Stifel downgrades Hammerson to 'sell' on disposal strategy concerns

Analysts at Stifel downgraded their rating of Hammerson to 'sell' from 'hold' on Friday, citing "the hard reality of falling retail asset valuations" in the UK.

The real estate investment company's strategy to deal with this issue has been to commit to sell a further £500m+ of assets this year, to establish an investment committee to oversee the disposals and reach agreement with Elliott Advisors, whereby the latter will not increase its voting and economic interests over the next 12 months.

However Stifel said: "We do not think this will be sufficient to arrest the decline in the shares, with EPS falling as a result of disposals, an investment committee which we think has been established to shield the executive from criticism if/when disposals are well below book, and the 4th largest shareholder striking bilateral deals with the company, the details of which do not seem to have been shared."

The FTSE 250 traded company also had its target price slashed to 300p from 340p as analysts lowered adjusted EPS forecasts to 27.9p from 32.3p and for the current year as it raised concerns over plans for disposals.

"It may prove challenging to execute the planned disposals in a timely manner and at a reasonable price relative to book, given the current market conditions and structural head winds UK retail continues to face. We have assumed disposals are completed at an average 10% discount to book value to reflect this," said the note from Stifel.

The analysts added that dividend cuts at contemporaries Intu and Capital & Regional "potentially opens the door for Hammerson to consider the same," leading them to cut dividend per share estimates to 25.9p from 28.7p for 2019.

Hammerson's shares were down 3.86% at 334.20p at 1234 BST.