As I write this on Monday, the FTSE 100 is up by more than 5% on following news that the Pfizer/BioNTech vaccine for COVID-19 could be 90% effective. Although the trial results haven’t yet been published and peer reviewed, they appear to be better than expected. Widespread deployment of the vaccine could bring the end of the coronavirus pandemic into sight. Apparently the UK government already has 40m doses on order.

Battered stocks such as Rolls-Royce, Cineworld and Carnival are enjoying double-digit gains. Airlines are flying too. However, I’d argue that even in a best-case scenario, the outlook for equity in these firms is likely to remain uncertain for some time. Many have taken on significant amounts of new debt in order to survive the pandemic. In my view, even a return to 2019 trading could leave many of Monday’s high-profile risers in need of several years of intensive deleveraging.

That’s not to say that there aren’t some good buying opportunities out there. But I think it’s worth considering how easy it will be for highly-geared firms to repair their balance sheets without further equity dilution.

This theme of balance sheet strength leads me to the sector I’d like to talk about this week: property.

Hidden value in this unloved sector?

Commercial property stocks have suffered badly in the pandemic and many now trade at a big discount to book value. However, a fair number of firms have managed to maintain healthy balance sheets. I can see value in this sector on a medium-term view.

At the big cap end of the market, British Land (I hold) and Landsec look safe enough to me. Both have promised to restart dividend payments this year. Moving down to mid caps, I believe that central London landlords with high-quality estates - such as Shaftesbury (I hold) and Derwent London - will also recover well in time.

The company I want to look at this week is a little different. According to its website, Henry Boot (LON:BOOT) operates “across the whole property value chain. We acquire land without planning permission, obtain planning permission, develop sites and maintain an investment portfolio”.

The group’s operations are structured in this way for a reason. Construction and property investment provide reliable cash flows, but at relatively low rates of return. However, this cash flow can be funnelled into land and development opportunities. These…

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