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Goldman and Credit Suisse at odds on Hammerson's prospects
Goldman Sachs and Credit Suisse have passed judgment on Hammerson and its proposed takeover of Intu - but with diverging views of the shopping centre operator's prospects.
The Goldman analysts, who already had a 'buy' rating on Hammerson, have added the company to their list of conviction shares. By contrast, Credit Suisse has downgraded Hammerson, which owns Birmingham's Bullring and Brent Cross in London, to 'neutral' and Intu to 'underperform' - both from 'outperform'.
Julian Livingston-Booth and his team at Goldman argued in a note dated 14 March that Hammerson and Intu's share prices were based on a too-gloomy view of the UK retail environment.
Hammerson's annual results demonstrated its resilient operational performance and gave more information about potential merger synergies, the Goldman team said. Combining with Intu will give Hammerson greater scale for investment, the knowledge and relationships of both businesses and the ability to attract the best retailers, they said.
Hammerson's shares, down 25% in the past year, fell out of the FTSE 100 index in February. The shares fell 5.5% to 431.5p at 12:27 GMT.
Newspaper headlines will continue to paint a downbeat picture of the UK retail market but there is little to justify the company's depressed share price, the Goldman analysts said, adding: "We prefer to risk being potentially too early rather than potentially too late."
The Credit Suisse analysts analysed Hammerson and Intu's shopping centres and were not enthused by the results. Hammerson has the more attractive sites with more aspirational brands but both portfolios are overvalued - by 13% for Intu and 3% for Hammerson, they argued in a note dated 15 March.
Ben Richford and his team at Credit Suisse were also unimpressed by the proposed takeover of Intu which, they argued, would increase Hammerson's exposure to low-growth UK markets while diluting exposure to growth in Ireland and from designer outlets.
The deal will probably be voted through by shareholders but the analysts added: "Irrespective of the outcome, UK shopping centre rents and yields are likely to come under increasing pressure as retail landlords continue to face headwinds."
Shopping centres have traditionally provided attractive returns as consumers bought more but the climate has changed, Richford argued. Squeezed consumer spending power, enthusiasm for experiences over goods, online shopping and a lack of new concepts will curb future returns, they said.