West End landlords Capital & Counties and Shaftesbury are set to benefit from rising consumer spending as Covid-19 restrictions lift, according to analysts at investment bank Jefferies.
The team has upgraded both listed companies to a “buy” rating, lifting its share price target for Capco to 210p and Shaftesbury to 660p. Yesterday’s closing prices were 163.5p and 593.5p.
Jefferies’ Mike Prew and Andrew Gill expect the UK economy to reopen from 2 April and for London to be moved into tier-three restrictions from tier four. In tier three, non-essential shops can reopen.
“UK households have saved £200bn and consumers will, we think, make up for lost time in 2H21,” Jefferies’ note read. “Hospitality and F&B spend collapsed in lockdown one and didn’t recover due to fear of infection. We conclude social spending has the highest rebound potential, and with more than 75% of their businesses in retail and F&B, we upgrade [Capco and Shaftesbury].”
The note continued: “International travel restrictions are a headwind for a full rebound for [Capco and Shaftesbury] but their assets are attractive to domestic ‘staycation’ tourism, which could increase. Limits on international tourism could hold back recovery especially in the higher-end boutique shops, which attract more tax-free shopping.”
A second “eat out to help out” scheme could be beneficial, the Jefferies team said, although evidence suggests this caused a rise in infections last year.
“Central London, unlike the rest of the country, also missed out on the upswing in restaurant demand,” the team added. “However, if a large proportion of the country is vaccinated, confidence could return to central London quickly.”
Elsewhere in its latest note, the bank has also upgraded its net asset value targets for healthcare property investors Assura and Primary Health Properties on the back of a rise in waiting lists for non-emergency treatment.
The team has upgraded serviced office operator Workspace Group to a “buy” recommendation, noting: “40% of the UK workforce is WFH. Business sectors, however, aren’t seeing productivity gains after the initial adrenaline rush and few intend to sustain these WFH rates permanently.”
On the working from home phenomenon, the team added: “REITs have, we think, been mispricing the WFH revolution and Zoom probably won’t do to the offices what Amazon has done to shopping centres, the latter being this pandemic’s revolution and transfer of value to logistics.”
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