Upgrade to Buy, target price: EUR 5.3 (5.2)
– Upgrade to Buy: After reaching 69% of our full-year
EBITDA estimates in 1-3Q09/10, Immoeast is on track to
match our expectations. Based on unchanged estimates
and moderate variation of valuation parameters, we
increased our 12-month target price to EUR 5.2 (5.3).
Relative to a current price of EUR 3.9 for Immoeast shares
our DCF model indicates an upside potential of above 35%.
We therefore upgrade the stock to Buy from Accumulate.
– Stock overhang priced in: Recent pressure on stock price
was in our opinion mainly driven by a stock overhang
stemming from Polish pension funds, a 36.36mn share
package being part of the Constantia Packaging B.V.
settlement and a potential capital increase. All in all, we
think the looming stock price overhang should be already
priced in.
– Discount to peers: A peer group valuation supports our
positive stance on the company. Whereas Immoeast is
priced more or less in line with peers in terms of P/BV11e
and P/NAV11e, a look on EV/EBTDA11e shows a clear
undervaluation of the stock.
– 3Q09/10 results: Net profit in 3Q09/10 jumped by 25%
based on nice growth in total revenues, a strong impact
from currency translation adjustments and lower income
taxes. Besides the good development in total revenues,
attention has also to be paid to gross cash flow, which
improved by 30.3% q/q.
– Upside triggers: The completion of development projects
and the restart of frozen projects remain the main upside
trigger, beside an overall optimization of the portfolio and
cost cutting efforts.
