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05 Feb, 2024 09:34

Morgan Stanley upgrades Landsec to ‘overweight’

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Land Securities GroupSharecast graphic / Josh White

Morgan Stanley upgraded its stance on Land Securities to ‘overweight’ from ‘equalweight’ on Monday and reiterated its ‘overweight’ rating on British Land as it pointed to stabilising property yields.

The bank lifted its price target on Landsec to 730p from 650p and on British Land to 460p from 405p.

It noted that investors who held British Land and Landsec shares over the last decade have made 0-1% per annum in total returns including dividends.

"That is unusual as the average total shareholder return averaged 9% per annum for both over the three prior decades," it said.

"The recent decade saw severe structural pressures on retail (UK asset valuations down 65% and rents down 30-40% on average) and recently office, Brexit-related uncertainty, Covid, and also the rise of large sector specialists. All of these factors have more than offset the tailwinds from low rates."

Morgan Stanley said NAV-based return profiles screen as compelling and NAVs are likely set to trough.

It pointed out that both companies are now guiding to 8-10% total accounting returns medium term, which it assumes is achievable. Retail and office portfolios have largely repriced, capital structures are appropriate, rents are rising, "and both are playing offence through opportunistic net investment even if they remain somewhat capital constrained," it said.

"Not only does this level of accounting return (cash dividend + change in NAV, as a portion of NAV) suggest a re-rating is likely, it is also consistent with the historical level of the long-term annual average 9% total shareholder return (cash dividend + change in share price, as a portion of share price); over the long term total shareholder return converges with total NAV-based returns."

At 0925 GMT, Landsec shares were up 1.4% at 660.40p, while British Land was 0.6% higher at 381.70p.


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Important Legal Notice about News Sources

Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author or publisher.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.

The value of investments can fall and you may get back less than you invested.