Hammerson (LSE:HMSO) PLC’s capital values are still on the decline and its leases are “over-rented”, according to analysts at Liberum, who said on Tuesday that they were “bearish” on the property firm and retained their ‘sell’ rating and 27p target price.
In a note, the broker also pointed out that the company’s vacancy rate was “high”, as was its allocation to underperforming assets, a balance which they thought could increase if Hammerson (LSE:HMSO) had to sell off better ones from its portfolio.
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“The steep negative property returns delivered over the last two years have erased all positive property returns made since 2014 at group level. Premium Outlets has been the star (+12.4% annualised property returns since we start measuring in 2012), but the rest of the portfolio has materially underperformed. We believe that Premium Outlets (Value Retail) may even be sold to fix the balance sheet – if required – which would leave Hammerson with capital, but perhaps just a portfolio of underperforming assets,” Liberum said.
The broker added that Hammerson’s debt covenants “remain a concern” and that it is relying on disposals to support its balance sheet at a time where “liquidity is still very thin”.
“In its current form (i.e. without further disposals), we think Hammerson’s balance sheet remains at risk of getting too close to covenant breach levels and requiring another equity injection,” the analysts added.
Hammerson shares sank 4.3% to 34.3p in late morning deals.