WOOD Flash – GTC: 4Q20 – recurring largely in line, books 6% revaluation loss for the year

GTC reported its 4Q20 results yesterday (23 March). The recurring figures were a touch weaker than our expectations, on a combination of slightly lower rental income and slightly higher overhead costs than we expected. The key difference lies in the revaluation result, where the company booked a lower loss than we had been pencilling in (but the result came in broadly in line with the consensus). The revaluation result for the year totalled 6% of the value of the portfolio, with key write-downs at the retail properties in Poland and Serbia, and offices in Poland and Romania. Thanks to the absence of a dividend from the 2019 profit, the LTV stood at 45%, largely unchanged yoy and below the company’s internal target of 50%. GTC does not plan to distribute dividends from the 2020 profit, which we view as a sensible decision. The stock is inexpensive, having missed out largely on the rerating of its peers. Compared to mid-2020, the stock is down 7% in EUR terms, while the continental real estate stocks (EXUK Index) are up 8% over the same period. GTC is trading currently at nearly a 40% discount to the NAV and a c.10% FFO yield. We see a risk of further revaluation losses ahead, which could be a headwind for the stock, especially considering the fairly high leverage. That said, we see the valuation as fairly attractive at the current levels, as long as the monetary support remains in place. The low free float is a key issue, as it is difficult to build a position in the stock.