New Value Analysis of British Land Plc (LSE:BLND) 2018
A new value analysis ofBritish Land Plc (BLND:LSE), a company listed in London has been added to our research pages here. BLND is a property investment and management company and is incorporated as a REIT.
A REIT (Real Estate Investment Trust) in UK pays no corporation tax as long as the company pays out 90% of property income as a dividend to shareholders. This makes the REIT form an excellent way for investors to access property income streams with tax advantages. The REIT structure also means that management are incentivised to pay out 90% of income to shareholders.
This site first offered a value analysis on BLND in March 2015. You can see that analysis here. The 2015 analysis showed BLND passed all the defensive value investor tests. However, the analysis report warned that there was some risk due to the relationship between the price a the time and the underlying earnings number. The price at the time was £8.62 per share and the price was 29 times the underlying earnings. Since the date of the last analysis the share price has declined nearly 50%.
The challenge for investors when looking at REITs is how to treat the reported earnings number in comparison with the underlying earnings number. Underlying earnings removes the effects of changes in the valuation of properties and gives an indication of the underlying profit from renting out properties. The reported earnings includes any revaluations of the property portfolio up or down. In years prior to 2016 there have been some huge changes in property valuations at BLND. The changes in property values had big impacts on reported earnings.
Underlying earnings at BLND have been more consistent than reported earnings. In the last two years the two earnings numbers have converged. At the current lower price BLND looks good in comparison with both reported and underlying earnings. The warning sign from the 2015 report was that the price was 29 times underlying earnings. To see if the current price creates an attractive purchase price for new investors in the common stock of BLND click here to download the new value analysis.