Broker snap: Investec upgrades Hammerson to 'hold'

2nd Oct 2012 09:26

Investec has upgraded its recommendation for retail-focused real estate investment trust Hammerson from 'sell' to 'hold' following a recent tour of the 'Value Retail' discount shopping outlet, Bicester Village, Oxfordshire.Value Retail gives luxury fashion retailers an efficient way in which to deal with surplus stock in a way that does not dilute their brand and integrity, Investec explained in a research report on Tuesday morning. Bicester Village is the only discount outlet in the UK which caters solely for high-end fashion.The broker said that the scope for a second such development is self-limiting ("given that the retailers do not want their respective brands diluted by any exposure to discounting beyond that to dispose of surplus stock, and also that surplus stock is inevitable, but also limited in supply") so the asset has "significant scarcity value".Investec said: "Value Retail is a growing component of the Hammerson business, significantly differentiated from the shopping centre and retail park portfolios to provide diversification of asset class exposure, whilst remaining consistent with the strategy to specialise in retail property and divest its office portfolio - a move that we wholly support."Investec estimates that Hammerson's Value Retail portfolio represents around 7.5% of the group's standing investment portfolio."There is a significant scarcity value on Value Retail assets, given the self-limiting nature of the luxury retailers offering, and the current valuation yield of c.6% is certainly undemanding."The broker has raised its net asset value-based target price from 415p to 465p to reflect the current sector rating and potential positive corporate newsflow.By 09:47, Hammerson was trading 0.37% higher at 457.9p.