VGP 10m22 update, rational strategy, focus on cash generation
VGP reported its 10m update ahead of its original schedule (18/11) as the stock has drifted on uncertainty. The new developments remain relatively slow, but completions track ahead of our expectations. Last year, VGP's 10m trading statement showed strong growth in in all its aspects and set off a stock rally. Over 1H22, it rationalized its development program and was punished for it. The stock subsequently collapsed after it delayed the 4th JV closing. We acknowledge the risk of an economic recession in Europe, but don't expect a funding crisis. VGP expects 58m of FY22 profit contribution from the JV, 44m of additional rent from its own portfolio within a year, 7% rent increase from indexation and other recurrent income to guarantee a stable dividend. Over the longer term, we believe that logistic developers benefit from trends like near-shoring, ESG and e-commerce (CEE). We expect JV closings with Allianz to return in larger numbers as soon as the panic in the market subsides and exit yields determined. Central banks are now compensating for their past irrational behaviour, while VGP has been punished (not rewarded) for becoming more rational in their strategy.VGP NV is a Belgium-based real estate development company that constructs and develops industrial real estate and ancillary offices, which are rented out to clients on long term lease contracts. The Company operates in three business segments: the Development activities segment is focused on the identification and acquisition of the land and development of the infrastructure, the design of buildings, the coordination of architectural and engineering aspects, the administration to obtain the necessary permits, the tendering and coordination of the construction works, including site management, and the facility management of the real estate portfolio; the Property Management and Leasing services segment is responsible for managing the operation of the buildings, and the Facilities Management services segment is responsible for managing the operation of the buildings and performs all actions, such as maintenance services, waste management services and maintenance greenery, among others.
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