Hammerson (LSE: HMSO) is a penny stock that has rallied since the beginning of the year. The share price is up over 55% so far in 2021 but has only increased by almost 5% during the last 12 months.
This means that most of the rally has occurred this year. And I reckon it could continue, especially with today being ‘Freedom Day’. The easing of most Covid-19 restrictions in England should bode well for this stock. I’ve been bullish on Hammerson before and would still snap up the shares now.
Things have been improving for the company so far. In fact, it issued a short but sweet operational and rent collection update last week. Let’s not forget that Hammerson is a shopping centre landlord and is relying on people visiting its sites.
I find it reassuring that the firm has stated that footfall trends in all its territories remain encouraging. To quantity, Hammerson said seven-day averages have been “sitting at around 70-80% of 2019 levels, following an initial spike on reopening”. And “many retailers continue to report high sales and conversion rates as visitors shop with purpose”.
With lockdown restrictions easing further, I reckon the number of people to its shopping centres could improve further and especially over the summer months. Consumers are likely to opt to eat out and socialise. And Hammerson is in a prime position to capitalise on this.
In terms of rent collection, things are also improving. The company has managed to collect 89% of billable rents in its 2020 financial year. The last 18 months have been challenging for the landlord, but this figure indicates it hasn’t been all doom and gloom for commercial property. There’s light at the end of the tunnel, which should help the stock rise higher.
It also announced that it has collected 68% of its rent for the first half of 2021 and 62% for its current financial year so far. Again, I’m encouraged by this news. Rent collections should continue to improve for Hammerson as remaining Covid-19 restrictions are eased. It has assured investors that its doesn’t “anticipate granting future concessions and all avenues to collect rents due are being pursued”.
I’d buy the penny stock. I feel the company is taking the right steps and the lifting of remaining restrictions should act as a tailwind. Clearly, Hammerson has been a victim of the pandemic and I wonder what it will do with its vacant units. It needs to find new tenants. But how easy this will be and what type of businesses it can attract after a number of retailers failed during the pandemic are big questions.
But it could follow what John Lewis and other property giants are doing and convert empty space into housing or offices. Or it could attract more leisure tenants. I guess I’ll have to wait and see what happens.
This stock does come with risks. As I mentioned, the number of Covid-19 cases are increasing in the UK so there could be another lockdown. This wouldn’t bode well for Hammerson as it would reduce footfall and may impact rent collection. Also, there’s no guarantee that conditions will continue to improve once restrictions are fully lifted.
Despite these concerns, I reckon the shares could push higher. Hence, I’d buy now.
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Nadia Yaqub has no position in any of the shares mentioned. 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.