Warehouses De Pauw Indexing and investments drive profits, upgrade to Accumulate
WDP's 2Q22 results beat our expectations on accelerated indexing. EPRA EPS came at EUR 0.33 vs. 0.29 expected. LfL rental growth accelerated to 4% as leases are indexed on the anniversary of the agreements. FY22 EPRA EPS guidance is raised from 1.20 to 1.25. We raise our EPRA EPS estimates for FY22-24, based on higher Gross Rental Income from indexing and higher investments. The premium to NTA now amounts to 42% vs. 108% at FY21 end. We raise our rating to Accumulate from Hold as we believe the share price has over-reacted to recession fears. However, we cut our target price from EUR 40.0 to 37.5 to reflect the impact from higher interest rates on future cash flows. Our Wacc increases from 3.4% to 3.8%, which more than compensates for the higher NOPAT. Rising construction costs will also impact yields over time.Warehouses De Pauw and its subsidiaries are engaged in investment in the Belgian semi-industrial property market. Co. is a closed-end property investment company which specializes in: development of storage and distribution premises; customized projects in line with the user's request; acquiring premises for customers who wish to engage in sale and leaseback transactions.
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