Goldman Sachs upgrades Hammerson over 'significant' potential from Intu merger
Hammerson
27.86p
16:34 03/05/24
Hammerson shares offer 25% upside after the acquisition of shopping mall rival Intu, said Goldman Sachs, seeing a deal that will "significantly enhance" the company's power in a polarising market and generate "significant" efficiencies.
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Goldman, which upgraded the FTSE 250 company to a 'buy' rating from 'neutral' and its 12-month price target by 4% to 625p, said it saw the potential for 4% to 13% accretion in earnings per share by 2021 from the deal after net disposals of up to £2bn.
As Hammerson chief executive David Atkins' said on the day of the deal: “We’re not interested in averages. We don’t own averages. We own the best”.
This was felt by analysts at the bank to be "the key in a market we expected to continue to polarise in a significant way" between the best and the rest.
The combination of Hammerson and Intu is felt will enhance the scale of the operating platform, which is felt to be "an increasingly important aspect of being a retail landlord in a market where 'averages' are in decline".
The geographic mix of the two companies' UK shopping centres offers "limited risk" of cannibalisation and even, with much more than half the UK population visiting the combined portfolio each year, the analysts say this increases its importance to the range of potential tenants.
Timing of the deal was also hailed as "a significant success factor in making acquisitions", with Hammerson having done well in this regard as the offer price is 12% below Goldman's 12-month price target for Intu, a 41% discount to Intu’s last reported net asset value and implies a 6.3% 2017 earnings yield on the bank's estimates.