Thursday tips round-up: British Land, Barratt Developments, ICAP

14th Nov 2013 07:38

British Land is preparing the ground work for the day when interest rates begin to rise in the UK. It has cut its average cost of debt to 4.2 per cent from 4.6 per cent and three quarters of it is now fixed for the next five years, slightly more than usual. Furthermore, it has been gradually shifting its portfolio. The company has been using the proceeds of disposals and a 500m-pound placing in March to buy offices in London - principally the West End - and a selection of retail locations. More spending is to come. The latest evidence suggests it is making the right choices. Net asset value rose 4.5% in the first half of the year, against a 3.8% improvement at rival Land Securities. Fact is, the company's share price did well during the last period of rising UK interest rates between 2003 and 2007. However, it fell 15% the year before rates started going up in July 2003, the Financial Times' Lex column points out. Housebuilder Barratt Developments, like peer Redrow, is going for growth, rather than shovelling cash out to investors, by building up its land banks. The company aims to complete 16,000 homes in 2016, up from 13,500 this year. Only then will additional returns to shareholders be considered. Like others in the industry, it is still trading out of land bought at high prices before the crisis, which will continue to improve margins. That will provide the impetus for further strong growth as is evident in the share price's performance. As well, its long-term supply agreements mean that for the time being it is shielded from the rising prices of materials, although it does face wage inflation for contractors, much like the rest of the industry. The stock trades on about 1.3 times net asset value, which looks hefty even if it is not atypical for the sector. Nevertheless, The Times' Tempus has doubts about how much longer such runaway share price growth for the sector can continue, but it shows no signs of stopping for now, so hold, it says. ICAP may be one company which stands to gain from a change in the interest rate environment, as market participants may again see a need to hedge against changes. The company has also been busy transforming itself, moving further into more profitable electronic broking and post-trade services that are, by their nature, more reliable, if less exciting, than the original voice broking business. Also to take into account is the fact that Wednesday's interim figures were held back by regulatory changes and the need to set up a regulated electronic programme in the US. However, those same regulatory changes have left ICAP in a commanding position in many markets.?Then there is the decision, also out on Wednesday, by Michael Spencer, the company's Chief Executive, to buy half a million more shares in the interdealer broker he founded. Follow the money, Tempus says. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB