EUR 450.00 For Business Accounts Only

Capital Park Offer price below NAV

We maintain our BUY recommendation and increase our FV by 6% to PLN 8.99
from PLN 8.50 on a higher valuation of investment properties and weaker PLN
vs EUR. In 2Q19, Capital Park reported positive revaluation in Fabryka Norblina
of PLN 60m due to development and commercialization of the project and a
PLN 35m rise in Eurocentrum Hotel & Residence based on the preliminary
disposal agreement, though the buyer pulled out of the deal on 20 September.
Given a weakening of PLN vs USD at end-3Q19 (4.37x vs. 4.25x at end-2Q19),
we expect further positive revaluation of investment properties of ca. PLN 50m
and a loss on the measurement of financial liabilities of nearly PLN 32m in
3Q19. Additionally, on 25 September, Capital Park signed a letter of intent
regarding the disposal of 100% of shares in Eurocentrum Office Complex (BV
of PLN 906m as of end-2Q19). On 8 October, Townsend Holding, a subsidiary
of Madison International, launched a tender offer for 36.8m shares of Capital
Park (34% of total) in order to increase its stake to 100%. Based on our
forecasts, the company is trading at a P/BV of 0.62x in 2019 and 0.60x in 2020,
with a 40% discount to its 2Q19 NAV.
Tender price at 40% discount to 2Q19 NAV per share
On 8 October, Townsend Holding, a subsidiary of Madison International, launched a
tender offer for 36.8m Capital Park shares, equal to 34% of the share capital. This
would allow it to increase its stake to 100% from 66%. The tender price is PLN 5.84
per share, implying a 35% discount to CPG’s 2Q19 BVPS. We highlight that the
NAV of income-generating assets amounts to PLN 6.59 per share (PLN 3.75/share
of Eurocentrum Office Complex and PLN 1.72/share of Royal Wilanów) and the
company has the Fabryka Norblina project under construction.