Investment Column: Hammerson offers value to build on
Thursday 16 December 2010
Our view: Hold
Share price: 419.8p (+1.3p)
Hammerson, in partnership with the Oman Investment Fund, has struck a deal to offload its Bishops Square office site in London's Square Mile. The buyer, JP Morgan Asset Management, has agreed to pay about £560m, netting Hammerson, which has a 25 per cent interest in its venture with the Oman fund, nearly £80m – a nice £34m surplus over the book value at the end of June.
The deal adds to growing evidence of a recovery in the capital's office market, which fell faster than other parts of the real estate market in the recession but is now recovering at a swifter pace. While the Bishops Square sale is positive, offices are only a minor part of the Hammerson portfolio. Just over half is prime shopping centres and a fifth is retail parks.
That seems worrying with the consumer outlook uncertain. The European operations are not particularly cheery either. However, Hammerson boasts one of the largest project pipelines in the business, and has never been shy about investing in development. So it could steal a march on competitors .
Don't rush to abandon this horse. It is trading at a discount of more than 11 per cent to forecast net asset values for 2011, suggesting there could be mileage in holding on to the shares for now.
Our view: Hold
Share price: 1450p (+178p)
SuperGroup, the owner of the fashion brands Superdry and Cult, has been flying high since it floated at 500p in March, with its shares soaring past 1600p earlier this month. But it was back to earth with a bump yesterday.
The company posted pre-tax profits up an eye-popping 86.4 per cent to £14.6m for the half-year to 31 October. But investors were spooked by the retailer's comments that increases in raw material prices "may affect gross margins in the next financial year".
That follows a series of warnings from other fashion retailers, including New Look, Primark and Next, over rising cotton prices and record freight charges for shipping from the Far East. While the City could be accused of over-reacting (a bit), concerns are growing that Supergroup's share price looks frothy, as it trades on nearly 32 times forecast full-year earnings – despite yesterday's sell-off. It also passed on an interim dividend.
That said, SuperGroup has genuine momentum, soaring online revenues and a rapid international expansion programme. Profits are forecast to double over the next three years. While management has done a great job of positioning the group for growth, we think the shares are a bit pricey to buy now. However, we'd hold for now and buy again at £10.
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