Immofinanz: CPI offer is attractive (downgraded to SELL)

We see CPI’s bid for Immofinanz as attractively priced, and believe that investors should use the opportunity to tender their shares into the offer. We expect a strong take-up, and believe the trading volume of the shares could fall significantly after the offer expires. While the discount to book (a P/NRV of 0.76x) could seem wide, the offer implies around a 4% FFO yield. We see the earnings multiple as generous, especially against the backdrop of the recent market-wide sell-off, and Immofinanz’s exposure to both CEE (c.80% of rental income) and retail (over 50% of rental income). The FFO could increase, going forward, driven by the indexation of rents, cost efficiencies, developments and the expansion of the retail park portfolio, and entry into the resi for rent market. Real estate may perform well in the inflationary environment over the long run, especially if the ECB’s key rates do not exceed the levels of around 0.5-1.0% the consensus is pricing in currently. That said, we cannot rule out a more hawkish pivot by the ECB. Even without one, however, the near-term outlook could be difficult. The coming sharp slowdown of economic growth across the EU is likely to weigh on consumer spending and office leasing demand. The change of control event also forced Immofinanz to spend part of its liquid reserves on bond repurchases, which could limit its ability to grow its portfolio, and expose it to a higher cost of financing sooner than its peers. We have downgraded Immofinanz to SELL (from Hold), setting our new 12M PT price target (PT) at EUR 16/share.