The stock market crash has thrown up plenty of FTSE 100 bargains. This makes now a great time to go hunting for shares, because you can pick up top UK companies at bargain valuations. Commercial property giant British Land (LSE: BLND) has taken a beating, but looks a tempting long-term buy to me.
The FTSE 100 property developer and investment company’s share price is up more than 6% this morning on better-than-anticipated full-year results. It looks a real bargain, as the estimated value of its office blocks, shopping centres and residential developments are around twice the actual share price.
Stock market crash bargain
British Land is under a three-pronged attack. Investors fear the rise of homeworking will hit demand for office space. They worry about the impact of the lockdown on physical retail. The fate of the residential property market is also uncertain.
Today’s results show the value of its portfolio falling 10% to £11.16bn in the year to 31 March, with retail sites down by a quarter. The group posted a £1.11bn loss after tax, but was struggling even before the stock market crash. Last year, it lost £320m.
Chief executive Chris Grigg admitted the trend towards flexible work may accelerate. However, potential customers are carrying out virtual viewings, and the group is “encouraged by negotiations.” Retail will be more of a struggle. British Land collected just 68% of March rent, a healthy 97% for offices, but just 43% for retail.
With luck, a large chunk of that unpaid rent has been deferred rather than lost for good. The danger is that tenants go bust as the stock market crash rolls on. However, British Land enjoys significant headroom over its covenants, and has access to plentiful liquidity.
The group suspended its dividend in the stock market crash to conserve cash. Today, management said it would restart payouts “as soon as there is sufficient clarity of outlook.” That’s a vague promise, but at least the board’s showing willing.
I’d buy FTSE 100 bargain British Land today
The advantage of having a widely-diversified portfolio is that some areas may hold up while others struggle. This is the case here, with rental collection and valuations at central London offices surprisingly positive. Also, I suspect the trend towards homeworking may have been overdone, as workers want to get out of the house again.
The big attraction of British Land is that the share price has fallen much faster than the value of its underlying assets. Right now, this real estate investment trust (Reit) is trading at a discount of 55% to net asset value. That’s why we like buying shares in a stock market crash. It throws up opportunities like this one.
It’ll be a bumpy road to recovery, so you’ll need to hang on for the long term. With that in mind, I’d consider buying British Land today.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.