Broker tips: British Land, IHG, Ashtead

15th Feb 2011 14:55

British Land continued to enjoy its period of continued outperformance at the end of 2010 driven by both income and capital growth, according to broker Panmure Gordon.The real estate investment trust reported a third quarter (Nov - Dec) pre-tax profit of £64m, slightly below the broker's estimate of £65.7m, while its net asset value was 548p, beating expectations of 532p.The company saw further improvement in retail rents with estimated rental values (ERV) up by 0.4%, while ERV growth in its office portfolio continued in the period with a 1.4% increase overall in its London office."The company's 1,000,000 sq ft developments [in office] that were completed in 2009/10 are now over 95% let, and it has over 2,200,000 sq ft of developments in its current programme - an important bull point given the supply:demand imbalance in office," the broker says.With an attractive 4.8% dividend yield - the highest in the broker's coverage universe - Panmure retains its 'buy' and ups the target price to 555p, from 548p.RBS keeps its 'hold' rating on InterContinental Hotels (IHG) after the Holiday Inns owner's 2010 revenues, earnings and profits being in line with expectations."Everything at IHG was 'bang in line'", says analyst Jason Streets. The statement also included remarks about refreshing its Crowne Plaza branded hotels and selling the InterConti in New York.However, as no details on the financial implications for either of these were given, Streets says "we don't see why numbers or expectations should change on the back of this but the tone is confident." Additionally, RBS expects room growth to be flat in 2011."The bottom line with IHG is that the scale of the business is such that by far the most important driver of profitability is the global economy and investors' views on the strength or otherwise of that should determine their view on the stock in our view."While the upside is "finely balanced" with risks of growth slowing as and when interest rates begin to rise, the broker sits on the fence with a target price of 1,375p.UBS lays out the bull case for equipment hire firm Ashtead Group and says that the stage is well set for a strong rental rate recovery, with fleet utilisation back towards optimum levels.The broker says that a "bull case scenario" would drive 100% upgrades to 2013 consensus, which would require rental rates to increase by 8% in 2012 and 2013."We believe the seasonality in rates in December/January was less marked than usual, suggesting consensus for 2011 could also rise materially, which would merely be a taster of the larger ones to come as 2011 progresses," says analyst Alex Hugh.The rental sector reported double digit revenue growth in the fourth quarter against a decline in the non-residential market, and with the industry forecasting a 50% penetration in 2014, it implies a 25% growth in the rental market from 2009 levels."Even if construction does not reach previous peaks, the rental industry is well set to exceed previous peaks," according to Hugh.."We think the rate rise story has another 18-24 months to run, which is the key driver of future share price performance." The target price is raised from 190p to 265p, and the 'buy' recommendation is retained.