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THE INVESTMENT COLUMN : Quality pays for Capital Shopping

Capital Shopping Centres, the property group ultimately owned by Liberty Life of South Africa, has proved a bumpy ride for investors. The flotation nearly two years ago was marred by concerns that it was over-priced and at the small number of shares being sold. As a result, the shares have only recently broken through the 230p placing price.

But maiden full-year figures out yesterday suggests these concerns were misplaced. Pre-tax profits soared 72 per cent to pounds 48.4m in the 12 months to December. More importantly, net assets jumped 16 per cent to 254p a share in the past year, news which sent the share price 17.5p ahead.

The group offers one of the highest quality property plays around at present, with eight shopping centres around England. The flagship is the 90 per cent owned MetroCentre in Gateshead, Europe's largest covered shopping mall - bought for pounds 324m last October . It also owns the massive Lakeside centre at Thurrock, adjoining the M25 on the London-Essex borders.

Underlying sales from CSC's eight units rose 9 per cent to pounds 1.6bn last year, more than double the 4 per cent growth recorded for the rest of the retail sector.

This buoyancy of shopping centre retailing bodes well for future rental streams. A five-yearly rent review currently underway at Lakeside should produce a 50 per cent increase in income from prime units, while a similar uprating at the MetroCentre due to start next month should see an uplift of "at least 40 per cent" for the best sites. That compares with generally flat rental values in the rest of the property market for the past 12 months.

A pounds 250m investment in a new shopping centre at Braehead, near Glasgow, will keep the group busy over the next two years. In the meantime, house broker UBS believes fully diluted net assets will rise to 277p this year and, even if a rising tax charge keeps earnings static, 10 per cent dividend growth from this year's 7.5p should be easily achievable. A firm hold.