South African investors who bought Hammerson shares when the rand hedge counter made its JSE debut almost a decade ago, amid great fanfare, no doubt felt short-changed for a long time.
At that stage, Hammerson — one of the top retail property players in the UK and Western Europe — was the JSE’s largest property stock and widely punted as a prime rand hedge. By 2017/2018, its market cap touched R100bn. But its glory days were short-lived. Five years later, its value had shrunk to less than R30bn.
The shopping centre owner, like most of its retail-focused peers, was hit by several headwinds: the relentless rise of e-commerce, pandemic-induced store closures and tenant insolvencies, all of which led to higher vacancies, falling rentals and excessive valuation write-downs. A prolonged period of share price weakness followed while the company embarked on an extensive asset disposal and restructuring programme to streamline the business and pay down debt.
An important turning point came in late 2024 when Hammerson sold its stake in luxury outlet operator, Value Retail, for about £600m in cash. This went a long way to shoring up the balance sheet and luring investors back.
Hammerson’s share price has rallied nearly 40% since. Late last week it breached R81 for the first time in more than four years after management announced the sale of another £69m of noncore assets in Ireland, bringing the year-to-date disposals to £75m. The market cap is now touching R43bn.
CEO Rob Wilkinson, who took over the reins from Rita-Rose Gagné in January, says proceeds from this year’s disposals will allow Hammerson to invest in new opportunities at attractive yields. A case in point is the recent acquisition of the remaining 50% of Ilac, a landmark retail destination in Dublin’s city centre, that Hammerson didn’t already own.
The latest deals come on the back of what ClucasGray portfolio manager Brendon Hubbard describes as a period of “significant transformation”.
He says that after a five-year reset, the internal restructuring is now largely complete. Hammerson has repaid most of its debt and sold noncore properties, leaving it with a core portfolio of 10 assets, all sized between 60,000m² and 120,000m². These are dominant, retail-led city-centre destinations in high foot count areas in major cities across Britain (London, Birmingham, Bristol, Reading and Southampton), Ireland (Dublin) and France (Paris and Marseille).
Hubbard says these are prime assets, “similar in quality to a Sandton City”. He adds that much has also been achieved in the past 18 months to reposition Hammerson’s existing assets for growth. “Outdated retail space has been replaced with new dining, social, leisure and entertainment venues to future-proof foot count against the rise in online shopping.”
The company will also unlock further growth through property development opportunities that are closely tied to existing assets. Hubbard refers to extension and redevelopment plans at, among others, Dublin Central, Bishopsgate Goodsyard in London, Bristol Broadmead, Dundrum Village and Martineau Galleries in Birmingham where Hammerson is planning a mixed-use combination of retail, workspace, housing and hotels.
He believes Hammerson is well placed to grow earnings off a new base. Management expects like-for-like net rental income growth of 4%-5% for the year to December, which should translate into earnings growth of 15%. Given that the share price has already rebounded sharply since its 2024 lows, Hubbard believes the easy money has probably been made. Still, if you’re looking for exposure to one of the best-quality retail portfolios in the UK, Ireland and France, he says Hammerson should be on your radar. “It offers a solid, hard currency income stream and potential for further NAV uplift.”
UK-based analysts agree. Peel Hunt and Goodbody Analytics both have a buy recommendation on Hammerson, with the latter citing any potential share price weakness as “an attractive entry point”. In a recent research note on Hammerson, Peel Hunt upgraded its target share price (LSE) from 350p to 400p. The stock was trading at 372p last week.
The note reads: “There is clear momentum in the business now, and further growth should provide additional tailwinds to our 10% per annum return outlook.”