Confidence in office rents gives broker boost to Derwent
OFFICE space developer
Derwent London pulled away from the wider market yesterday after Exane BNP Paribas gave its portfolio in the capital a glowing forecast in the face of any Brexit headwinds.
An economic downturn will lead to a rising uptake of Derwent’s “resilient” portfolio of office space on the fringes of central London, said the broker, which upgraded the FTSE 250 company to buy.
Despite subdued leasing volumes in the capital’s office rental market since the EU referendum, Michael Burt, an Exane analyst, lifted his growth forecast in anticipation of a “softer landing” for rents.
Rents are “softening, not collapsing” and any impact on jobs in London’s financial sector is likely to be “gradual”, Mr Burt argued.
Following the note, Derwent gained 89p to £27.41, outperforming the midcap FTSE 250 index, which ended the day down 0.1pc, or 9.98 points, at 19,408.4. British Land, fellow developer and Exane “top pick”, edged up 4.5p to 607p on the FTSE 100.
Elsewhere on the blue-chip index, Standard
Life climbed 3.6p to 414.5p after HSBC gave its much maligned merger with Aberdeen Asset Management its stamp of approval and put the insurer and investment manager on its buy list.
“Standard Life and Aberdeen’s merger builds scale, diversifies both companies’ businesses and helps offset revenue and cost pressures,” the broker told clients.
Standard Life’s current share price implies no growth, and £200m of synergy savings also make the stock an appealing pick, HSBC said.
“We believe the cost
synergies are conservative given both managements’ track record in past acquisitions, and the UK asset management sector average at 50pc,” it argued.
However, in-line results from Ashmore failed to boost the emerging markets-focused asset manager’s shares, which shed 7.7p to end at 343.1p. It reported a 5pc rise in its fourth-quarter assets, fuelled by new client cash.
Miners dominated the blue-chip leader board as commodity prices firmed, with Anglo American up 23p at £11.17 and gold miner
Fresnillo rising 23p to £14.81. But the pound’s advances on the dollar ensured the benchmark
FTSE 100 index remained in the red for the day, finishing 26.05 points lower at 7,387.62.
Royal Mail was among the biggest laggards on the benchmark index as unions split over its pension scheme proposals. RBC Capital Markets trimmed its price target for the postal company threatened with relegation from the bluechip index, citing the high probability that its London property will be used to fund the altered pension plan. It closed 10p lower at 401p.
Astrazeneca dropped another 14.5p to £49.99 as departure rumours continued to swirl around Pascal Soriot, its chief executive. The drugs giant has refused to comment on “rumours and speculation” since reports emerged from Israel mid week that Mr Soriot was in talks with the country’s pharmaceuticals giant Teva. After London closed however, Astra’s US listed shares rallied after sources close to the company said Mr Soriot was staying on.
On the mid-cap index,
Carillion’s rollercoaster week continued with the beleaguered construction and services group bouncing 11.9pc in intraday trade before closing just 0.7p higher at 56.15p after it appointed HSBC as a financial adviser.