Capital & Counties under pressure on Exane downgrade

The bank noted CapCo’s share price is highly correlated to Prime Central London (PCL) residential prices, where a weaker outlook causes it to downgrade net asset value estimates and lower the price target.

Exane said the stock’s valuation was not compelling, particularly given near-term headwinds.

It said that following recent weakness, land at Earls Court is now being valued off undemanding assumptions, particularly if CapCo is able to deliver on NAV upside from higher density in 2017.

Exane reckons the current share price already allows for a c.10% slippage in assumed selling prices at Earls Court at current levels of density.

“However, we are yet to see a correction in London residential pricing, creating a risk that liquidity for unit sales remains at depressed levels for a sustained period.

“Combined with political risks surrounding a possible ‘Brexit’ and the London Mayoral elections, we see catalysts remaining negative in the short-term.”

Exane said the main changes in its sum-of-the-parts methodology are reductions to its valuations of land at Earls Court, partly to reflect lower sales price assumptions given the significant recent slowdown in sales rates at Lillie Square.

At 1036 GMT, CapCo shars were down 3.1% to 315.60p.