CEE Real Estate Sector

presenterbelchΔιαχείριση

18 Νοε 2013 (πριν από 3 χρόνια και 9 μήνες)

84 εμφανίσεις

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ERSTE GROUP RESEARCH

1

October 2007

ERSTE GROUP RESEARCH

CEE Real Estate Sector

Investment Opportunities

André Albrecht

Günther Artner, CFA

Gernot Jany

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ERSTE GROUP RESEARCH

Overview

1.
Recent

under
-
performance



2.
Real

estate

sector

indices



3.
CEE market environment



4.
Financials & valuation


5.
Current

top

picks



6.
Summary


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ERSTE GROUP RESEARCH

1.
Recent under
-
performance (1)

Performance comparison

Source: Bloomberg as of September 25, 2007


European real estate sector (EPRA) markedly under
-
performed global equities (MSCI global index),
as well as global real estate (GPR250) in 2007


Companies with high share of development out
-
performed EPRA, GPR250 and also MSCI


In the short
-
term we expect the sector to remain quite volatile, in mid
-
term we expect stock prices to
converge towards NAVs

Performance overview

1M
3M
6M
YTD
MSCI World
6.1
0.1
6.5
10.8
GPR 250
5.6
-0.2
-5.9
-0.7
EPRA Europe
1.5
-9.5
-21.4
-21.8
IATX
-0.6
-13.7
-26.3
-19.0
CERX
n.a.
n.a.
n.a.
n.a.
Immoeast
0.8
-16.6
-25.2
-21.9
CA Immo Int.
-5.4
-11.9
-20.6
-19.8
GTC
25.9
21.1
5.5
35.6
Orco
4.0
-4.4
-10.7
16.0
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ERSTE GROUP RESEARCH

1.
Recent under
-
performance (2)

Main reasons and how to take advantage


Environment of increasing interest rates, sub
-
prime crises and rising credit spreads

-
> higher cost of capital and bearish mood on rental yield development


Slow down of the US residential market and arising problems in the Spanish real
estate market increased the uncertainty, despite no direct connection

Main reasons

To take advantage of depressed valuation, go for…


…companies with high share of developments,…


…focused on added value through active management and on…


…the fast growing SEE and CIS regions.

Top picks


Austria
-
based:

-

Immoeast (Buy, target price: EUR 11.7)


-

CA Immo Int. (Accumulate, target price: EUR 16.0)


CEE
-
based:

-

GTC (Buy, target price: PLN 57.5)


-

Orco (Buy, target price: EUR 129)

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ERSTE GROUP RESEARCH

Overview

1.
Recent

under
-
performance



2.
Real

estate

sector

indices



3.
CEE market environment



4.
Financials & valuation


5.
Current

top

picks



6.
Summary


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ERSTE GROUP RESEARCH

2.
Real estate sector indices

Description and composition


Comprises Austria
-
based real estate companies listed
on the Vienna Stock Exchange (Prime Market)


Free
-
float capitalization
-
weighted index


Base value 155.47 points as of January 2, 1996


Current free
-
float cap.: EUR 6.0bn


Serves as underlying for standardized derivatives and
structured products


Recent exclusion of participation certificates positive

Immobilien ATX (IATX)

CEE real estate index (CERX)



Comprises the largest CEE
-
focused real estate companies
listed on the stock exchange in Bucharest, Prague,
Warsaw or Vienna (strong development
-
focus)


Capitalization
-
weighted index


Base value 1,000 points as of January 5, 2003


Current free
-
float cap.: EUR 6.0bn


Serves as underlying for standardized derivatives and
structured products

Immoeast, 20.1%
CA Immo, 20.0%
Immofinanz, 18.9%
conwert, 18.8%
Sparkassen Immo,
9.2%
ECO, 5.7%
CA Immo Int, 4.6%
Warimpex, 2.8%
GTC, 27.6%
Immoeast, 21.4%
Orco, 19.7%
Echo Inv., 9.0%
Impact, 5.0%
CA Immo Int, 4.6%
LC Corp., 4.2%
DOM Dev., 3.9%
Warimpex, 2.8%
ECM, 1.9%
as of Oct. 11, 2007

Source: Vienna Stock Exchange

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ERSTE GROUP RESEARCH

Overview

1.
Recent

under
-
performance



2.
Real

estate

sector

indices



3.
CEE market environment



4.
Financials & valuation


5.
Current

top

picks



6.
Summary


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ERSTE GROUP RESEARCH

3.
CEE market environment (1)

Austrian companies are leading investors in CEE


Investments into the CEE real estate sector were rising significantly, even excl. developments


Austrian (listed) real estate companies are the biggest players in the whole CEE region (!)


Immoeast, CA Immo Int., etc. are the leading Austrian investors in the CEE region

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ERSTE GROUP RESEARCH

3.
CEE market environment (2)

Penetration rates still behind Western Europe


Most CEE countries are still substantially behind Western Europe (WE) in terms of office space density,
even the most advanced markets of Prague and Warsaw are still 60% behind


Retail density is far more progressed and the core CEE markets have already approached WE levels


Romania, Russia and Ukraine are the markets with the highest catch
-
up (i.e. growth) potential


Shopping center density 2006 in Europe

Office density 2008e

0.36
0.39
0.77
0.77
1.11
1.14
1.28
1.92
2.05
4.34
5.21
6.11
18.12
24.88
0
3
6
9
12
15
18
21
24
27
Belgrade
Kyiv
Moscow
Sofia
Bucharest
Zagreb
Budapest
Warsaw
Prague
Madrid
Berlin
Vienna
Frankfurt
Paris
sqm/capita
0%
20%
40%
60%
80%
100%
06-08 growth
Stock per capita 08e
06-08 growth
Source: CBRE, JLS, Eurostat, Erste Bank estimates, CBRE, DTZ, KS

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ERSTE GROUP RESEARCH

3.
CEE market environment (3)

Yields are converging, rents are increasing


There has been a continuous convergence of rental yields in CEE towards Western European levels


Rents are either bottoming out or in an increasing phase in nearly the whole CEE region


There has certainly been a lot of value creation in the CEE real estate sector already, but the macro
environment is still OK


listed stocks have anticipated a much worse environment already

European Office Property Clock, Q2 2007

Source: Jones Lang LaSalle

Source: CB Richard Ellis

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ERSTE GROUP RESEARCH

3.
CEE market environment (4)

Interest rate development and yield spreads

10y government bond vs. 3 month EURIBOR/VIBOR

Prime office yield spread over 10y bonds


Whereas the 3
-
months EURIBOR has reached a neutral level, the 10
-
year government bond is still low in a historical
context


the interest rate environment is neutral in summary



The current interest rate environment is significantly better than at the beginning of the 90ies, the time of the latest
major decline in property values in Europe


Property yield spreads vs. government bonds are most attractive in Romania, Bulgaria and Russia, the worst in
Hungary and France

-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
RO
BG
RU
CZ
HU
PL
AT
GE
SP
FR
Source: Datastream

Source: Erste Bank estimates, end September 07

87

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91

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99

00

01

02

03

04

05

06

07

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2

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6

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9

10

AUSTRIA BENCHMARK BOND 10 YR

EURIBOR 3 MONTH

VIBOR 3 MONTH

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ERSTE GROUP RESEARCH

Overview

1.
Recent

under
-
performance



2.
Real

estate

sector

indices



3.
CEE market environment



4.
Financials & valuation


5.
Current

top

picks



6.
Summary


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ERSTE GROUP RESEARCH

4.
Financials & valuation

Peer group comparison

Market
EPRA NAV
(EURmn, EUR)
Cap.
Country
2006
2007e
2008e
2009e
2006
2007e
2008e
2009e
2006
2007e
2008e
2009e
last rep.
CAGR 06-09e
Austria-based
Immoeast
7,042
AT
1.02
0.84
1.14
1.29
0.00
0.00
0.00
0.00
10.15
11.31
12.47
14.00
10.50
11.3%
Meinl European Land
2,196
AT
1.31
n.a.
n.a.
n.a.
0.00
n.a.
n.a.
n.a.
15.56
n.a.
n.a.
n.a.
15.64
n.a.
Immofinanz
3,879
AT
1.03
1.05
1.15
1.73
0.33
0.23
0.24
0.29
10.85
11.97
13.17
14.90
11.30
11.1%
CA Immo
1,648
AT
1.16
1.07
1.33
1.67
0.00
0.00
0.00
0.00
21.21
22.28
23.61
25.28
22.23
6.0%
conwert
1,122
AT
0.97
0.97
1.02
1.03
0.00
0.00
0.00
0.00
15.30
16.49
17.73
19.23
15.33
7.9%
Sparkassen Immo
555
AT
0.62
0.48
0.76
1.43
0.00
0.00
0.00
0.00
8.91
9.72
10.52
11.94
9.40
10.2%
CA Immo Int.
549
AT
1.84
1.50
1.71
3.20
0.00
0.28
0.31
0.30
13.71
15.25
17.09
18.54
14.25
10.6%
ECO
338
AT
0.99
0.98
1.03
1.32
0.00
0.00
0.00
0.00
12.15
12.56
13.76
14.99
12.22
7.3%
CEE-based
GTC
1)
3,292
PL
0.91
0.58
1.51
1.62
0.00
0.00
0.00
0.00
n.a.
11.7
13.6
14.2
n.a.
10.2%
Orco
1,173
CZ
12.74
12.98
12.70
7.84
1.00
1.10
1.21
1.33
99.4
124.4
142.0
155.6
115.7
16.1%
ECM
103
CZ
5.02
6.36
2.91
4.26
0.00
0.00
0.00
0.00
52.3
61.1
70.5
65.4
57.7
7.8%
Share
EPRA NAV
price
Currency
2006
2007e
2008e
2009e
2006
2007e
2008e
2009e
2006
2007e
2008e
2009e
last rep.
CAGR 06-09e
Austria-based
Immoeast
8.45
EUR
8.3x
10.0x
7.4x
6.6x
0.0%
0.0%
0.0%
0.0%
0.83x
0.75x
0.68x
0.60x
0.80x
Meinl European Land
10.40
EUR
7.9x
n.a.
n.a.
n.a.
0.0%
n.a.
n.a.
n.a.
0.67x
n.a.
n.a.
n.a.
0.66x
Immofinanz
8.45
EUR
8.2x
8.1x
7.3x
4.9x
3.9%
2.7%
2.8%
3.4%
0.78x
0.71x
0.64x
0.57x
0.75x
CA Immo
18.89
EUR
16.3x
17.7x
14.3x
11.3x
0.0%
0.0%
0.0%
0.0%
0.89x
0.85x
0.80x
0.75x
0.85x
conwert
13.15
EUR
13.6x
13.6x
12.9x
12.8x
0.0%
0.0%
0.0%
0.0%
0.86x
0.80x
0.74x
0.68x
0.86x
Sparkassen Immo
8.15
EUR
13.1x
16.8x
10.7x
5.7x
0.0%
0.0%
0.0%
0.0%
0.91x
0.84x
0.77x
0.68x
0.87x
CA Immo Int.
12.63
EUR
6.9x
8.4x
7.4x
3.9x
0.0%
2.2%
2.5%
2.4%
0.92x
0.83x
0.74x
0.68x
0.89x
ECO
9.90
EUR
10.0x
10.1x
9.6x
7.5x
0.0%
0.0%
0.0%
0.0%
0.82x
0.79x
0.72x
0.66x
0.81x
Average
10.5x
12.1x
10.0x
7.5x
0.5%
0.7%
0.8%
0.8%
0.84x
0.79x
0.73x
0.66x
0.81x
9.2%
CEE-based
GTC
15.00
EUR
16.4x
26.0x
9.9x
9.2x
0.0%
0.0%
0.0%
0.0%
n.a.
1.29x
1.10x
1.06x
n.a.
Orco
111.94
EUR
8.8x
8.6x
8.8x
14.3x
0.9%
1.0%
1.1%
1.2%
1.13x
0.90x
0.79x
0.72x
0.97x
ECM
59.68
EUR
11.9x
9.4x
20.5x
14.0x
0.0%
0.0%
0.0%
0.0%
1.14x
0.98x
0.85x
0.91x
1.03x
Average
12.4x
14.7x
13.1x
12.5x
0.3%
0.3%
0.4%
0.4%
1.13x
1.05x
0.91x
0.90x
1.00x
11.4%
Source: JCF, Erste Bank estimates
1) EPRA NAV CAGR 07e-09e
EPS
DPS
EPRA NAV
P/ EPRA NAV
P/E
Dividend yield
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ERSTE GROUP RESEARCH

Overview

1.
Recent

under
-
performance



2.
Real

estate

sector

indices



3.
CEE market environment



4.
Financials & valuation


5.
Current

top

picks



6.
Summary


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ERSTE GROUP RESEARCH

5.
Current top picks
(1)

Immoeast (Buy, EUR 11.7 from EUR 13.2)

Dominant CEE player


Dominant player in CEE with clear investment focus


Experienced management team with excellent track record


Well diversified portfolio across regions and sectors


Strategic joint ventures and partnerships with well established
developers active in CEE


Additional value creation from development gains


Switch to more active portfolio management


Low interest rate sensitivity, due to hedging strategy

Risks


Substantial recent capital increase with dilutive effect and
temporary sub
-
optimal capital structure


Higher business risk, due to stronger focus on developments


Higher country risk especially in SEE and CIS


Potential conflict of interest between Immoeast and Constantia
Privatbank, which have same management team

Property breakdown 1Q 07/08

Key figures

Office, 34%
Retail, 29%
Residential, 14%
Logistics, 15%
Parking, 6%
Other, 2%
EUR mn*
2005/06
2006/07
2007/08e
2008/09e
2009/10e
Total revenues
79.7
192.1
392.2
681.5
1,170.3
EBITDA
71.2
92.0
246.6
367.4
615.0
EBIT
156.3
541.3
760.1
1,187.8
1,613.1
Net profit
145.3
528.2
683.4
947.9
1,074.3
EPS (EUR)
0.76
1.02
0.84
1.14
1.29
NAV/share (BVPS) (EUR)
7.47
8.83
10.04
11.17
12.46
EPRA NAV/share (EUR)
8.39
10.15
11.31
12.47
14.00
CEPS (EUR)
n.a.
n.a.
0.38
0.39
0.37
Dividend/share (EUR)
0.00
0.00
0.00
0.00
0.00
EV/EBITDA (x)
26.4
51.1
27.0
18.1
10.8
P/E (x)
n.a.
8.3
9.5
7.0
6.2
P/CE (x)
n.a.
n.a.
21.1
20.6
21.3
P/EPRA NAV (x)
1.01
0.83
0.71
0.64
0.57
Dividend yield
0.0%
0.0%
0.0%
0.0%
0.0%
* All ratios based on the fair value method.
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ERSTE GROUP RESEARCH

5.
Current top picks
(2)

CA Immo International (Accumulate, EUR 16.0)

Early bird in CEE


Early bird with proven track record in CEE


Experienced in
-
house management


Additional value creation from development gains


Third
-
party fee income


Active portfolio management


Low interest rate sensitivity, due to hedging strategy

Risks


Sub
-
optimal current capital structure


Higher business risk, due to focus on developments


Higher country risk, especially in SEE and CIS


Still relatively low liquidity compared to other real estate stock

Property breakdown 1H 07

Key figures

Office
60%
Logistics
2%
Parking
27%
Other
7%
Retail
4%
EUR mn*
2005
2006
2007e
2008e
2009e
Total revenues
31.3
47.6
56.4
59.2
94.3
EBITDA
20.7
32.0
34.4
63.2
125.8
EBIT
60.2
63.8
83.6
112.4
242.0
Net profit
46.7
47.9
65.4
74.2
139.0
EPS (EUR)
n.a.
1.84
1.50
1.71
3.20
NAV/share (BVPS) (EUR)
11.73
13.41
14.89
16.24
17.83
EPRA NAV/share (EUR)
11.77
13.71
15.25
17.09
18.54
CEPS (EUR)
n.a.
0.00
0.34
0.25
0.44
Dividend/share (EUR)
0.00
0.00
0.28
0.31
0.30
EV/EBITDA (x)
25.6
22.8
24.2
26.6
17.4
P/E (x)
n.a.
6.9
8.7
7.6
4.1
P/CE (x)
n.a.
n.a.
38.4
52.6
29.6
P/NAV (x)
1.08
0.94
0.88
0.80
0.73
Dividend yield
n.a.
0.0%
2.2%
2.4%
2.3%
* All ratios based on the fair value method.
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ERSTE GROUP RESEARCH

5.
Current top picks (3)

GTC (Buy, PLN 57.5)

Shark in a local pond


Clear strategy focused on development in unsaturated SEE and
CIS region


Well diversified portfolio in eight countries and three sectors


Large economies of scale


Very low indebtedness


Loans 80% fixed rate or hedged


Experienced and stable management team with strong track record


Good relationship with best tenants in region

Risks


Already high efficiency do not allow for above
-
average growth
margins


Slightly higher valued compared to competitors


Slim employment structure could cause delays or slow new project
starts


Expansion to SEE and CIS increases exposure to more volatile
economies

Property breakdown 1H 07

Key figures

Office; 39%
Retail; 16%
Residential; 44%
Other; 1%
EUR mn*
2006
2007e
2008e
2009e
Sales
80.9
88.9
331.7
846.0
Revaluation gains
199.1
154.9
416.2
357.8
EBIT
232.6
183.8
496.8
537.8
Net profit
195.1
126.5
333.1
358.1
EPS (basic, EUR)
0.91
0.58
1.51
1.62
EPS (diluted, EUR)
0.88
0.57
1.50
1.61
NAV/share (EUR)
n.a.
11.68
13.62
14.18
BVPS (EUR)
3.35
3.90
5.40
7.02
DPS (EUR)
0.00
0.00
0.00
0.00
P/E (basic, x)
16.5
26.0
9.9
9.2
P/NAV (x)
n.a.
1.29
1.10
1.06
P/BV (x)
4.48
3.85
2.78
2.14
Dividend yield
0.0%
0.0%
0.0%
0.0%
*All valuation ratios are based on the current stock price.
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ERSTE GROUP RESEARCH

5.
Current top picks (4)

Orco Property Group (from Hold to Buy, EUR 129)

Opportunistic player

with re
-
development potential


Above
-
average yield potential through re
-
development focus
and growth in occupancy


Opportunistic approach with focus on arbitrage gains, rather
than segment/region focus


Good access to financing with partners like MSREF, LB,
quadruple stock listing


Strong balance sheet with 44% LTV after recent capital
increase


Good segment diversification


Regional diversification with operations in CEE and Germany


Stable and experienced management

Risks


Low exposure to quickly growing SEE and CIS markets
compared to peers


Lower share of developments compared to peers


S
till low operating performance


D
ifficult valuation methodology

Property breakdown 1H 07

Key figures

Office, 35%
Retail, 9%
Residential, 46%
Other, 10%
EUR mn*
2006
2007e
2008e
2009e
Sales
172.9
270.4
324.5
489.6
Revaluation gains
145.9
198.0
272.6
168.6
EBIT
134.2
245.7
299.1
230.3
Net profit
96.7
130.7
159.0
108.4
EPS (basic, EUR)
12.7
13.0
12.7
7.8
EPS (diluted, EUR)
8.2
8.7
9.9
6.4
BVPS (EUR)
54.1
74.2
88.4
98.7
NAV/share (EUR)
99.4
124.4
142.0
155.6
DPS (EUR)
1.00
1.10
1.21
1.33
P/E (basic, x)
8.8
8.6
8.8
14.3
P/BV (x)
2.07
1.51
1.27
1.13
P/NAV (x)
1.13
0.90
0.79
0.72
Dividend yield
0.9%
1.0%
1.1%
1.2%
*All valuation ratios are based on the current stock price.
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Overview

1.
Recent

under
-
performance



2.
Real

estate

sector

indices



3.
CEE market environment



4.
Financials & valuation


5.
Current

top

picks



6.
Summary


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6.
Summary

Main points and outlook


No direct impact of US subprime crises


Significant removal of funds from institutional investors triggered a correction of the European real estate
sector stocks

Weak performance in 2007

Market environment deteriorated, but not significantly


Financing costs (credit spreads) have increased and will remain more expensive than before


Real estate companies have less liquidity, which may slightly dampen the market environment also in Europe


Sentiment and stock exchange multiples (NAV discounts) are far worse than the actual market situation,
however

Outlook


Rental market yields could slightly increase, but room is limited due to arbitrage opportunities through
leveraged debt financing


Stock prices should converge towards NAVs in the mid
-
term, when the next quarterly results continue to show
a good operating performance and no major write
-
downs


We focus on development
-
oriented firms, which are heavily weighted in the CERX index

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Disclosures