Hammerson PLC (LON:HMSO) shares gained as Deutsche Bank resumed its coverage of the stock with a ‘buy’ rating after the shopping centre operator pulled its offer for rival Intu Properties PLC (LON:INTU).
Intu on Wednesday freed Hammerson from its obligation to hold a shareholder vote on the £3.4bn takeover bid after withdrawing its recommendation for a deal.
Intu said its board would not post the scheme of arrangement documents for the deal to its investors, meaning the takeover would be formally scrapped.
The move followed Hammerson’s decision to make a U-turn on the deal after receiving pressure from shareholders over concerns that buying Intu would increase its exposure to the struggles facing the UK’s retail sector.
High street stores have been under pressure as higher inflation prompts consumers to cut back on spending and as more people shop online.
Hammerson discount 'unjustified', says Deutsche Bank
Deutsche Bank said despite the negative retail market backdrop, it believes Hammerson’s current 32% discount to net asset value is “unjustified” and resumed coverage with a ‘buy’ recommendation.
The bank cut its target price to 600p from 650p.
“The termination of the offer period for Hammerson's proposed acquisition of Intu marks the end of a period of transactional uncertainty for retail landlord shareholders,” Deutsche Bank said.
“As a stand-alone entity, we forecast Hammerson to deliver a three-year net asset value (NAV) total return compound annual growth rate (CAGR) of 6% per annum, with dividend growth of 6% per annum over the same period and a one-year forward dividend yield of 5%.”
Hammerson shares rose 1.8% to 549p in morning trading.
No dividend growth for Intu expected until 2020
Deutsche Bank resumed coverage of Intu with a ‘hold’ rating and lowered its target price to 210p from 220p.
It expects Intu to deliver a 3% decline in NAV total return CAGR over the next three years with no dividend growth until 2022.
“For now, Intu remains a stand-alone entity and although it trades on a deep 53% discount to last reported NAV per share, we do not see a catalyst for a re-rating on a one-year view and expect company strategy to remain unchanged, at a time when we would prefer to see substantial new action taken,” Deutsche Bank said.
Intu shares edged up 1% to 200p in morning trading.