Atrium: Steady as she goes (stays HOLD)

Atrium has sold over 100 non-core standing assets since 2013. The value of the non-core land reserves has also declined substantially, from 16% of NAV in 2012 to 7% in 2017. We believe the repositioning is likely to continue, driven by additional divestments (in Poland or Romania), as well as the completion of the four ongoing developments in Poland. Combined with lower overheads, driven by lower legal costs and general cost-cutting initiatives, this should drive c.4% annual FFO I growth between 2017-21E, on our estimates. We expect FFO I to reach EUR 130m by 2020-21E, while we see Atrium generating around 6-7% FFO RONAV throughout our forecast horizon, in line with companies like Klepierre or Unibail-Rodamco. We believe that much of this transformation has been reflected in the share price already, however. Atrium has generated a c.20% total return over the past 12 months (LTM), while the continental-listed retailers have lost 6%, on average, over the same period. This outperformance has closed the relative valuation gap: we see Atrium trading at a 7.8% 2018E FFO yield, while most of its retail peers trade at a c.7-8% yield, on consensus estimates. As such, Atrium is no longer as compelling on a relative basis. As sourcing acquisitions remains difficult (hence the special dividend) and, given that the recent geopolitical turbulence may prompt further RUB weakness, we do not see many triggers to prompt a rerating in the short term. As such, we maintain our HOLD rating, while we adjust our price target (PT) to EUR 4.14/share (from EUR 4.57).