WOOD Flash – GTC: 3Q16 – strong results, set for an eventful 2017E

GTC reported a strong set of 3Q16 results yesterday, exceeding our expectations on both the top line and FFO. The FFO amounted to EUR 33m for 9M16, up 14% yoy, and EUR 44m on an annualised basis (10% above our full-year forecast). The strong performance was driven by additions to the portfolio, along with a continuing decline in financing costs. On the current share price, the annualised FFO translates into a 5.2% yield. The EPRA NAV amounted to EUR 837m, or EUR 1.82/share (PLN 8.0/share, at the current EUR/PLN), valuing GTC a touch above NAV.
So far, 2016 has proven to be a very busy year for GTC. The company has purchased five standing offices for EUR 152m, disposed all of its remaining non-core standing assets and a number of land plots, completed the construction of two offices, issued bonds and refinanced several properties. 2017E looks set to be at least equally as dynamic, in our view, with a number of assets scheduled for completion, including Galeria Polnocna, the flagship Warsaw shopping mall. We also expect to see a decision on Galeria Wilanow at some point in the first half of next year. Management is mulling over another capital increase, to help fund its expansion. On top of this, 2017E may bring the introduction of a regular dividend. Along with the launch of several new development projects, many of which were introduced during the 2Q and 3Q16 conference calls, GTC’s growth story (we had pencilled in an 11% FFO CAGR between 2016E and 2018E in our June update; this is without accounting for any upside from project construction that had not been initiated on by then), looks as if it will continue to remain in focus in the quarters to come, in our view.