MS still prefers UK stocks in European property space
22/03/2023 08:56
** Morgan Stanley keeps its preference for UK stocks in the
European property sector, seeing the return profile for shares
as relatively better than for most of continental Europe
** The brokerage says most UK stocks offer "reasonable asset
yields and rents", while continental Europe is "dominated by
stocks for which yields screen too low"
** "EPS generation is under attack from an inevitable rise
in debt costs, while upward pressure on asset yields drives
deleveraging, which erodes EPS further," it says
** MS says capital office yields are lower and implied
loan-to-value ratios are higher in continental Europe, while
shopping centre capital values have not yet corrected as they
have in the UK
** MS upgrades French firm Icade ICAD.PA to "overweight"
from "equal-weight", noting its "healthcare disposal is
transformational from a balance sheet perspective"
** It cuts German housing giant Vonovia VNAn.DE to
"underweight" from "equal-weight" due to the group's recent
dividend proposal, which has "increased the risk for more
impactful balance sheet repair"
** The brokerage retains an "overweight" rating for UK
companies Unite UTG.L , British Land BLND.L , Great Portland
GPEG.L , Landsec LAND.L , Derwent DLN.L and Segro SGRO.L
** Merlin MRL.MC , Cofinimmo COFB.BR , LEG Immobilien
LEGn.DE , CTP CTPNV.AS also remain "overweight"
(Reporting by Anna Mackenzie)
((Anna.mackenzie@thomsonreuters.com))