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Capital & Regional busy recycling

Crystalising gains on mature assets and investing in new sites should underpin rental growth
March 9, 2017

Landlord cum real estate investment trust (Reit) Capital & Regional (CAL) focuses on in-town community shopping centres, a market segment that has been under some pressure since the referendum, although Capital & Regional has performed a lot better than the headline figures suggest.

IC TIP: Buy at 59p

On a like-for-like basis the portfolio valuation fell by 1 per cent, against the 8 per cent fall recorded by the IPD shopping centres index. Crucially, net rental income was up 6.7 per cent at £52.6m, and the headline loss reflected a £14.5m property devaluation compared with a £74.8m revaluation the previous year. New lettings and lease renewals generated £5.6m, with rents agreed 2.1 per cent ahead of estimated rental value.

Once again, Capital & Regional has been adept at recycling capital, disposing of mature schemes at a premium to book value and investing in new property. The Mall in Camberly was sold for £86m while the Marlowes shopping centre in Hemel Hempstead was bought for £53.8m. And shortly after the year-end, the sale of the Buttermarket Centre in Ipswich was concluded, realising £13.5m. The proceeds from the sale were used to buy The Exchange Centre in Ilford for £78m, completed in early March this year.

Analysts at Peel Hunt are forecasting adjusted net asset value at the December 2017 year-end of 68p, unchanged from 2016.

CAPITAL & REGIONAL (CAL)
ORD PRICE:59pMARKET VALUE:£414m
TOUCH:59-59.5p12-MONTH HIGH:67pLOW: 44p
DIVIDEND YIELD:5.7%TRADING PROPERTIES:£13.9m
DISCOUNT TO NAV:13%NET DEBT: 69%
INVESTMENT PROPERTIES:£852m*

Year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201251-13.0-3.0nil
2013547.32.00.65
20146067.213.60.95
201572-19.913.93.12
201668-33.0-0.63.39
% change-6--+9

Ex-div: 27 Apr

Payment: 16 May

*Includes investments in associates