2019 has proved to be a rocky ride for investors in Land Securities Group (LSE: LAND).
During a serious share price fall that lasted from late spring to late summer, the property play slumped to its cheapest since 2012 as market makers fretted over the dual problems of falling consumer confidence and the inexorable rise of e-commerce, problems that have seen the number of bricks-and-mortar shops going out of business ballooning of late.
That said, 2019 on the whole has proved a successful one for Landsec’s share price. It’s up 17% since the turn of last January, the recovery that set in around mid-August being turbocharged more recently by the UK sidestepping the no-deal trapdoor at the end of October.
Retail redemptions rise
But can the FTSE 100 firm continue to attract significant buyer interest in 2020? It’s not outside the realms of possibility. Noted economist John Maynard Keynes famously said that “markets can stay irrational longer than you can stay solvent,” a sentiment that (in my opinion at least) explains why Landsec has risen despite a litany of poor trading updates this year.
That said, I’m confident enough to suggest that the shopping centre operator is in huge danger of seeing its share price resume its long-term downtrend in 2020. News this week that M&G has suspended its Property Portfolio fund on account of “unusually high outflows” indicates how nervousness over the health of Britain’s retailers is growing.
And if you think that M&G is alone in this, well think again. The Financial Times has just reported that the Aberdeen UK Property fund of Standard Life Aberdeen has been hit by a sea of withdrawals following the aforementioned suspension, with redemptions hitting £31m on Wednesday, levels that were equal to those of the previous four months combined.
Are big dividends enough?
There certainly appears to be no respite for Landsec as we move into 2020. In November’s half-year financials, it declared that “the retail market continues to be challenged as retailers adapt to structural change, rising costs and a more cautious consumer,” and announced that it had swung to a £147m pre-tax loss in the six months to September from a £42m profit a year earlier.
No wonder City analysts expect the Footsie firm’s long record of annual earnings increases to grind to a halt in the current fiscal year (to March 2020). In fact, a 1% bottom-line drop is currently forecast, and consensus suggests that things will get worse in the following year, a 3% decline being touted right now.
Despite this, though, Landsec still trades on a forward P/E ratio of 16 times, one which I consider to be too high given the high chance of analysts’ estimates being hacked back in the weeks and months ahead. Not even a chunky 5% corresponding dividend yield is enough to encourage me to invest. The property business has been defying gravity of late but I fully expect it to fall to earth with a bang sooner rather than later.
