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CapCo still has hidden value

Capital & Counties has two jewels in its portfolio, both with untapped potential.
February 27, 2015

There was no trace of a slowdown in the London property market in these full-year results from Capital & Counties (CAPC). The London developer delivered another year of impressive growth, including a 25 per cent rise in adjusted net asset value to 311p a share.

IC TIP: Buy at 400p

Net rental income grew by 16 per cent to £70m, and there was an additional £454m revaluation gain, taking the value of the property portfolio up to £3bn. These impressive metrics were driven by the group's residential development at Earls Court and its retail holdings around Covent Garden. At the vast Earls Court site planning consent was granted for Earls Court Village and the Empress State Building, which helped lift the valuation there by 18 per cent to £1.2bn.

At Covent Garden, the group achieved record new lettings, and estimated rental value (ERV) - the amount of rent the estate would generate if all leases were marked to market rates - rose by nearly 14 per cent on a like-for-like basis, to £75m. With no let-up in demand for premium space, Capco reckons ERV will hit £100m by 2017. The company spent £167m on eight new properties in the area, where it has gradually been replacing cheap souvenir stores with luxury boutiques.

Analysts at Oriel are forecasting year-end book value of 350p a share.

CAPITAL & COUNTIES PROPERTIES (CAPC)
ORD PRICE:400pMARKET VALUE:£3.34bn
TOUCH:399.6-399.9p12-MONTH HIGH:400pLOW: 313p
DIVIDEND YIELD:0.4%TRADING PROPERTIES:£22.1m
PREMIUM TO NAV:33% 
INVESTMENT PROP:£2.78bnNET DEBT:14%

Year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2010*14213321.21.5
201116216223.91.5
201219621929.91.5
201323934744.11.5
201430045055.61.5
% change+25+30+26-

Ex-div: 28 May

Payment: 19 Jun

*Capital & Counties demerged from Liberty International on 10 May 2010