Market minnows: Town Centre Securities might be one to watch

2 March 2020

Share price: 212p

Trying to pick tiddlers when the market is in meltdown is a dangerous business.

At the moment there are particular concerns for the small cap stocks as many of the firms were underfunded even before last week’s sharp sell-off. As a result just a partial or temporary shut-down of a factory or a trading route can have devastating consequences for minnows.

With this in mind this week’s tip is a small, unflashy real estate investment trust called Town Centre Securities.

Mainly focused on the North of England, its property portfolio is split between Leeds, Glasgow, Edinburgh, Manchester and a small smattering in London.

Its largest asset is the Merrion Centre in Leeds, which makes up more than a third of the value of the group’s property portfolio.

The asset has managed to defy the retail downturn and over the past 12 months footfall has increased. It also recently renewed tenants, including The Co-op, Dominos, We are Cow, OKA, Greggs and Whittard. Its number one tenant is Morrisons, and its lease runs until 2040.

The only major issue remains the company’s debt, which is high at £182 million. Nevertheless it is working hard to reduce the level and its loan-to-value measure is at 49%, which means the debts are half the value of the property.

The firm should also benefit from the Tories’ pledge to spend £80 billion on infrastructure in the North. The Conservative manifesto included measures to boost Northern towns as well as road and rail schemes.

Let’s see what new Chancellor Rishi Sunak comes up with in the Budget.

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