Broker tips: Hammerson, British Land, Shaftesbury, Ferguson, Huntsworth
The retail squeeze is starting to show on property values, said Credit Suisse as it reappraised real estate investment trusts Hammerson, British Land and Shaftesbury.
Hammerson and British Land were downgraded by the Swiss bank to 'underperform' from 'neutral' ratings, while Shaftesbury's focus on London's West End saw it upgraded with the reverse rating change and its price target lifted to 1,015p from 860p.
Hammerson's share price target was cut to 540p from 545p and British Land's to 695p from 710p.
Recent results were generally robust, with activity rewarded by modest upticks in net asset values, Credit Suisse analysts believe recent numbers from Land Securities boded ill for the wider sector.
"The write-down in value of several shopping centres by LandSec was a partial admission of the weak occupier and investment demand in that sector and we would think it illogical if UK shopping centre yields did not expand more widely given that Bluewater (which was revalued down by 11%) was widely used to mark values up after Landsec's acquisition of a 30% stake in 2014".
With Ferguson shares now touching an all-time high, analysts at Canaccord Genuity expect the group to report a "good" and "supportive" third-quarter update on 19 June, with attractive profit growth driven by strong US organic growth and margin improvement.
Canaccord forecast Ferguson's profit growth to slow from its strong first-half performance as comparatives become more difficult, but continued to predict a good result for the firm in the US. If Ferguson is able to maintain momentum in America through to July, the broker believed it could bring about a modest upside to the group's 2018 consensus estimates.
The broker, which reiterated its 'hold' rating on the plumbing and heating products distributor, expects Ferguson's US third-quarter organic growth to come in around 8%, including a 2% bump from price inflation, as well as a roughly 1.7% benefit from acquisitions.
The underlying market in the UK was expected to have remained "challenging", however, Ferguson's Canadian operations were forecast to have continued to deliver "healthy high single-digit percentage growth".
"Overall, the shares look well supported by good underlying trends in Ferguson's key US market, market share gains and a strong balance sheet," Canaccord's analysts concluded, edging their price target up to 6,080p from 5,985p mainly to take account of the strength of the US dollar on valuation since their last note.
Berenberg initiated coverage on healthcare communications firm Huntsworth with a 'buy' rating on Wednesday, highlighting the group's "strong competitive positioning".
Huntsworth, a top ten player in the $6bn healthcare communications market, has benefited from the growth in the global pharmaceutical market and its ability to navigate the "increasing complexity" of being able to deliver the right information to stakeholders through "increasingly digital channels", the broker explained.
Excluding mergers and acquisitions, Berenberg forecast "double-digit earnings growth" for Huntsworth's underlying healthcare revenues, even after having nearly doubled peers' rate of top-line growth over the previous three years.
From its roots as a general PR company, Huntsworth now generates 80% of its profits from its healthcare services businesses, which provide a range of marketing, technical communications and event engagement services that had generated underlying revenue growth of 12.6% per year between 2014 and 2017, leading Berenberg to project a 10-12% rate of increase in operating profits across those businesses.
The non-healthcare division, on the other hand, had registered a decline through a "period of restructuring and refocus", but it had stabilised in 2017, giving the broker cause to forecast 9-11% annual operating profit growth rates for the group, above management's more cautious guidance of 6-7% per year.
Berenberg also noted that Huntsworth's strong balance sheet could be leveraged to deploy up to £100m for mergers and acquisitions over the next two-and-a-half years, lifting earnings by 15% or more.
The broker issued the firm with a target price of 135p.