GTC: Gonna be a brighter day (upgraded to BUY)
We have upgraded GTC to BUY (from Hold), increasing our 12M price target (PT) to PLN 7.7/share, offering 21% upside. GTC largely missed out on the rerating of the European real estate stocks, which has taken place over the past six months. It is trading currently at nearly a 40% discount to the 2020 year-end NAV. Assuming that the restrictions on non-essential stores are lifted for good by the end of this year, we believe the FFO should increase to around EUR 75m in 2022E, from EUR 66m in 2020. At the current share price, this would value GTC at around an 11-12% FFO yield. While we appreciate that we may not be out of the woods yet, we see this as too cheap. Two-thirds of GTC’s rental income is generated by offices, and European office landlords are trading at FFO yields of 3-7%. We see a risk of further revaluation losses throughout this year, which could be a headwind for the stock. That said, at its current valuation, we believe GTC is pricing in a fairly challenging outlook already. We believe an improvement in liquidity would go a long way towards making the story attractive to a wider range of investors.Globe Trade Centre is the parent company of the capital group, Globe Trade Centre (the Group). The Group is engaged in the development and rental of office and retail space and the development and sale of residential units. The Group is a real estate company in Central and Eastern Europe and South-eastern Europe, operating in Poland, Romania, Hungary, Croatia, Serbia, Bulgaria, and Slovakia. Additionally, it co-owns land in Ukraine and Russia and operates in the Czech Republic. The Group's portfolio comprises: completed office buildings and office parks as well as retail and entertainment centres; residential projects; and undeveloped plots of land and suspended projects.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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