The lie of the LAND
I’m out shopping for shares again. Should I add Land Securities (LSE: LAND) to my wish list?
Last time I checked out Land Securities, way back in December, it had enjoyed a good 2012, its shares rising 30% to £8.20. I was impressed with its progress, having expected the shaky economy to take a wrecking ball to its portfolio of commercial and retail property. So how does the Land lie today?
Land Securities is up a solid 11.5% year to date, in line with growth on the FTSE 100. It is up 50% over three years, against 18% for the index. Its first-quarter interim statement was positive, with increased interest in developments leading to “virtually full occupancy” across its portfolio. Highlights included £5.5m of development lettings signed between April and June, with a further £12.3m in solicitors’ hands, and further letting success in London SW1 and EC3, as well as Leeds, Crawley, Taplow and Chadwell Heath.
Retail therapy
The high street may be dying, but retail parks are holding their own, despite what chief executive Robert Noel describes as a “challenging” market. Overall occupancy rate for Land Securities’ retail portfolio is a healthy 97.2%. Footfall is down -2.9% in Q1 year on year, although that is better than the national figure of -4.1%. Total sales grew 2.5%.
I’m worried by the impact of online shopping, but for many people, retail parks are a destination in themselves. Another concern is that wages are still rising more slowly than inflation, which means consumers are getting poorer in real terms. I’m less concerned about London office space, because the booming capital should help maintain demand.
If Land Securities can manage such healthy figures during the downturn, it looks nicely placed for the recovery. The dividend yield of 3.2% is below the index average of 3.5%. The stock does look expensive at 25 times earnings, but then real-estate investment trusts (REITs) do tend to be pricey. British Land trades at 19.2 times earnings, while Intu Properties and Hammerson trade at 19.9 and 27.8 times respectively.
Gimme Land
Last December, I thought Land Securities looked expensive at 18.8 times earnings. Unless we get a full-blown market correction, I can’t see it getting much cheaper. It is handled itself well lately, and that bodes well for the future. Bank of America has it as a ‘buy’ with a target price of £10, JP Morgan is ‘overweight’ and targets £10.40. Other brokers are less enthusiastic, but on balance, it looks a buy to me.