Property investment firms Capital & Counties Properties PLC (LON:CAPC) (Capco) and Shaftesbury PLC (LON:SHB) have had their ratings upgraded by analysts at Peel Hunt, who said that shares in both groups now offered “value to the patient investor” after sharp declines in 2020 due to the effects of the coronavirus pandemic on the London property market.
In a note on Thursday, the broker upgraded Capco to ‘buy’ from ‘add’ and retained their target price at 180p while Shaftesbury was raised to ‘add’ from ‘reduce’ alongside a target price hike to 600p from 540p, saying that while the coronavirus had presented “significant challenges” for London and its businesses, a recovery in tourist and office worker footfall was “a question of when and not if” and as such there was a “long-term opportunity” available.
“Our analysis concludes that current share prices reflect a significant and permanent reduction in retail/[food & beverage] rental income. Beyond the pandemic, we do not see London losing its attractions, and therefore we think the shares now offer value to the patient investor”, the broker said.
Analysts also said that the share prices of both real estate investment trusts were “now pricing in significant falls in capital values”, equivalent to around a decade of lost growth, although they reiterated that these decline sin both values and rents were “inconsistent” with their view on medium and long-term prospects for London.
Shares in Capco rose 2.4% to 120.5p in late-morning trading, while Shaftesbury was up 2.2% at 537p.