WOOD Flash – Immofinanz: 2Q21 – revaluation gain, higher DPS, retail in Italy and plans to enter resi for rent
Immofinanz’s recurring 2Q21 was broadly in line with our estimates, but we were surprised positively by the revaluation gain, as well as the decision to increase the dividend to EUR 0.75/share, up from the originally proposed EUR 0.55/share. While the occupancy in offices is under pressure, there was an encouraging improvement in the sales of the retail tenants. Following the recently-announced decision to expand its STOP.SHOP network to Italy, Immofinanz announced another, potentially very significant initiative: to overbuild the single storey STOP.SHOP retail parks with residential, potentially creating up to 12k rental apartments over c.70 STOP.SHOPs in the coming years, via modular construction. Even though it would take at least three-to-five years before we would see tangible rental income from this venture, we see this as a laudable initiative from management and a move in the right direction for the company. There was no update on the S Immo stake, and management said that it is keeping all its options open. There was also no communication from the Board, according to our knowledge, following the resignation of Mr. Pecik as CEO. We do not know whether the Board is searching actively for candidates currently, or whether the company will continue to be steered by the existing management duo, Messrs Reindl and Schoenauer. The key question, we believe, pertains to the ownership situation, and its evolution going forward. Currently, there are three key shareholders – S Immo, with approximately a 13% stake, and Mr. Korbacka and Mr. Vitek, with c.10% stakes each. Considering that Mr. Vitek’s father is the founder and owner of CPI, the largest property group in CEE, which has recently, jointly with Aroundtown, gained control of Globalworth, we see a number of potential options on how the situation could play out. While an offer for the shares cannot be ruled out, trading at a c.3.8% FFO I yield on our 2021E, the stock is expensive, especially considering that half of the earnings are generated by the retail portfolio, and its retail real estate peers in Europe trade at double the FFO yield.Immofinanz AG is an Austria-based real estate company that invests in commercial properties. The Company's core activities are the management and development of retail and office properties in selected Central and Eastern European countries. The Company focuses its operations on such markets as Austria, Germany, the Czech Republic, Slovakia, Hungary, Slovenia, Romania and Poland. The Company manages a portfolio of approximately 240 properties, covering rentable space of approximately 1.8 million square meters. In the office sector, the Company concentrates on the capital cities of the core countries and the major office locations in Germany with its international myhive brand. The Company's activities in the retail sector are based on the brands STOP SHOP for retail parks and VIVO! for shopping centers which are designed for secondary and tertiary cities of Central and Eastern Europe.
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