Hammerson PLC (LON: HMSO)– Materially impacted by the COVID-19 disruption, while the CEO decided to step down.

Hammerson PLC is a FTSE 250 listed Investment Management and Property Development Company, which operates retail destinations. Its portfolio comprises of around 20 premium outlets, 9 retail parks, 4,700 tenants, and 2.2 million square lettable areas in 14 countries.

Recent News
27^th May 2020: After leading the Hammerson for over 10 years, the Company CEO, David Atkins has decided to leave the position. He will hold the position at the latest by spring 2021 until the Group finds his successor.

6^th May 2020: The Company terminated its plan to dispose of its seven retail parks portfolio.

COVID-19 Update (as on 30^th March 2020)
The Group discussed the impact of COVOD-19 pandemic and stated that its retail portfolio across the UK remained closed since 24^th March 2020. As at 27^th March 2020, the Group had only received 37 per cent of rent billed for UK assets for the second quarter. Similarly, the flagship portfolio in France and destinations in Ireland remained closed since 15^th March 2020 and 25^th March 2020, respectively. Regarding the liquidity and balance sheet, the Group reported GBP 1.2 billion of undrawn committed facilities and cash, as at 31^st December 2019. On 25^th March 2020, the Group drew a further GBP 100 million under these facilities to bolster the position of cash surplus. 

Share Price Performance

Daily Chart as on 10^th June 2020, before the market closed (Source: Refinitiv, Thomson Reuters)

Hammerson PLC’s shares were trading at GBX 118.25 on 10^th June 2020, which was down 5.25% against the last day closing price. Stock's 52 weeks High is GBX 325.30 and Low is GBX 39.57.

From the technical standpoint, 3 days, 9 days and 14 days relative strength index of the stock was unfavourable and price could fall further from the current trading level. Moreover, the shares were trading well below its support level of 200-day simple moving average prices, which reflects a downward in the stock and carrying the potential to move down further.

Risk Analysis
Inevitably, COVID-19 will have a material impact over the Group’s performance during the FY20; hence, the Company suspended the final dividend of FY19 of 14.8 pence per share. Moreover, the Company is facing deferrals in rental payments, which can possibly impact its cash flows. Furthermore, the changing retail landscape in the United Kingdom can materially impact the valuation of its property portfolio.

Conclusion
During the financial year 2019, the Group reported a significant decline in the financial performance as net income declined by 11.2 per cent against the FY18 and net profit plunged 10.9 per cent against the FY18. Further, the Group reported LAT (loss after-tax) of GBP 781.2 million in FY19 versus a LAT (loss after-tax) of GBP 268.5 million in FY2018. However, the Group was able to reduce the Pro forma net debt position significantly to GBP 2.4 billion, by the end of FY19. The Group has suspended all its previous guidance regarding the FY20, considering the rapidly evolving state of COVID-19 disruption. In such a scenario, the Company is adopting serval cost-cutting measures and conserving liquidity to withstand the prevailing economic turmoil.

Based on the above rationale, we have given a “Watch” recommendation at the current price of GBX 118.25 (as on 10^th June 2020, before the market close at 1.10 PM GMT+1), while we look for any upcoming catalysts in the near term.

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