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Land Securities is the largest Real Estate Investment Trust in the UK, and in May the company reported a 10% increase in full-year earnings as income from rents rose. A bounce back in commercial property in the UK has also assisted the firm’s net asset value, which rose by 12% over the period.
CEO Robert Noel stated the firm is ‘reaping the rewards’ of the risky strategy it embarked on during the recent downturn; Land Securities was in a position to attain financing for projects during the credit crunch when competitors weren’t. Acquiring buildings for development and letting at the height of the property slump was a gamble but it has paid off. Mr Noel announced that most projects are ‘now sold or virtually let’ and the rest of the London schemes will be finished in two years. One of the more famous assets in its portfolio is the ‘Walkie-Talkie’ building at Fenchurch Street in London and close to 90% of the space has been leased.
A poll last week for the next UK general election put the Labour party narrowly ahead of the Conservatives, and the left-of-centre party has promised to clamp down on ‘excessive’ rents. If this were to become a reality it could curtail profitability at the £12 billion property firm. Looking beyond the 2015 election, the European question is gaining momentum in British politics; a number of multi-national companies based in the UK have voiced their concern at the prospect of Britain exiting the EU. The UK’s biggest landlord depends on foreign firms for rental income, especially in London’s financial district. If euro-scepticism ramps up it may hinder Land Securities’ share price.
In July, the firm revealed it had a solid start to the new financial year. It acquired a 30% stake in Bluewater shopping centre in Kent for £656 million, and sold The Bridges in Sunderland for £152 million. An American law firm signed a 20-year lease for its new UK head office in the City of London.
Equity analysts are bullish on Land Securities. Out of the 18 recommendations, eight are buys, eight are holds and two are sells, with the average target price of £11.68. Equity analysts however, hold a more bullish view on British Land. Out of the 18 ratings, 15 are buys, one is a hold and two are sells. Dealers are anticipating a first-half revenue of £283 million and the first-half operating profit to be £264 million.
Land Securities will announce its full-year figures in May 2015; the consensus is for revenue of £626 million and adjusted net income of £322 million. This would be a slight improvement on last year’s figures, for the same period, of £594 million and £319 million.
The share price has been in an upward trend since March 2009, and the 50-week moving average is providing support at £10.40. A drop below that would put £10 in the crosshairs. It is a bullish signal that the stock has held above £11 — it made several attempts throughout the past 10 months but always fell back below. The target is £12, a level not seen since September 2008, and the next big level beyond that is £14.