RBC Capital cuts British Land price target, ups PT on Landsec

The price target on British Land was slashed to 325p from 355p as RBC said it expect developments to remain the key driver of income growth for the company, but remains cautious on the yield on costs generated through developing offices.

"A disposal of now ‘non-core’ shopping centres would help fund development after an increase in net debt in 2H2022/23 of over 5%," it said.

"However, while a change in strategy around shopping centres is logical, we question whether it would result in a sufficient drop in British Land's cost of capital to offset the drag on its return on capital employed."

The bank maintained its ‘underperform’ rating on British Land rating given the significant upside potential elsewhere in its coverage.

RBC lifted its price target on Landsec to 625p from 600p as it said recent results showed the benefits of a well-executed restructuring to date, including £2.2bn of London office disposals and accretive reinvestments.

"Against the good progress to date, we remain positive on its restructuring plans but continue to expect the remainder to be more challenging. In particular, we remain cautious on the risk adjusted returns from its planned London office developments."

RBC rates Landsec at ‘sector perform’.