GTC: Attractive entry point (stays BUY)

Our last call on GTC did not deliver the results we were expecting – since we reiterated our BUY in July last year, the stock is down 7%, having underperformed the WIG Index by 2% over the period. However, the external conditions remain favourable: leasing demand is remarkably strong across the region and there is no sign of yield expansion; on the contrary, realtors see room for further tightening in a number of the markets in which GTC operates. Also, internally, the investment case is on track, in our view, as GTC is not only continuing with its original developments, but has announced several new development projects since our previous update. Upon completion, we estimate that the projects currently under construction and in planning could generate around EUR 70m of additional rental income and well over EUR 100m of revaluation gains. This is without Galeria Wilanow, which we continue to value separately. We believe that the key factor holding the share price back in recent months has been the perceived risk of technical pressure related to the anticipated exit of Lone Star. While, until a deal is announced, a degree of uncertainty remains, we believe the recent dip in the share price has created an excellent opportunity to buy into what remains one of the fastest-growing companies in the European listed real estate universe. We reiterate our BUY rating, and increase our 12M price target (PT) to PLN 11.7/share, offering 31% upside.