and 432p for 2013. But before the bears start grumbling, we'd point out that Great Portland boasts an enviable portfolio of prime London property, which, along with the prevailing demand trends, more than warrants the premium rating.

Another point to note is the positive sentiment around property companies in general, something that Great Portland, as one of the stronger players, is well placed to draw stream from. This one still has room for upside gains, in our view.

888 Holdings

Our view: Buy

Share price: 34.75p (+1.75p)

The online gaming firm 888 looks set to increase annual profits on the back of strong performances from its casino and poker businesses. Yesterday, it delivered an encouraging second quarter trading performance with revenue climbing 29 per cent year on year to $79m from £61m in the same period last year.

First half revenues look healthy with an 18 per cent rise to $154m, from $130m in the first six months of 2010. The company was confident enough to suggest that full year results will be "marginally ahead of current market expectations".

Significant investment in its poker platform has helped to increase poker revenues 58 per cent over the year to $13m. But the bulk of revenue was once again produced by the firm's casino division, which grew 34 per cent to $36m. Customer numbers are also pleasingly up.

The share price has slipped since April when takeover talks with Ladbrokes collapsed, but analysts are now targeting around 51p compared to last night's closing price of under 35p.

There remain concerns that it could be a big loser from moves to introduce a remote gaming tax in the UK in 2013 but, despite that, its positive prospects make it a buy.

Howden Joinery

Our view: Hold

Share price: 114.4p (+7p)

Ever since it changed its name from Galiform last September, Howden Joinery has been a steady winner.

A major component of the group's success has been the fact that it only supplies kitchens to builders rather than being involved directly in the retail market, something which has helped it through the recession.

Yesterday, it posted a near 10 per cent rise in first-half profits, and the fact that it remains on track to meet expectations is encouraging, given the challenging economic backdrop.

While it true that the weak sentiment around the consumer will continue to weigh on the shares for the near-future, Howden looks well placed for the long term.

So, hold for now, as economy is weak, but we would happily buy on weakness.

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