VGP When the going gets tough, the tough can raise money
We remove our suspended rating after the closing of the EUR 302.9m rights issue at 55.50 per share. We reinstate a Buy rating with a new price target of EUR 150 (215), partly on the dilution effect of the issue, but also our expectation that the previous growth premium might not return over the next 12-18 months as sentiment has soured. The company took a rational decision to suspend a large 4th Allianz JV closing until pricing becomes more transparent. The market reacted by eradicating the future development gains in the valuation and now applies a 22% discount to NTA for potential yield expansion impact. We have halved our expectations for asset transfers over the next 5 years. Our development expectations and debt repayments can be met without new equity while maintaining a gearing below 40%. We expect VGP consolidated gearing to amount to 30.3% at FY22 end and the LTV ratio for the combined JV's to amount to 44.5%. Both are well within covenants of 65% and 75% respectively and can withstand a significant yield expansion impact. Our target of EUR 150 equals to 16.3x EPS23 and a 51% premium to NTA (98.7). Over the last 5 years, VGP traded at a premium between 80-170% to NTA. We also switched our reporting to a REIT model to emphasise the own standing assets and cash returns. We forecast a EUR 3.00 dividend over FY22 that could increase gradually to 3.82 by FY25.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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