WOOD Flash – Globalworth: 1H21 in line with preliminaries, reflecting difficult leasing market backdrop

Globalworth’s 1H21 earnings were weak, in line with what the preliminary results suggested. The CEE office markets remain difficult, on a combination of weak leasing demand and the continuing supply of space. Still, trading at nearly a 30% discount to NAV, we believe Globalworth looks good value at the current levels. Some discount is likely to be appropriate, given the weak liquidity and the low visibility on the future strategic direction, with a potential management and supervisory board reshuffle ahead. However, 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 the 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. In the mid- to long-term we see developments and, potentially, logistics centres acquisitions as the key drivers of upside.