Broker snap: Not much to separate two property giants

16th Nov 2010 12:28

Despite trimming full year net asset value estimates KBC Peel Hunt retains a 'buy' for real estate group British Land.The property group's valuation increase in the first half was 2.6%, driven principally by office lettings with only a "modest contribution from yield compression".The 0.7 percentage point gap between the initial yield of 5.2% and the net equivalent yield of 5.9% implies "future rental growth will come through", says the broker.Estimated net asset value for the full year to March 2011 has been reduced by Peel Hunt from 553p to 544p, which assumes a second half capital growth of 1.5% as opposed to 2.5% previously.The focus for British Land in recent months, according to the broker, has been the commitment to bring forward large scale city projects, including the construction of the purpose built building for UBS, and projects on Leadenhall Street and Bishopsgate.Between British Land and rival Land Securities, "British wins on dividend" with a 5.2% yield versus Land's 4%. "However the Land Securities dividend has better cover and Land Securities has a richer development pipeline"."The British Land shares have outperformed by 3.5% on a three-month view, however we see the shares broadly moving in line going forwards", the broker says.A 'buy' recommendation is retained.