The disposal of healthcare on very good terms - HOLD vs SELL - TP 103,5€
The disposal of the Gecimed portfolio for a consideration that is 16% above appraisals is proof enough of the continuing heat in the property investment market. That combined with the expectations of yield compression for Parisian offices will drive 2015 NAV considerably higher. There will however be some (2017) earnings dilution given the rental yield of the assets sold (5.9%, pre-transfer) and the average cost of associated debt (2.7%). Shorter term, the risk profile is improved with an end 2016 LTV of 33.6% (e). Our TP is €103.5/share and we raise the recommendation to NEUTRAL from SELL. The valuation is high but less excessively so at the current price. The premium over last published NAV is 4.8% versus a discount of 12% of its peers. The earnings (FFO) multiple is 19x (2016) vs 14.7x for peers. The dividend yield is 4.5% vs 5.3% for the peer group.Gecina is a rental real estate company. Co.'s purpose is to operate individual rental properties or group of properties located mainly in France. Co.'s properties include commercial assets (offices and retail outlets), residential assets, logistics assets, hotels and healthcare facilities. Co. is organized around two main sectors and one ancillary segment: Economic sector comprising the commercial segment (offices and retail outlets), the portfolio of logistics properties and of hotel buildings; Demographic sector comprising traditional residential units (housing units property holding), portfolio of students residences and of healthcare facilities; Ancilary segment of real estate services.
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