So I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I'm hoping to pinpoint the very best buying opportunities in today's uncertain market.
Today, I am looking at Land Securities (LSE: LAND ) to determine whether you should consider buying the shares at 840 pence.
I am assessing each company on several ratios:
- Price/earnings (P/E) ratio: Does the share look like a good value when compared against its competitors?
- Price/earnings-to-growth (PEG) ratio: Does the share look like a good value factoring in predicted growth?
- Yield: Does the share provide a solid income for investors?
- Dividend Cover: Is the dividend sustainable?
So let's look at the numbers:
||3-Yr. EPS Growth
||3-Yr. Dividend Growth
The consensus analyst estimate for next year's earnings per share is 35.3 pence (down 8%) and dividend per share is 29.8 pence (up 3%).
Trading on a projected P/E of 23.8, Land Securities appears slightly cheaper than its peers in the real estate investment trust (REIT) sector, which are currently trading on an average P/E of 24. However, Land Securities' share price is currently 9% below the company's basic net asset value of 922 pence per share taken from Sept. 2012.
Land Securities offers a 3.5% yield, which is about the same as the sector average. However, Land Securities does have a three-year compounded dividend growth rate of only 4%, implying the yield could soon begin to fall behind that of its peers.
Indeed, the dividend is just under one-and-a-half times covered by earnings, giving Land Securities not much room for further payout growth.
Should you buy Land Securities for the discount to its net asset value?
Land Securities is the U.K.'s largest REIT and is composed of two property portfolios.
The larger of the two portfolios is valued at just under 6 billion pounds and consists mainly of offices and shops in central London. I believe this exposure to the fairly resilient London property market has helped Land Securities remain profitable, while other REITs have struggled during the past few years.
That said, Land Securities has not been immune totally from the downturn. In particular, revenue from the company's second portfolio, which is composed of shopping centers and warehouses outside of London, has been hit by falling rents and occupancy rates around the country.
However, Land Securities does have one of the lowest levels of debt among REITs, with the group's loan-to-value ratio at just 36% as of Sept. 2012. Furthermore, its management is committed to keeping debt low by using property disposals to fund acquisitions and developments.
As I say, the majority of Land Securities' property assets are in London, where the property and rental markets look relatively stable. In addition, its management is committed to keeping debt low and maximizing shareholder returns.
And given the discount to book, too, I feel now looks to be a good time to buy Land Securities at 840 pence.
More FTSE opportunities
In addition to Land Securities, I am also positive on the FTSE 100 share highlighted within this exclusive free report. You see, the blue chip in question offers a 5.7% income, its shares might be worth 850 pence compared to about 700 pence now, and it has just been declared "The Motley Fool's Top Income Stock for 2013."
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In the meantime, please stay tuned for my next verdict on a FTSE 100 share.