Hammerson gains on JPMorgan upgrade

Listed Anglo-French property group Hammerson advanced strongly on Wednesday as analysts at JPMorgan upgraded the company from neutral to overweight. Hammerson, the 4th largest UK real estate investment trust (REIT) was up 7.4% to 333.7 pence in afternoon trading after hitting a high of 344 pence.

JPMorgan said that valuations of well capitalised companies were starting to make some sense. Stating that 'we are not there yet,' the analysts said Hammerson looked attractive on valuation. 'But is not what we would view as 100% bullet proof yet,' they said.

JPMorgan said there were several reasons why Hammerson should be on investors' 'radar screen'. One of the main factors was Hammerson's announcement of a rights issue earlier this month which will reduce the company's loan-to-value ratio to 41%, the lowest of all the major UK REITs. The company's financing risk has been pushed back to 2012.

On the issue of the need for UK property company's to de-leverage, the analysts said Hammerson has several options available, such as disposals (£755m is for sale), debt restructuring and M&A.

'In particular the M&A option will come in focus in our view, as disposals, debt restructuring and raising equity may be difficult in many cases. As Hammerson's overall LTV is quite low and it has a high quality portfolio with a strong future development pipeline and strong management team, we believe it could be an attractive M&A candidate in any potential industry consolidation.'

Another reason was that Hammerson has one of the highest quality cash flows in the sector, JPMorgan said. Hammerson has a £6.5bn property portfolio, which is for 60% in the UK, 39% in France and 1% in Germany

Meanwhile, Hammerson's proposed rights issue received 99% support in a vote at an extraordinary general meeting on Wednesday.