Shares in British Land have recently hit a six-year high, as the combination of rising property prices and low interest rates offer a double boost for the company. The second-largest Real Estate Investment Trust in the UK has seen profits and net assets value climb, as the UK property market continues to recover. First-half pre-tax profits jumped by 6% and the NAV increased by 11.8%.
The upturn in the British retail sector has clearly benefited the company as commercial properties are in demand, particularly outside London, although the rise in online shopping has led to cautious expansion by some big high-street retailers. Over half of British Land’s property portfolio is retail sector, and the company will maintain its policy of selling retail assets it can’t add food or leisure businesses to.
The largest rise in property values has been experienced in London; British Land has close to 90% of its office space in the Broadgate development already pre-let. To offset its exposure to the City the company has constructed offices in the West End, as the firm wants to diversify itself.
In November, CEO Chris Grigg judged that an interest rate rise in the UK was ‘not imminent’, and this week’s unanimous decision by the Bank of England to keep interest rates on hold supported this. Rock-bottom interest rates have played a big role in British Land’s success, and will continue to assist the company for the foreseeable future. The company’s loan-to-value ratio has fallen to 36%, but this is due to net disposals of assets rather than a desire to have lower gearing.
British Land will announce its full-year figures in May, and the consensus is for revenue of £619 million and adjusted net profit of £318 million. These forecasts represent a 61% rise in revenue and an 8% increase in adjusted net profits. The company will also reveal its second half numbers in May and traders are anticipating revenue of £191 million. The first-half figures were well received; revenue came in at £232 million, while the market was expecting £175 million.
Equity analysts are very bullish on British Land, and out of the 18 recommendations 15 are buys and three are holds. The average target price is £8.79, which is 6% above the current price. Investment banks are moderately bullish on Land Securities, and out of the 18 ratings, nine are buys and nine are holds. The average target price is £12.88, which is marginally above the current price.
Shares in British Land have been in an upward trend since March 2009, and the 50-day moving average is providing support at £7.68. If this metric is held then £9 will be in sight. If the 50-day moving average is breeched to the downside it will become resistance, and the 200-hour moving average of £7.20 will be brought into play.