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The fact that Highcross has been placed in receivership has had an adverse effect, not only on the share price of Hammerson, but also on the share prices of other REITs having an exposure to retail shopping centres. It is bad news for the sector - it means that Hammerson did not consider that Highcross was worth saving. However, it is not all bad news in economic terms. The centre will be sold, at a knockdown price, of course, however, Hammerson’s share of the debt will be largely repaid. So, while it will lose an asset, it will also lose a liability. There might, possibly, also be a lucrative management contract available, since the Receiver will not wish to assume direct responsibility for managing Highcross. Nevertheless, the fact that so large a shopping centre has been permitted to go into receivership does cast a long shadow over all retail shopping centres. It is unlikely, however, that the share price of Hammerson will go into free fall - it will probably settle at about half the current net asset value per share, that is, about 25.5p.
Yes, the price is still holding up. I bought some today at 54.8p. The price seems to be reasonable stable at about 55p, which gives a return of over 6%.
You are right - in the long term, this will represent a good, sound investment, providing a return, at the current share price, of about 6%. I bought some today at 55p.They seem to have over reacted to the share going “ex div” today.
More of a bargain, of course, if you had waited until now, when you could have paid 56p.
Indeed - the share price is even higher today, now than it was before the share went ex-dividend - a real gain of 10% overnight. There is no apparent explanation for this sudden rise in the share price, except that it was probably grossly undervalued before the 10% effective rise.
I wonder why, since the shares went “ex dividend” today, the price has remained the same? Presumably, anyone who buys a share today at 18.5p will only have an ex dividend share worth 90% of the value of a share held yesterday (since he will not receive the 2p scrip dividend), even though the price yesterday was also about 18.5p. No doubt someone will explain why this is the case.
Hammerson is making a distribution of 2p per share to comply with the requirement that a REIT must distribute all of its taxable income. This means that, at a share price of 17.5p, the company is returning 11.4%. That doesn’t sound too bad, so I bought in at 17.5p and will wait to see if the share prices rises, in, perhaps, three years time, to 35p, which would represent a more usual return of 5.7% The company has sufficient cash in hand to meet all of its debt repayments until 2025. There is no risk of it breaching its covenants. It plans further disposals to further enhance its solvency ratios. It seems to represent a good long term investment.
Scrip dividends are, more or less, neutral, since the net income which would otherwise have been distributed, reducing the cash held by the company, is retained, increasing the value of the company, with the issue of the scrip dividends then restoring the position. However, there are positive factors arising from the retention of the company’s net annual income, since it strengthens the balance sheet, thereby making the company a less risky investment.
There are two competing forces at work. On the one hand, rising inflation and the recession will have an undoubted impact on the retail economy putting rental income at risk. However, rising inflation also causes investors to look for safe, inflation proof, investments and property has always been seen as the soundest inflation proof investment. So, it is difficult to say in which direction the share price will be pulled by these two competing and opposing forces.
That is all quite correct. The company is issuing these shares in order to comply with the requirements associated with being a Real Estate Investment Trust. Issuing the shares constitutes a “distribution” of the net income received by the Trust so enables the Trust to continue to enjoy the status of being tax exempt. If every shareholder takes up the issue then the net effect will be neutral in accounting terms. However, the effect on the share price will be positive, because the company has retained, rather than distributed, its net profits and this has the effect of reducing its debt to equity ratio. This reduces the level of risk in terms of breaching the covenants under its loan agreements. So, the distribution of income by way of a rights issue is all positive, as far as shareholders are concerned