Aaron Guy at Collins Stewart, whose firm ranked second in Shares’ (21 August) survey of analysts’ stock recommendations, has initiated coverage of property groups Hammerson (HMSO), Land Securities (LAND) and British Land (BLND) with a ‘sell’ recommendation for each. ‘Our sector review is cautious with the risk remaining to the downside,’ says Guy. ‘Net asset values (NAVs) will continue to be written down and earnings per share growth is coming under pressure.’

Guy believes Hammerson’s NAV will be written down by 24% to 31 March 2009, with a further 10% decline in 2010. ‘Although their French portfolio to date has fought against UK valuation declines, we think the French portfolio will begin to contribute more to valuation declines given Hammerson’s reported equivalent yield for French retail is 4.5% and office is 4.8%.’ He has set a price target of 665p, implying a share price decline of 28%.

Of British Land, Guy believes ‘city office exposure and speculative city office development will weigh on the shares given their higher gearing’. He has set a target price of 656p, implying a share price decline of 13%. He expects NAV to be written down by 28% this financial year and a further decline of 13% in 2010 annual results.

Land Securities is likely to see NAV written down by 23% to 31 March 2009, with a further decline of 7% in 2010 annual results. ‘Although Land Securities is a quality company, it is swimming against the tide of the direct real estate market which is undergoing significant valuation declines and experiencing tenant uncertainty,’ says Guy. His target price of £10.26 implies a share price decline of 22%.

by Rachel Robson