Capital & Counties Properties PLC

Capital & Counties Properties PLC (LON: CAPC) is an FTSE 250 listed real estate firm that owns and manages properties.  

The Company will pay a final dividend of 0.1 pence per share on 08 July 2022, while the ex-dividend date was 09 June 2022.

Investment Rationale for Valuation – Speculative Buy at GBX 157.40

• Returns Improvement: The Group reported total property return of 1.5% in FY21, reflecting a significant increase from negative 24.4% in FY20. Total shareholders return also stood at 16.5% in FY21, compared to negative 44.3% in FY20.
• Rental Growth: Growth in rentals were driven by 60 new leases and renewals, represented by £11 million in contracted income.
• Decent Start to FY22: The company has witnessed a positive start to FY22 and has maintained a leasing pipeline with £3.8 million of income under offer.
• Technical Indicator: The price of the stock is trading near the lower Bollinger band, with a low 14-day RSI of ~35.78 reflecting an oversold stance.  

Key Risks

• Inflation Risk: The Group is prone to the looming risks of inflation and rise in raw material prices.
• Interest Rate Risk: The company is also exposed to the changes in interest rates, that can impact valuations, funding, and customers.  

Financial Highlights (for the year ended 31 December 2021, as of 23 February 2022)

(Source: Company Website)

• Property Value: The total property value stood at £1.82 billion during FY21 end.
• Net Rental Income: Underlying net rental income grew to £52.3 million for the year ended 31 December 2021, compared to £43.6 million during the prior corresponding period.     

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (FY22E)

Conclusion

The company remains focused to invest for quality places with an eye on Central London. It is positive on the long-term prospects of the Covent Garden estate and London's West End.  

The stock made a 52-week high and low of GBX 188.20 and GBX 142.00, respectively.

Based on the decent performance, traction in rental growth, positive long-term outlook, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Capital & Counties Properties PLC at the closing market price of GBX 157.40 (as of 25 April 2022) with lower double-digit upside potential based on 0.85x Price/NTM Book value (approx.) on FY22E book value per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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