Broker Numis published a note on property stocks, saying the current key themes remain deleveraging, cash conservation and asset management initiatives.
In all geographies, property values continue to register declines; rental receipts and balance sheets remain under pressure and debt/equity finance is both scarce and costly. Numis believes capital structure and management action remains the key to rating and survival at present.
Regarding opportunities in the sector of property investment companies in the UK, the broker said it remains positive on ING Global Real Estate Securities, from a value and income perspective.
Standard Life Income remains attractive from an income perspective with comfortable levels of cash and one of the highest levels of dividend cover amongst its peers.
However, upside from the UK is likely to be muted given the recent strong run. For value investors, Numis believes a number of emerging market and specifically Asia names look interesting at current levels. “We expect further corporate action in this space to result in potential cash returns to shareholders.”
While it believes that share price recovery is still some way off for the emerging market property plays, from an operating perspective it is more positive on the region compared with emerging Europe. “We believe that the demographics and macro picture is far stronger and will ultimately result in a swifter recovery in these names in our view.”
Consequently it keeps a cautious eye on the Vietnamese funds, where VinaLand and JSM Indochina look particularly interesting. VNL is targeting partial or full exits and will not seek to reinvest the proceeds. JSM has a sizeable cash balance which will allow it to take advantage of the current distressed market, potentially enhancing returns for share holders.
Numis’ preferred Indian play for the long-term is Eredene Capital which offers exposure to port and logistics assets in four key regions of India.