Citi has upgraded shares of Hammerson Plc (LON:HMSO: LN) (OTC: HMSNF), a UK-based property development and investment company, from Neutral to Buy.
The firm also increased the price target for Hammerson to GBP0.43, up from the previous GBP0.26. This adjustment reflects Citi's positive outlook on the company's future growth prospects, particularly after the sale of its Value Retail business.
The upgrade comes with a reassessment of Hammerson's potential in the context of the real estate market. Citi believes that the company is set to benefit from an emerging positive cycle in real estate, which is expected to see an increase in shopping centre asset values and rents.
The firm's analysis suggests that Hammerson's net asset value (NAV) and earnings per share (EPS) are likely to rise, which has led to the raised price target and upgraded stock rating.
Citi's analyst pointed out that Hammerson's shares are currently trading at a significant discount when compared to past growth cycles.
By applying historical growth cycle multiples to their revised estimates, Citi anticipates a valuation corridor for Hammerson's shares between GBP0.43 and GBP0.76. This represents a substantial upside potential and underpins the firm's decision to recommend a Buy rating for the stock.
The analyst's statement emphasized the expected growth for Hammerson, particularly highlighting the potential for asset values and rents to grow from a low base.
The optimism is rooted in the belief that a new positive real estate cycle is on the horizon, which could significantly benefit Hammerson's financial performance.
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