(Bloomberg) — Land and property regenerator Harworth Group Plc is “one of the best kept secrets in UK real estate,” according to a Janus Henderson analyst who says the stock offers artificial intelligence exposure.
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Harworth last month completed the sale of a plot of land in Leeds, England to a subsidiary of Microsoft Corp. which plans to develop the site into a hyperscale data centre. The sale of a second plot of land is targeted for the first half of next year.
“Developable land is scarce and few have the foresight and expertise to take unusable industrial land and produce suitable land for development,” equities analyst Tom Foster said in a presentation at the Janus Henderson UK Investment Conference on Wednesday, calling the firm “unique.”
Microsoft will eventually pay about £106 million ($129 million) for the two adjoining parcels of land once the second part of the deal is completed, according to a company statement last month. Harworth had purchased the former power station site for about £3 million in 2014. The UK company sees its investment generating an internal rate of return of more than 40%.
A shortage of suitable sites that can handle the massive power requirements of data centers has turbo-charged the value of land appropriate for their development. That has prompted demand for previously-used properties or plots intended for office or industrial use, that could be redeveloped as data centers — allowing them to capture a higher land value.
Janus Henderson’s Foster sees UK-based Harworth having more sites similar to what it sold to Microsoft in its land bank.
Bloomberg News has reached out to Harworth for comment.
All three analysts tracked by Bloomberg have a buy recommendation or equivalent on Harworth. Its shares have risen more than 30% over the past 12 months, pushing its market capitalization to around £540 million.
Still, the stock is trading at about 5.5 times expected earnings, making it more than 60% cheaper than the UK FTSE 350 Real Estate Index, according to data compiled by Bloomberg.
The stock offers both value and growth, while also being a “bargain,” Foster said.
–With assistance from Jack Sidders.
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