25th Sep 2014 10:49
LONDON (Alliance News) - Liberum says Hammerson's proposed placing is a sensible deal, expanding the balance sheet on an earnings accretive basis with minimal dilution to net asset value of about 0.3%.
The real estate investment trust launched a placing of up to 71.3 million shares, or 9.99% of its existing stock, to raise about GBP400 million to fund the GBP180 million acquisition of the rest of the Highcross shopping centre in Leicester that it doesn't already own, a GBP100 million investment in a new outlet shopping centre venture, and GBP120 million to fund existing developments.
"Further investment into outlet centres is welcome given it is one of the few parts of the retail market showing structural growth, while the acquisition of Highcross is reasonably priced. The placing also lessens the need to sell assets to fund the group's about GBP1 billion major developments," Liberum wrote in a note to clients.
The brokerage is assuming a 5% placing discount to Wednesday's closing share price, which it said would be the most attractive entry multiple since December.
Hammerson expects to have a loan-to-value ratio of 33.9% after the placing, below its target of 40%. "This will provide debt capacity to progress with future development projects," the company said.
Liberum said the placing will create up to GBP450 million of headroom for additional investment assuming a loan-to-value ceiling of 38%.
"We understand that this will be used to fund a combination of further investments into VIA - where there is a pipeline of acquisition opportunities - and the company's existing development pipeline. Hammerson's major projects at Leeds, Brent Cross and Croydon will require up to about GBP970 million of capex over the next 5 years, in addition to which the company has about GBP840 million of committed schemes and other pipeline projects," Liberum wrote.
"The placing therefore removes any immediate pressure for disposals to fund this pipeline, although it does not completely negate the requirement for further capital recycling," it added.
Liberum has a Buy recommendation on the stock and a target price of 664 pence.
Hammerson shares were down 2.7% at 568.50 pence Thursday morning, one of the biggest declines on the FTSE 100.
By Steve McGrath; [email protected]; @stevemcgrath1
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