Investment Column: Land Securities needs recovery to motor

JD Wetherspoon; Jupiter
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The Independent Online

Our view: Hold

Share price: 694.5p (-4p)

Bosses at property group Land Securities have been feeling rather chipper this week. On Monday, work began on the "Walkie Talkie" tower that promises a solid revenue stream, as well as a rather arresting view for Londoners from 2014. Then yesterday they said shopping development One New Change will soon be full of office workers, shops and shoppers.

The comments came in the group's third-quarter interim management statement, which was largely seen as positive. Francis Salway, chief executive, said the plans laid out for the financial year were bearing fruit, with a rise in lettings driving valuation surpluses and income growth. The announcement pointed to progress at Park House on Oxford Street as well as at Trinity Leeds, the largest new development commitment by a real-estate investment trust in the UK since the downturn.

The group pointed to further projects as well as buying opportunities in 2011 to keep investors happy, with talk of 20 per cent rental growth over the next three years. The pipeline looks strong, especially in London, where the lack of office space as developments were shut down during the recession has driven rents higher in recent months. Yet advising on property companies is still a tricky business as the outlook for 2011 remains uncertain.

Analysts believe Land Securities' story in the long term is positive. Matrix Securities has Land Sec on an estimated 2011 net asset value of 752p, a discount of about 7 per cent to the current share price. By contrast, British Land trades on a discount of 1 per cent and Hammerson is about par.

Investors should be pleased with the healthy 2011 target dividend yield of 4.2 per cent, but rival British Land offers 5.2 per cent. In truth, the shares look more or less fairly valued. There should be some upside but it depends on the economy. Worth holding, then.

JD Wetherspoon

Our view: Buy

Share price: 464.7p (+23p)

The value-pub operator JD Wetherspoon raised a glass to strong trading in its last quarter yesterday, as the company brushed off the disruption from the snow. Shares in the company, which operates 786 pubs, surged after it toasted like-for-like sales up by 3 per cent for the 12 weeks to 16 January, ahead of City expectations.

This represented an acceleration from 1.6 per cent sales growth delivered in the previous quarter. Furthermore, Wetherspoon's said the performance of its recently opened pubs remains encouraging and that profit and cashflow continue to be "resilient". So no whining about that winter weather then.

We tipped the company as a share to buy in July at 422.5p and that looks to have been sound advice. Nonetheless, we will stick to our guns, despite a share price jump since then. Wetherspoon's did give warning of rising costs of a wide range of food and bar purchases, as well as its utility bill and the perennially high excise duties. And its shares on a forward-earnings multiple of 13.6 are also not all that cheap anymore. But we believe Wetherspoon's, which will open about 50 new pubs this financial year, is well placed to prosper in a tough trading environment. And with crackdowns to come on supermarkets selling cheap booze, we'd stick with JD and buy.


Our view: Buy

Share price: 305p (-2.4p)

The performance of the two recent fund-manager floats couldn't be more different. Gartmore recently had to be rescued after a succession of disasters, but its chief executive will wave goodbye with £5m in his back pocket.

By contrast, Jupiter has made its investors money as well as its bosses. And how. The shares have gone in only one direction, eschewing the cult of the star manager that brought Gartmore so many problems and Jupiter has done this through a strong ethos and effective management. Its funds also perform well, which make them an easy sell.

Overall funds under management rose by 9 per cent to £24.1bn in the fourth quarter, which beat City forecasts. The company also boasted net inflows of £772m. Interest rates are low, and probably won't rise by much this year with the economy still weak. This makes equity investments popular. Good news for Jupiter. At 13 times 2011 earnings, yielding a prospective 3 per cent, it is no longer a bargain, but those that don't hold the shares already should do so. Buy.