Shaftesbury Capital Upgraded to Buy Following Strategic Investment by Norges, Enhancing Financial Outlook and Reducing Risk

Shaftesbury Capital (SHC – Research Report), the Real Estate sector company, was revisited by a Wall Street analyst today. Analyst John Cahill from Stifel Nicolaus maintained a Buy rating on the stock and has a p165.00 price target.

John Cahill has given his Buy rating due to a combination of factors, primarily driven by the recent investment by the Norwegian sovereign wealth fund, Norges, which acquired a 25% stake in Shaftesbury Capital’s Covent Garden estate. This investment not only validates the estate’s valuation at £2.7 billion but also enhances the company’s financial outlook by reducing its loan-to-value ratio to below 20%, thereby improving liquidity and enabling the repayment of a significant bond at maturity next year.
Additionally, the deal is expected to be immediately accretive to earnings while maintaining the net tangible assets (NTA) neutral. Shaftesbury’s shares are currently trading at a substantial discount to the forecasted NTA, which is not justified given the positive developments from the Norges deal. This discount is wider than the average for UK REITs, and Cahill believes that the shares should not be rated similarly to other London office developers. Consequently, he has upgraded the rating to Buy, with a target price of 165p, reflecting the improved financial metrics and reduced takeover risk.

In another report released on March 27, UBS also maintained a Buy rating on the stock with a p165.00 price target.