WOOD Flash – Graphisoft Park: 4Q21 – stable results, guidance increased slightly, DPS proposal implies 4% yield

Graphisoft Park’s 4Q21 results were largely in line with our estimates. We maintain our positive view on the stock, which – at around an 11% FFO yield and 0.7x P/NAV – continues to rank among the cheapest real estate names in Europe. The Southern Area of the Park offers development potential of around 24k sqm GLA. The Northern Part, pending decontamination, could accommodate an additional 40k sqm. The development of the new premises could increase the area of the Park from the current 82k to 106k, or to c.150k sqm GLA, potentially, c.30% and 80% increases vs. today, respectively. If Graphisoft reverts to paying out 90% of its pro-forma profit (c.40-45% of its FFO, a 4-5% yield), the retained earnings should be sufficient to finance the gradual development of additional buildings, without pushing the leverage up materially. If the entire Southern Area (24k sqm) is developed over the next four years, the FFO could increase from around EUR 12m to c.EUR 15-16m by 2025E (a 14-15% FFO yield, a c.5-7% CAGR). In the absence of launching new developments, we see capacity for around 70-80% of the FFO to be paid out, which would translate into a dividend yield of around 7-8%. With its compact portfolio, Graphisoft could be an attractive acquisition target, in our view. However, even in the absence of a bid, we believe that the developments, or what could be a relatively generous dividend yield in their absence, could help drive further upside.