These 2 property stocks are ridiculously cheap
The property sector has faced an uncertain period this year. The impact of Brexit on valuations may have been somewhat modest, but investors seem to be unsure about the future prospects for the sector. This has led to a number of property companies having wide margins of safety, which could signal that they offer good value for money. With that in mind, here are two property-focused stocks which appear to be worth buying right now.
Improving performance
Reporting on Friday was property developer and manager Capital & Counties(LSE: CAPC). It reported that its two central London estates have enjoyed an active start to the year. Its Covent Garden estate now represents two-thirds of revenue and has recorded positive rental and value growth. It has also seen operational progress, with 43 leasing transactions signed during the first half of the year.
Similarly, at the company's Earls Court project, enablement works are on track and it continues to progress plans for the enhanced Masterplan in order to maximise the potential of the land holding. At the company's Lillie Square asset, it has pre-sold over half of the development and the handover of Phase 1 is on schedule to complete by the end of the year.
Capital & Counties remains optimistic about its future prospects. It has a relatively strong balance sheet and low leverage, as well as high liquidity. This should provide a degree of security should the wider sector experience difficulties brought on by an uncertain outlook for the UK economy following Brexit. And with it having a price-to-book (P/B) ratio of just 0.8, it seems to have a sufficiently wide margin of safety to merit investment at the present time.
Income potential
Also offering upside potential in the property sector is real estate investment trust (REIT), Land Securities (LSE: LAND). It has an enviable asset base, with it including prime real estate in London. This could experience a turbulent period because of Brexit, but in the long run it looks likely to appreciate in value as demand for office and retail space in the capital increases.
Land Securities also offers a wide margin of safety. It trades on a P/B ratio of just 0.7. Given the strength of its asset base, this suggests it is dirt cheap at the present time. That's especially the case since the company is forecast to post a rise in its bottom line of 6% in the current year, followed by 4% next year.
This growth potential could provide the company with the means to raise dividends in order to boost what is already a relatively enticing yield. Land Securities currently has an income return of almost 4% and since dividends represent around 78% of profit, they appear to be at an affordable level. This mix of income, value and growth potential could make the stock a worthwhile investment despite the uncertainty which the wider property sector currently faces.
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Peter Stephens owns shares of Land Securities Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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