Shares in Coalfield Resources (LSE: CRES) have risen by 50% today after the company announced it will purchase the 75.1% stake in Haworth Estates that it does not already own, for £150m. Coalfield Resources, which was previously the parent company of UK Coal but is now a pure-play property company, will raise £115m of the funds via a placing, with the remainder of the £150m being paid for via shares in the new entity.
This is positive news for Coalfield Resources, since the price paid for the stake represents a near-20% discount to the net asset value of Haworth Estates. It also means that the seller of the 75.1% stake in Haworth Estates, the Pension Protection Fund, will become a 25% shareholder in the new entity. And, with Coalfield Resources set to change its name to Haworth Estates PLC, this could be the start of a more prosperous period for investors in the new entity, with it having delivered relatively disappointing share price performance in recent years.
Industry Peer
Of course, the UK property market has enjoyed a relatively prosperous period of late, with results released today by shopping centre operator Capital & Regional (LSE: CAL) highlighting that the sector could be enjoying a purple patch. For example, Capital & Regional has seen its property portfolio valuation rise by £36.9m in the last year, which has contributed to its bottom line rising from £7.5m in 2013 to £67.2m in 2014. This has allowed it to increase its dividend by 46%, so that even after today’s 7% rise in its share price, Capital & Regional still yields an impressive 4.2%.
Looking Ahead
However, neither Capital & Regional nor Coalfield Resources offers the size, scale and stability of British Land (LSE: BLND) and Land Securities (LSE: LAND). And, while their yields may be lower than that of Capital & Regional at 2.6% (Land Securities) and 3.4% (British Land), they offer much more consistency when it comes to the paying of dividends, with them having been paid in each of the last five years and not being subject to a cut in that time.
Furthermore, British Land and Land Securities have remained highly profitable during the last five years, while Capital & Regional and Coalfield Resources have had loss-making periods. And, with the current favourable conditions in the property market that have been caused by an ultra-loose monetary policy unlikely to last over the medium to long term, the wider economic moats of British Land and Land Securities could make a real difference moving forward.
As such, and while Coalfield Resources and Capital & Regional are companies with bright futures, British Land and Land Securities appear to be the better investments at the present time.