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On Monday, HSBC analysts upgraded Hammerson Plc (LON:HMSO:LN) (OTC: HMSNF) from a Hold to a Buy rating, increasing the price target to GBP3.73 from the previous GBP2.66. This adjustment follows Hammerson’s strategic move to concentrate its portfolio on ten core city centre destinations, a transition that was marked by the sale of Value Retail in August 2024.
The upgrade is grounded in the analysis that Hammerson’s portfolio has seen valuations reach a potential turning point. Capital values in the UK segment of Hammerson’s portfolio have declined by 67% from their peak, with rents decreasing by approximately 27%. However, the current average property yields stand at 8%, which provides a significant spread of over 300 basis points compared to the UK’s 10-year bond yield.
HSBC also noted the attractive spreads in France and Ireland, ranging between 200 and 300 basis points. The analysts believe that the current yields offer an appealing opportunity for investors, especially with the potential for growth in rents and increased market interest in quality shopping centres.
The analysts anticipate that the focus on core city centres and the attractive yield spreads could not only establish a much-needed floor for property valuations but could also drive meaningful growth going forward. With the prospect of rent increases and heightened investment interest in the sector, Hammerson’s strategic positioning appears to align with potential market trends.
Hammerson’s strategic divestment of Value Retail and the subsequent portfolio concentration are now seen as positive steps that could bolster the company’s financial outlook and market performance. The upgraded rating and raised price target reflect HSBC’s optimism about Hammerson’s future in the retail property market.
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