Capital & Counties available at a big discount – Wayne McCurrie
Capital & Counties, a London-based property developer listed on the JSE, saw its share price decline 6% after announcing results on Wednesday. This provides an opportunity for investors, said Wayne McCurrie of FNB Wealth and Investments.
Capital & Counties (Capco) is one of the largest property companies in central London with over £1.8 billion in property value – including the famous Covent Garden market.
The central London property developer lost £211.8 million in 2022 from a profit of £34.8 million in 2021.
This is mainly due to the decline in fellow London property developer Shaftesbury’s share price. Capco owns 25% of Shaftesbury, with whom it wants to merge.
Capco released an “okay set of results”, according to McCurrie. The share price declined 6% in intraday trading.
This decline presents an opportunity to investors buy into Capco at “a big discount” with Net Asset Value (NAV) growing reasonably well.
The recent share price decline is a continuation of the pressure it was under during the Covid pandemic, where it nearly halved.
It is now trading at a “crazy, low price”, according to McCurrie, with the share price lingering well below pre-Covid levels.
Capco is also good for South African investors seeking offshore exposure, foreign currency earnings to mitigate a weakening Rand, and a stable, predictable business.
Capco is merging with Shaftesbury, a fellow London property developer, with “prime assets” in London’s prestigious West End.
This merger will create a £4.9 billion property portfolio under a new company, Shaftesbury Capital.
The decline in Shaftesbury’s share price allows Capco to pick up high-quality assets in central London fairly cheaply, said McCurrie.
Capco reported strong leasing momentum with 71 new leases and renewals, ensuring £10 million points in contracted income.
Tourism in London bounced back in 2022, raising occupancy rates across Capco’s portfolio with 99% of rent collected.
This is particularly vital for Capco, with over half of its property income coming from the hospitality sector and its primary asset, Covent Garden, relying on tourist spending.
Capco’s rental income increased to £57.2 million in 2022 from £48.9 million in 2021, enabling it to pay a 2.5 pence per share dividend.