WOOD Flash – Immofinanz: 2Q16 – NAV slides further

Immofinanz has reported another set of weak results for 2Q16. While there has been some positive momentum in some of the cost lines (with lower property expenses, driven by lower taxes and declining vacancy costs), the underlying FFO was still very low (if we annualise the FFO I reported by Immofinanz, we get a c1.6% yield on the current share price), as Russia and, to a degree, office vacancy, still continued to weigh on the top line. While the resulting poor profitability was widely expected, Immofinanz has booked a EUR 104m FX-adjusted revaluation loss on its investment properties, driven predominantly by its Moscow assets. This exceeded our estimate somewhat (we were pencilling in a EUR 75m write-off in Russia, offset by c.EUR 25m of positive revaluations elsewhere). Together with a loss of EUR 88m booked under the other financial result (attributable mainly to the mark-to-market valuation of CA Immo shares, which generated a loss of EUR 106m during the quarter), this has pushed Immofinanz’s EPRA NAV to EUR 3.14/share (from EUR 3.41/share last quarter and EUR 4.18/share at the end of 2Q15/16, down 8% qoq and 25% yoy). While we were expecting the NAV to drop slightly, the magnitude has surpassed our expectations. Considering that our net income estimate (-EUR 147m vs. the actual figure of -EUR 187m) was the lowest of the consensus (the other two estimates were -EUR 25m and EUR 9m), we doubt that the market was looking for a NAV drop of this magnitude. We expect a negative market reaction today.