WOOD Flash – S Immo: 4Q19 – hotels and retail exposure, combined with leverage, spells tough year ahead

S Immo published a short comment on the highlights of its 4Q19 results yesterday (18 March). The 4Q19 numbers were broadly in line. Management is proposing a dividend of EUR 0.7/share for the year (a 5% yield), and also announced a buyback amounting to c.3% of the share capital. The stock – now trading below EUR 14/share – is down 49% over the past two weeks, and is trading at a 50% discount to its YE19 EPRA NAV of EUR 26.5/share. Thanks to the recent timely capital increase (in mid-January, S Immo raised EUR 149m – a 10% increase in the number of shares – priced at EUR 22.25), the company should have a fairly comfortable cash position currently, well north of EUR 200m. We estimate that S Immo is generating around one-fifth of its rental income from residential, and around one-third from office properties. Along with the cash pile, this should provide some stability in the current situation. That said, around half of its earnings are generated by retail properties and hotels, on our estimates. We expect the earnings from both hotels and retail properties to be affected significantly by the current situation. We see downside for our FFO estimate and expect to see sizeable revaluation losses, amplified by the 12% stake S Immo holds in Immofinanz. The recent capital increase limits the risk of a covenant breach, but we would monitor the LTV evolution closely in the coming months.