Broker tips: Auto Trader, British Land and Landsec

By Michele Maatouk

Date: Friday 10 May 2019

(Sharecast News) - Citi downgraded its stance on shares of Auto Trader to 'neutral' from 'buy' on Friday as it said the risk/reward is now more balanced.
The bank, which lifted its price target on the stock to 580p from 494p, said its fundamental view on Auto Trader is unchanged.

Citi said Auto Trader is a high-quality asset operating in an attractive competitive landscape and is the clear leader in the space. It also said it sees potential upside from the Cox JV.

Against this, however, the shares have performed very strongly in the last 15 months and are now trading at a premium to peers, and notably, recent takeout multiples in the space. In addition, Citi said there may be some risk around capital flowing out of domestic online classified names, including Auto Trader, as Nasper's spins out the largest internet stock in Europe.

"Putting this all together, we feel that the risk/reward is now more balanced and we downgrade Auto Trader to neutral."

Citi said that while the bulls may still argue that Auto Trader is an attractive asset to a potential private equity buyer - and it would tend to agree - the potential premium to the current share price may be getting narrower so it can't justify putting fresh money into the stock.

British Land was under the cosh after Barclays cut its stance on the stock to 'underweight' from 'equalweight' ahead of the company's full-year results next week.

The bank also cut its price target on British Land by 14% to 500p. In the same note, it trimmed its price target for Landsec by 4% to 755p while retaining its 'underweight' rating on the stock.

Barclays said that while it was taking a slightly less negative view on the London office market given the observed underlying resilience, it expects further, and accelerated, weakness in the retail portfolios to put further pressure on both earnings and NAV estimates.

"We now expect flat earnings growth for British Land and Landsec going forward as positive contributions from the development pipeline are offset with a more bearish outlook on rental growth for retail," it said.

"Moreover, we expect write-downs in the retail portfolio to accelerate and near term NAV estimates to come down as a result (BLND -7%, LAND -4%)."

This effect is more pronounced for British Land, Barclays said, given its higher exposure to the challenged retail warehouse segment, which accounts for around 25% of the company's total portfolio.

Landsec's retail portfolio is more exposed to higher quality Central London retail and hotels, it said.


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