Capital & Counties' central London properties continue to glide upwards in value. The surveyors marked its estate at Covent Garden (52 per cent of the portfolio) up by 4.5 per cent, while the Earls Court area (38 per cent) gained 4.6 per cent. We see no reason why valuations should change course, but the shares have appreciated even faster than the properties since our buy tip (174p, 10 Nov 2011), so we are downgrading our advice from buy to hold.
Covent Garden is rising in value because more and more premium retailers are moving in, most recently Chanel and Hackett. This trend seems likely to continue, pushing Covent Garden shop and restaurant rents up towards their equivalents further West around Regent Street, while raising the potential residential value of under-used upper-floor space. Chief executive Ian Hawksworth said he was even considering turning some office buildings into residential as local house prices set new records.
Meanwhile, Earls Court was revalued because CapCo jumped through some hoops in the planning process to turn the old exhibition site into some 7,500 homes. Progress in planning is inherently opaque and unpredictable, but there is political will behind projects like this. Mr Hawksworth expects a yes or no from the London Borough of Hammersmith and Fulham in September.
Brokerage Peel Hunt expects adjusted net assets to rise to 190p per share by the year end, up from 177p at the end of June.
CAPITAL & COUNTIES (CAPC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 210p | MARKET VALUE: | £1.44bn | |
| TOUCH: | 210-211p | 12-MONTH HIGH: | 218p | LOW: 155p |
| DIVIDEND YIELD: | 0.7% | TRADING PROP: | £17m | |
| PREMIUM TO NAV: | 21% | |||
| INVESTMENT PROP: | £1.6bn | NET DEBT: | 33% | |
| Half-year to Jun 30 | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 150 | 70.2 | 10.7 | 0.5 |
| 2012 | 173 | 99.0 | 13.9 | 0.5 |
| % change | +15 | +41 | +30 | - |
Ex-div: 22 Aug Payment: 18 Sep | ||||
