- Timescales for delivery of recovery profits growth needs careful thought
- Prudent reflection on acquisitions and adjusted earnings is important
This week we look at businesses that have screened well for upgrade momentum. This can be tricky to assess at the moment as many businesses are experiencing a strong rebound or catch-up post Covid and it is important to determine whether there is a positive underlying story that shows sustainable growth potential after trading has normalised. Very different businesses here again: London real estate, digital marketing and international hotels.
Capital & Counties (CAPC) – CapCo owns large parts of the well-known London tourist and leisure destination Covent Garden. Central London real estate has been hit hard by Covid, Covent Garden arguably more so because it relies so heavily on tourist footfall. Rents fell by 24 per cent and yields rose from 2½ to 3¾ per cent pushing the net asset value (NAV) down from c.325p to 190p. Although the NAV has picked up to 212p this largely came from the 25 per cent stake in fellow London investor Shaftesbury (SHB), not its own estate. Rents are rising slowly and yields are unlikely to fall as benchmark interest rates rise so investors should not soon expect the NAV to show any material improvement. Shaftesbury might be a better option.