Broker snap: Credit Suisse downgrades Capco after strong YTD rise

Date: Monday 02 Jul 2012

Credit Suisse has downgraded its recommendation for London property specialist Capital and Counties Properties (Capco) by two notches, from 'outperform' to 'underperform', after the stock's strong share price performance in the year-to-date.

The broker says that Capco was the strongest performing stock within its coverage universe in 2011 returning 23.7% and has jumped a "very solid" 10% in the 2012 so far.

"However, despite being potentially one or so months away from a possible ‘green light’ on the material Earls Court and West Kensington Opportunity Area (ECWKO) planning application, we believe based on our valuation that the share price is now fully up with events and downgrade to 'underperform' as the risk to return bias fully supports profit taking at the current valuation."

Credit Suisse notes that investors in Capco since the de-merger from Capital Shopping Centres (formerly Liberty International) in May 2012 have received a total return of 64.3% driven by expectations of potential planning approval at ECWKO and improved prospects for Covent Garden - "the latter of which has been delivered on and the former we await".

On 2012 estimates, Capco is trading at 15% more than spot net asset value per shares, the highest in Credit Suisse's coverage universe. "All in the price", the broker said.

A 220p target price has been kept.

BC

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