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Capco sees footfall pick up in the second half of the year

The Covent Garden landlord has seen vacancy rates improve, but property valuations are still falling.
Capco sees footfall pick up in the second half of the year
  • Full-year dividend returns
  • Property valuation continues to fall

Covent Garden landlord Capital and Counties (CAPC) results are another indicator that the pandemic my finally be receding. Customer sales are approaching 2019 levels and its vacancy rate has dropped to 2.6 per cent, from 3.5 per cent at the end of 2020. High end retail clients clearly think there is still value in having a central London location.

This increase in footfall helped increase total property return to 1.5 per cent from a loss of 24.4 per cent. Underlying net rental income was up 20 per cent to £52.3m which meant management could bring back the final dividend at 1p – having scrapped it last year.

The group's property market value though slipped again to £1.82bn from £1.94bn last year. However, the valuation of Covent Garden rose 4.6 per cent in the second half of the year on a like-for-like basis. This reflects an increased optimism in prime London real estate – which could be justified by footfall returning to around 70 per cent of 2019 levels at the back end of 2021.

Broker Peel Hunt thinks that net tangible assets per share will increase 5 per cent in 2022, to 223p. Currently the shares are at a 26 per cent discount to Peel Hunt's 2022 estimate which suggests there is good value to be had here.

The issue though is that with energy costs rising, household disposable income may start to shrink. Demand for new clothes, handbags and an expensive bite to eat might not return to pre-pandemic levels as quickly as management are expecting. With the recovery of luxury bricks and mortar retail far from certain we think this discount is justified. Sell.

Last IC View: Sell, 168.3p, 27 July 2021  

CAPITAL & COUNTIES (CAPC)  
ORD PRICE:167pMARKET VALUE:£ 1.4bn
TOUCH:164-166p12-MONTH HIGH:188pLOW: 154p
DIVIDEND YIELD:0.9%TRADING PROP:£82.5mn
DISCOUNT TO NAV:27%   
INVESTMENT PROP:£1.73bnNET DEBT:35%
Full-year to 31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017330-63.0-0.11.5
2018322-119.0-6.71.5
2019292-61.3-7.31.5
2020207-704.7-82.6nil
202121130.03.41.5
% change-36---
Ex-div:09 Jun   
Payment:08 Jul