FREE

The strategy remains unchanged

The strategy remains unchanged.

Colonial held yesterday its investor day in Barcelona. The company provided a guidance of gross rental income (GRI) 2017e above €279mn, and 2-2.5% dividend yield. In addition, it quantified the capex program in €295mn for the period 2017-2022 and the acquisitions program in €300mn per annum, by prioritizing value added opportunities. On top of that, the company announced yesterday a share buyback program of €100mn to be carried out within the next six months.

Management expects to maintain its loan to value (LTV) below 40% in order to keep the current rating and will try to extend maturities and to reduce cost of debt by issuing bonds. The company said that it will continue to sell mature assets, but it did not provide any details on that.

Regarding Axiare, Colonial did not say anything new. The strategy for the moment is to wait and see.

Finally, Colonial’s management team said that the Barcelona portfolio, which represents c.18% on NAV (a total of €8.07bn), has strong fundamentals, and that the downside risk of short term maturities is irrelevant. Only 5.3% of its rental contracts in Barcelona mature within the next 18 months.

We maintain our Sell recommendation.

The guidance provided by the company is totally in line with our estimates with a GRI 2017e of €301mn 2017e and a dividend yield of 2.1% in 2018e and 2.6% in 2019e. We do not rule out that the company increases its risk profile by acquiring pricey assets, due to the scarcity of buying opportunities. In addition, Colonial is trading above our valuation (€7.38/share). We maintain our Sell recommendation.