A Capital property play

That's because it owns the exhibition centres at Earls Court and Kensington Olympia, on the western fringes of prime residential London. Management wants to move the entire exhibition business to Olympia and redevelop Earls Court with housing, as part of a master plan drawn up by the architect Sir Terry Farrell.

The planning application was submitted in June. Yet, in CapCo's books, Earls Court is still valued as an exhibition venue - at £133m, far below its potential residential value. A similar scheme on the adjacent car park, already valued as a development site, offers a clue about how far below. The car park covers about 1m square feet (sq ft) and is in the books at £115m – or about £115 per sq ft. Meanwhile, CapCo's share of the Earls Court master plan covers 4.3m sq ft yet is in the books at £133m. That suggests the book value of the exhibition centre could triple when it is revalued to take account of the planning process. By that measure, CapCo's shares are trading well below their net asset value, not at a premium to the latest figure.

Of course, this depends on the master plan being approved. It is predictably controversial, with fierce opposition from the West Kensington estates. But it seems almost certain that a major residential plan will go through. London is desperately short of housing and Earls Court is one of the largest brownfield sites.

Politicians are committed to the project at every level. The London Borough of Hammersmith & Fulham, which owns 3.7m sq ft of the 10.4m sq-ft site covered in the master plan (the balance belongs to Transport for London) favours it, as does London's mayor, Boris Johnson. Central government is desperate to unblock the planning process to stimulate growth and wants to facilitate the conversion of commercial land into residential, which is what's happening here.

CapCo's other major site is Covent Garden, where it owns the market building and most of the shops around the piazza. Management has been trying to raise the tone of the retail offering – and the rents correspondingly - by tempting in retailers such as Rugby by Ralph Lauren, which has just chosen Covent Garden for its first site in Europe. Whether due to these efforts or the seemingly unshakeable strength of the London retail market, like-for-like market rents rose 6.3 per cent in the first half.

Yet they have room to rise further - rents in Covent Garden are much lower than in the west-end shopping districts around Regent Street. And CapCo has only just started the process of converting old offices on upper floors into flats, which should also generate big valuation gains.

CapCo is not a real-estate investment trust, so it isn't obliged to pay 90 per cent of its rental income in dividends. Indeed, unusually for property, it's a play on capital gains rather than income. But nor does it suffer from the cash problems most developers face - mercifully, given the current funding climate. Strip out property revaluations and it still turned a £6.2m profit in the first half.