The long-awaited re-rating of
St Modwen gets its valuers, Jones Lang LaSalle, to split its revaluation gains into those it has achieved through active management and those given (or taken away) by the wider market. Last year the former totalled £48m, three-quarters of which came from work on the residential land bank. A site just inside the M25 in Uxbridge, which the company bought from the RAF back in 2006, made the biggest single contribution.
But these were offset by market valuation losses of £20m. St Modwen owns a portfolio of regional shopping centres and industrial estates that provide income to cover its operating expenses, and these were written down 5 per cent in a very thin investment market, even as net rental income rose by 2 per cent to £36.2m.
The company also announced development terms with Swansea University for a £150m new science campus on a 65-acre site it bought from BP in 2009. This should boost profits over the next two years at minimal risk. Broker Peel Hunt expects adjusted net asset value to rise to 291p by November 2013, up from 272p last year.
|ST MODWEN PROPERTIES (SMP)|
|ORD PRICE:||248p||MARKET VALUE:||£497m|
|TOUCH:||246-249p||12-MONTH HIGH:||250p||LOW: 135p|
|DIVIDEND YIELD:||1.5%||TRADING PROPERTIES:||£175m|
|DISCOUNT TO NAV:||1.2%|
|INVESTMENT PROPERTIES:||£846m*||NET DEBT:||71%|
After last year's run the shares trade at a wafer-thin discount to net asset value. That book value should continue to grow, providing ongoing gains for loyal shareholders - but at a much more modest pace. Hold.
Last IC view: Buy, 222p, 5 Dec 2012