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Hansteen strategy change should remove near-term uncertainty for investors, says Liberum

Liberum upgraded its rating on Hansteen to ‘buy’ from ‘hold’ and raised its target price to 110p from 105p
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Hansteen buys and manages business parks and industrial estates

Hansteen Holdings PLC (LON:HSTN) is no longer expected to be a significant net seller of assets and Liberum views the strategy change as positive.

The landlord, which buys and manages business parks and industrial estates, had recently sought to sell the majority of its assets before the next property cycle but it will now focus on managing its residual holdings for income and value growth.

READ: Hansteen shares gain as property values rise despite Brexit uncertainty

In its 2018 results on Monday, the company said it would still seek acquisitions that “fit our approach” and sell “opportunistically” but won’t sell a large chunk of assets until it has a clearer view on the cycle.

“A reversal in strategic focus should remove near-term uncertainty for investors, allowing greater focus on underlying performance,” Liberum said.

“While further political and economic uncertainty remains a risk we believe investors are adequately compensated.”

Liberum upgraded its rating on the stock to ‘buy’ from ‘hold’ and raised its target price to 110p from 105p.

The broker said the decision to halt the reduction in assets will reduce stress on operating metrics, allowing management to “right-size” overheads and enhance returns.

Liberum also thinks Hansteen’s decision to end its long-term incentive plan has the potential to further enhance shareholder returns if conditions remain strong.

“In addition, we believe Hansteen will now approach any further sales negotiations from a stronger position rather than effectively being perceived as a forced seller,” it said.

The full-year results were 3% ahead of Liberum’s forecasts and the broker raised its net asset value estimates by 2%.

However, Liberum downgraded its earnings per share estimates by 6% to reflect “disposals ahead of forecast and a higher gross to net leakage”.

Liberum believes the market backdrop for UK multi-let industrial remains strong, underpinned by continued cyclical expansion and the structural benefits of rising e-commerce activity.

“Hansteen's urban assets further benefit from severely constrained supply with the focus for land use concentrated on residential and development unviable at current levels of market rent.”

In late morning trading, shares fell 0.5% to 96p each.

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