Analysts at Berenberg upgraded property asset manager Capital & Regional from ‘sell’ to ‘hold’ on Monday, citing the firm’s now strengthened balance sheet.
Berenberg said Capital & Regional’s recent £30.0m equity rase and £19.0m debt restructuring had “significantly mitigated” its prior primary concern regarding the firm – overleverage.
The German bank said this action “should safeguard” Capital & Regional as a going concern, although it noted it had come “at a cost” – with NTA dilution and a further reduction in share liquidity.
“As a result, although the first green shoots of a UK retail recovery are beginning to emerge, this share illiquidity and the potential for the formalisation of handing back assets to lenders limit the rerating potential of the shares, in our view,” said the analysts.
However, while Berenberg said the recent recapitalisation shored up the group’s balance sheet, making it “more investable”, it also increased Growthpoint Properties’ ownership to 60.8%.
“Although the share price more than allowed for this dilution, reduced liquidity and minority control is likely to present a significant barrier to investment for most investors, limiting rerating potential,” highlighted Berenberg, which also increased its price target on the stock from 50.0p to 70.0p.
