Rebound long way off
INVESTORS HAVE BEATEN a hasty retreat out of British shopping centre giant Liberty International following worse than expected results for first half 2008. The dual-listed stock (JSE and FTSE), which has an SA shareholding of more than 40%, was down 10% in rand terms in the five days following its interim earnings announcement earlier this month.
Underlying profits slumped 17% in the first six months of 2008 (year-on-year) – in stark contrast to the situation just six months ago, when the company declared a 6% increase in underlying profits for 2007. At the same time property values of Liberty International’s £8bn (R116bn) portfolio fell by 7,4%.
The London-listed property index is off a massive 52% from its 2007 highs as jittery investors continue to bail out of bricks and mortar on the back of ongoing turmoil in global financial markets. However, it has to be said that Liberty International’s share price has been more resilient than the rest of Britain’s real estate sector, no doubt due to its large exposure to regional shopping centres in prime locations. Even so, investors are clearly keen to cut their losses before share prices drop further.
Management concedes there’s more bad news to come. Says Liberty International chairman Patrick Burgess: “Property values are unlikely to recover until stability returns to Britain’s banking sector. Therefore, we consider the process of falling values not yet complete.”
SA fund managers agree a recovery is still some way off. Coronation Fund Managers’ property analyst Anton de Goede says shopping centre values are likely to fall further to pre-2002 levels, when the most recent upswing in Britain’s property market started. Says De Goede: “Positive momentum within the British property market may only return once this yield out shift has been completed, which could take 12 to 18 months given the current uncertain consumer and banking environment.”
Evan Jankelowitz, co-head of Stanlib’s property franchise, says Liberty International is probably not the place to be over the short term. “The company has great assets and great management but is caught in a very weak market.”