Interactive Investor

Insider: new MediaCity owner backed for brighter times

21st February 2022 07:33

Graeme Evans from interactive investor

The blue-chip owner of Manchester's MediaCity and a mid-cap hurt by the energy crisis have seen buying by their directors.

A plan by Land Securities (LSE:LAND) to invest £2.8 billion in mixed-use urban neighbourhoods and London office projects has inspired one of its directors to spend £35,000 on its shares.

The purchase by non-executive board member Manjiry Tamhane was made at a price of 793p, which compares with November's last disclosed net asset value per share of 1,003p.

Shares in FTSE 100-listed Landsec, whose £11 billion of assets include the Bluewater shopping centre and London's iconic Piccadilly Lights, have made a steady recovery since trading at 616p just under a year ago. They had been near to 1,000p in late 2019.

In a note published last week, analysts at UBS placed a target price of 950p and said their estimate equated to a 16% discount on Landsec's forward net asset value.

Their update was published after attending the company's capital markets day in Manchester, which focused on Landsec's growing pipeline of urban mixed-use assets and featured visits to two recently acquired sites in the city.

In November, Landsec spent £426 million on a 75% stake in MediaCity, the media hub in Salford where Coronation Street and the BBC's Match of the Day are filmed. Europe's biggest television studio was previously owned as a joint venture between Legal & General and Peel Group.

That same week it unveiled the £269 million acquisition of London-listed brownfield developer U+I, whose mixed-use scheme at Mayfield, Manchester is well advanced through planning. U+I's long-term pipeline also includes a residential and life sciences-led development in Cambridge.

Landsec told analysts that it expects to start construction of the first building at Mayfield later this year and start the second phase of MediaCity in 2023. Other mixed-use schemes in its own pipeline include two shopping centres in London and one in Glasgow.

Urban opportunities now represent 8% of the portfolio, up from 4% a year ago but chief executive Mark Allan believes this could grow to 20-25% over the medium term. His other key areas of focus are central London offices and major retail destinations.

Following the acquisitions, the pipeline of future mixed-used urban neighbourhoods consists of five schemes with scope to deliver 7,000 residential units, 2.9 million sq.ft of offices and 900,000 sq.ft of retail, leisure and other space.

Two of the schemes are ready to start in the next 14 months, requiring the deployment of capital expenditure of £1.5 billion and offering a potential 20% profit return.

The company's planned overall expenditure of £2.8 billion between 2022-27 also includes £1.3 billion of spending on London office developments. It is part of a strategy of recycling capital out of mature or sub-scale assets, with £880 million already raised since September 2020.

Landsec intends to capitalise on strong investor demand by disposing of a further £1.7 billion of London offices, as well as £1.3 billion of other sub-scale assets over the medium term.

UBS said following the capital markets day: “Our overall take was positive: both on the assets themselves as well as the transformation of the story with the material increase in capex potential following the new strategy.

“We rate Landsec as a Buy and see good value in the shares still at about a 25% discount, 6% implied yield, with improving prospects ahead, culminating in 10% compounding return on equity potential over the coming three years.”

Tamhane, whose purchase of shares on Thursday was her first since joining the board in March 2021, is chief executive of WPP-owned marketing consultancy Gain Theory.

Backing a recovery in fortunes

The chairman of (LSE:MONY) has spent £100,000 backing a recovery in fortunes for the price comparison site as it grapples with current energy market difficulties.

Robin Freestone, who has been in the role since May 2019, bought the shares on Friday, the day after the FTSE 250-listed company reported a smaller-than-expected 9% fall in 2021 earnings per share to 11.9p.

The stock had been trading at its lowest level since 2014 but rose 3% on the day of the results and finished the week at 194p, which is the level that former Pearson chief financial officer Freestone bought his new holding.

The company warned on Thursday that it doesn't expect to make any money from energy switching this year, causing guidance for 2022 earnings to be 10% short of City hopes.

But with prospects brighter in car insurance and travel insurance, it backed its longer-term outlook by declaring an unchanged final dividend of 8.61p for payment on 12 May.

The company, which trades with a 6% dividend yield, has plenty of support in the City, with Jefferies highlighting a price target of 355p and Numis Securities seeing the potential for 320p.

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