Hammerson shares slumped on Tuesday on the back of a downbeat note by Liberum.
The broker, which rates the stock at ‘sell’ with a 27p price target, said capital values are still falling, with yields rising and rental values declining, and further to go.
“Vacancy is high and leases are over-rented,” it said. “The allocation to underperforming assets is still too high.”
Liberum said Hammerson’s balance sheet position means the weighting to underperforming assets may have to increase if the better ones are sold. “Retail Parks was a prime example,” it added.
“The steep negative property returns delivered over the last two years have erased all positive property returns made since 2014 at group level.
“Premium Outlets has been the star (+12.4% annualised property returns since we start measuring in 2012), but the rest of the portfolio has materially underperformed.”
Liberum said Premium Outlets may even be sold to fix the balance sheet – if required – which would leave Hammerson with capital, but perhaps just a portfolio of underperforming assets.
The broker also said that Hammerson’s covenants remain a concern, with the company reliant on disposals in a market where liquidity is still very thin.
“In its current form (i.e. without further disposals), we think Hammerson’s balance sheet remains at risk of getting too close to covenant breach levels and requiring another equity injection,” it said.
At 1230 BST, shares in the shopping centre owner were down 3.6% at 34.53p.
