WOOD Flash – CA Immo: 4Q17 – strong quarter tops off a successful year, guidance suggests upside for our forecasts

The strong set of 4Q17E results and the new FFO guidance suggest there may be upside for our forecasts. The merger ratio risk, for the time being, seems to be gone. The equity ratio stood at 50% as of the year-end, despite a c.11% increase in total assets. The company targets an equity ratio in the range of 45-50%, meaning that the capacity to finance the development pipeline remains substantial. Having continued to work on the optimisation of its financing structure (c.6Y average maturity, at a c.1.9% average cost, with c.80-90% fixed or hedged), we believe that CAI is well-positioned to withstand the beginning of the tightening cycle, which may unfold in the Eurozone in the next 12-24 months. At the same time, the company is likely to continue to benefit from the underlying strong economic backdrop, driving leasing demand. As such, we believe it offers an appealing way to play the office markets in Germany, Austria and CEE, with the earnings driven by a combination of like-for-like growth in rents and the ongoing monetisation of existing land reserves. With the share price having advanced some 6% in the wake of the results, our 12M PT of EUR 29.0/share implies 13% upside for CA Immo.