Globalworth: Headwinds priced in, bid could drive upside (upgraded to BUY)

Since our downgrade to a HOLD in July 2021, after the EUR 7/share takeover offer period closed, Globalworth’s shares have declined some 13%. CPI and Aroundtown now jointly hold a c.60% stake. With the additional c.30% held by Growthpoint, the liquidity is predictably weak. The CEE office markets remain difficult, on a combination of weak leasing demand and the continuing supply of space. At 0.78x P/B and a 5.3% FFO yield on our 2021E, it seems that the headwinds are largely priced in, and Globalworth looks good value at the current levels, in our view. Some discount is likely to be appropriate, given the weak liquidity and low visibility on the future strategic direction, with a potential management and supervisory board reshuffle ahead. That said, with rents still not above the 2007-08 levels, CEE offices are the cheapest they have ever been (relative to salaries), and we believe the market vacancy levels could stabilise next year; while expansion in the attractive logistics segment, via acquisitions and own developments, could drive FFO growth in the near- to mid-term. We believe the key near-term upside trigger would be a new takeover offer, if CPI and Aroundtown bid to take the company private. Even at the former level of EUR 7.0/share, investors would stand to make some 16% from the current levels, potentially. While we have moderated our forecasts slightly in the wake of the 1H21 earnings, following the share price weakness, we have upgraded Globalworth to BUY, setting our new 12M price target (PT) at EUR 7.6/share.