VGP Preferred Investment in the logistics space
We consider VGP the best investment option in the logistics space. However, we adjust our target price to EUR 125 (from 140). We increase our recurring EPS estimates slightly for FY23, but reduce our estimates for FY24-25. In this note, we have modelled the JV's on a look-through basis and value the consolidated cash flows. The development gains drive NTA appreciation that should also support the share price. The 10m23 trading statement came above our estimates on new developments and completions. As the JV cash recycling restarted and the demand for space remains strong, VGP re-accelerates its development activity. The JV plan with DEKA Immobilien for 20 buildings in Germany is executed as expected. The first closing gross cash income amounted to 461m over 3Q23. The set-up is similar to the previous Allianz JV via 50/50 partnerships that are equity accounted for and also financed by vendor loans (at a lower 30% LTV). We like the focus on the cash return potential as this should put any fears on leverage to bedVGP 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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