CA Immo Buy (unchanged) Target: Euro (old: Euro 24.00)

Transcription

1 CA Immo Buy (unchanged) Target: Euro (old: Euro 24.00) 24 August 17 Price (Euro) weeks range / Key Data ISIN AT Reuters CAIV.VI Bloomberg CAI AV Reporting standard IFRS Market Cap (Euro million) 2,219 Number of shares (million) 98.8 Free Float 68% Free Float Market Cap (Euro million) 1,509 CAGR EBITDA cash profit ('16 -'19e) 19.0% Multiples e 2018e 2019e Market Cap/ Total revenues PE-Ratio Dividend Yield 2.9% 3.3% 3.8% 4.2% Price-to-Book-Ratio P/ NAV-ratio Key Data per share (Euro) e 2018e 2019e Earnings per share (EPS) Dividend per share (DPS) Book Value per Share (BVPS) NAV per share EPRA NNNAV Financial Data (Euro '000) e 2018e 2019e Total revenues incl net disposal gains 258, , , ,717 Rental income 165, , , ,020 Admin expenses -44,140-34,255-35,450-37,887 EBITDA profit (cash-driven) 147, , , ,988 Net result from revaluations 138,260 97,003 73, ,548 Operating profit (EBIT) 293, , , ,272 Net financial result -56,228-61,257-66,473-61,208 Pre-tax profit (EBT) 237, , , ,064 Taxation -53,688-55,678-49,650-69,789 Net profit after minorities 183, , , ,275 Shareholders' equity (Euro million) 2,204 2,328 2,423 2,569 Property assets let (Euro million) 3,219 3,325 3,578 3,813 Property assets under development RoE (pre-tax) 10.8% 10.3% 8.8% 11.5% RoE (after tax) 8.5% 8.1% 6.9% 9.0% Equity ratio 51.2% 51.0% 51.6% 51.4% Main Shareholders Immofinanz 26% Own shares 6% Financial calendar 9M 2017 report 23 November annual results 22 March 2018 Analyst Internet Dipl.-Kfm. Stefan Scharff, CREA scharff@src-research.de A very good first half of the year with a high earnings quality target up to 25 Euros Buy affirmed Today, CA Immo, a leading European investor and developer of superior office properties in Germany, Austria and CEE capitals and main cities, published its 1H 2017 report and hosted a conference call to give more insights. The numbers were good and the earnings quality was high for the first six months, as the cash driven numbers delivered a steep growth. The previous 1H 2016 was also good, but much more flattered by the revaluation result. Looking at top line growth, rental income hiked 9% from Euro 81m to Euro 89m. The net rental income even increased 11% from Euro 72m to Euro 80m. The reasons were the purchase of Millennium Towers in Budapest in September 2016 and the acquisition of a minority stake from JV partner Union Investment. The company delivered a strong letting performance in the development and standing assets, for instance in Bucharest, Budapest and Berlin, which makes us clearly optimistic for the rental result in the coming quarters and the following years. There was a tremendous 18% growth at the cash-driven operating profit in terms of EBITDA (even +29% 2Q standalone), which increased from Euro 61m to more than Euro 72m. The hike in cash earnings in FFO I result (before taxes and trading activities) was even more significant at 28.5%, from Euro 43.8m to Euro 56.3m. Consequently, the firm reaffirmed the full year FFO I guidance of more than Euro 100m, after Euro 92m in The guidance seems to be not too ambitious in our view, after the good first half year. FFO II was also up +32% to Euro 54m. The EBT was more or less unchanged at Euro 135m (1H 2016: Euro 137m) despite a much lower revaluation result of Euro 40m, only one third of last year (Euro 113m). The bottom line was even higher at Euro 105m, after a net profit of Euro 99m in 1H The reason for the good bottom line performance was the low financing costs. After Euro 10.2m financing costs in 1Q 2017, they fell by 23% q-o-q to only Euro 8.3m in 2Q CAI managed to bring down average Cost of Debt from 2.8% in 2Q 2016 to 2.2% in 2Q The company worked on an early prolongation of bank loans, which helped to lift the average debt maturity from 4.3 years (2Q 2016) to now 6.0 years. Furthermore the interest hedging ratio steeply climbed from 65% one year ago to now high 85%. That means we will see very low interest expenses in the next years, giving full support to cash flow and profits. The balance is rock solid with 51% equity ratio and only low 35% LTV. Furthermore, the firm mentioned additional future upside by developing land reserves, which are earmarked for residential products, for instance in Munich and Vienna, and give good future upside by selling them in packages. We like the 1H result with the steep growth of cash profits. The stock already jumped 30% YTD but with a triple EPRA NAV per share, which climbed 3% to Euro in 1H 17, we lift our target from to Still Buy rating.

2 Industry: Real Estate Management Board of CA Immo Sub segment: Office/ Commercial Frank Nickel (CEO) Country: Austria Dr. Hans Volkert Volckens (CFO) Headquarter: Vienna Foundation: 1990 Employees (year end 2015) 357 Supervisory Board of CA Immo Torsten Hollstein (Chairman) IR Contact Dr. Florian Koschat (Dep. Chairman) Christoph Thurnberger / Claudia Höbart Prof: Dr. Klaus Hirschler Nicole Kubista (Mail: ir@caimmoag.com) John Nacos Michael Stanton Georg Edinger Prof. Dr. Sven Bienert Richard James Gregson Sebastian Obermayer Franz Reitermayer Dr. Oliver Schumy Stefan Schönauer Founded in 1987 CA Immo is one of the major property owners in Europe. The Viennabased company is a specialist in property management and the development of premium large scale office properties as well as mixed city quarters and has at present an investment portfolio with a volumeof about Euro 3.8bn and allocated in Germany (44% ), Austria (15%) and Eastern and South Eastern Europe (41%, thereof Hungary is 13% and Poland as well as Romania each have about 8%). The company is active through its own property holdings, JVs and new project developments in 7 core countries (Germany, Austria, Poland, Czech Republic, Slovakia, Hungary and Romania). 7% of the total asset portfolio, resp. 14% as referred to Eastern Europe, is allocated in the former 3 Yugoslavian countries Serbia, Croatia, and Slovenia as well as in Bulgaria. In 2015, CA Immo further sharpened its specialist profile, especially by disposing some none strategic assets like a logistics portfolio in Eastern European in 1Q 2015 or the H&M logistic asset in Hamburg in 2H 2015 for above Euro 100m for instance. By another disposal of two Czech hotels in 1Q 2015 and a plot of land in Berlin, CA Immo finally increased the share of premium office within the asset portfolio from 79% in 2014 to 85% by end of By doing this, CA Immo rebalances the group's portfolio picture towards officeand towards the more stable economies of Germany and Austria. Another great success for streamlining the portfolio is the recent sale of Prague Sestka shopping center in October 2016 and several non strategic German land plots were also sold. Thus, at the end of 2016 the sale of non core strategic assets is more or less completed. Another important focus besides the sharpening of the profile by selling non core assets was to grow the portfolio by own developments and by acquisitions which make sense to strongly and sustainably uplift the future FFO results. The 2016 net rental income jumped by 8.5% as CA Immo bought the JV stakes in the EBRD portfolio in mid of 2015 and the Buy Out of JV partner Unon Investment in the CEE portfolio in 2016 (closing in 1Q 2017). Furthermore, the Millenium Towers in Budapest were acquired in 2016, which is a promising bet to profit from a yield compression there with a first class and fully let and LEED certified property marks the start for several promising developments in German and Austrian hubs like ViE in Vienna, the Frankfurt Steigenberger hotel, Rheinallee III (Mainz) and Rieck I Offices in Berlin. Also keep in mind Berlin based Cube Office trophy building with 19k sqm to be completed in 2019, which was sold in a forward sale to a big fund manager. Some more projects like Baumkirchen, NEO (Munich) are in advanced stages of preparation to start the construction works soon. For instance, the NEO mixed use project recently got the construction permit from the city of Munich, for a GLA of 21k sqm. Another highlight of 2016 was the reduction of the financing costs which came down 31% to only Euro 42m, by 31%. The optimisation of financing structure (repayment of expensive bond and the issue of and bonds) will help to further reduce the cost of debt (falling from 2.9% in 2015 to 2.3% in 2016). Also keep in mind, that CAI recently issued another Euro 175m bond in February 2017, with a 1.875% coupon and a 7 years duration. CA Immo is listed on the Vienna Stock Exchange since 1988 and member of ATX blue chip index. About 68 % of the shares are in free float. Immofinanz has a major 26% stake in CA Immo since August 2016, after a purchase agreement with O1 Group in April The firm will lift the payout ratio and will in future pay 70% of the FFO I cash earnings as dividend to the shareholders (instead of 60% before). Thus the 2016 dividend will steeply increase from 50 Cents (2015) to 65 Cents. The company delivered a 18% hike in the 2016 FFO I per share from 82 Cents to 97 Cents, meaning Euro 92m. For 2017 the management guided another FFO hike to at least Euro 100m. CA Immo has also rock solid balance sheet metrics with an equity ratio of 51% and a net LTV of only very low 34% which might rise to a healthy range of 40% to 45% with the coming investments for the developments. For the next years the firm has Euro 290m land reserves to develop / exploit which are mainly (> 90%) in Germany (more or less a split of Frankfurt, Munich and Berlin) and would offer a high additional Euro 2bn book value potential to be realized (with a targeted development margin of c. 20%). Source: Company Data, SRC Research 2 2 SRC Equity Research

3 SWOT Analysis (CA Immo stand-alone) Strengths Weaknesses Opportunities Threats The total portfolio value increased by 4% up to 3.82bn at year-end 2016 (2015: 3.66bn) which was largely driven by an extraordinary high net revaluation of Euro 138m which jointly with new acquisitions and capital expenditure more than counterbalanced the volume of asset disposals. The occupancy rate among assets in the investment portfolio increased by 2 percentage points up to at 92.4% and is above market average across all regions (even in CEE at high 91%). This improvement demonstrates the company s strong and compelling efforts in terms of tenant retention and successfully convincing new tenants moving into CAI s office space of superior quality. CAI achieved outstanding 2016 results regarding a 14% hike in FFO I (even 18% in per share). After 2015 with an even higher revaluation result the year 2016 was the second best in history with regards to the bottom line. And earnings quality was better with the much higher FFO result. With a gross initial yield of 6.1% in the investment portfolio the assets are not aggressively priced (4.9% yield for the biggest market Germany).The WALT was more or less unchanged in 2016 at 4.3 years (2015: 4.5 years). The like-for-like rental income in the investment portfolio grew from Euro 179.1m in 2015 to Euro 182.5m in 2016 by 2%. The sales volume remained high in 2016 with Euro 336m, streamlining the portfolio and still getting a margin of Euro 38m. Very well risk-diversified portfolio of tenants. Many internationally and globally known firms are major tenants of CA Immo as they seek for best or at least superior office space. The 7% stake of hospitality and logistics properties in the overall portfolio does not facilitate the strategic aspiration of CAI to obtain a distinctive profile in the business of purely managing, developing and renting solely highquality office buildings in the Centre of Europe. After a share buyback program with a target volume of 5 million shares was terminated in September 2016, the management started another share buyback program which runs until October 2018 with up to 1 million shares with a maximum buying limit of per share. At the moment CAI has about 5.4 million own shares in treasury. CAI outperforms its financial targets in terms of higher than expected profitability by wealthy and sustainable FFO I numbers of 81m (2015) and Euro 92m in 2016 (+14%) which supports much higher future dividend payments. Most of the current developments, which are either planned or still under construction, are scheduled for completion not before 2018 and thus may be associated with cost overruns and delays in completion. This can adversely affect the economic viability of individual projects and lead to contractual penalties and compensation claims. The purchase of the Budapest Millennium Towers helps to close the gap for another FFO increase in 2017 and is a good bet for shrinking yields in Budapest as investors demand might rise. Central Eastern Europe is exposed to increased insecurity and political instability, i.e. because of the civil war in Syria and the still unsolved refugee movements, which might make firms postponing further expansion plans. 3 3 SRC Equity Research

4 Occupancy up again to over 92%, after the little dip in first quarter, like-for-like rentals up 2%, overall portfolio not aggressively priced Source: Analysts Presentation, 24 August 2017 The land bank is the key to significantly bring up future Profits the more as CAI plans to include some Munich residential projects Source: Analysts Presentation, 24 May SRC Equity Research

5 with Europolis from 1Q 2011 on Assets held in JVs were shown in EBIT "as result from investments in JVs" from 1Q 2014 on 31/12 IFRS ('000) e 2018e 2019e CAGR '16 - '19e Rental income 281, , , , , , , % Proceeds from property sale (Trading Portfolio) 29, , , , , , ,227.0 Expenses from property disposal (Trading Portfolio) -16, , , , , , ,201.0 Subtotal Trading Portfolio 12, , , , , , ,026.0 sale margin (Trading Portfolio) 41.9% 58.7% 32.4% 33.6% 27.1% 26.5% 24.3% Proceeds from property sale (Hold Portfolio) 889, , , , , , ,662.0 Expenses from property disposal (Hold Portfolio) -826, , , , , , ,785.0 Result from property sales (Hold Portfolio) 63, , , , , , ,877.0 sale margin (Hold Portfolio) 7.1% 14.0% 15.8% 8.5% 23.5% 22.8% 21.9% Operating costs passed on to tenants 68, , , , , , ,899.0 Revenues from construction 1, Hotel operations (net) and income from services 1, , , , , , ,895.0 Total revenues including the net gains from disposals 428, , , , , , , % Operating expenses -77, , , , , , ,788.0 Other expenses directly related to Hold-Portfolio -21, , , , , , ,252.0 Expenses for construction -4, , , , , ,250.0 Admin expenses -38, , , , , , ,887.0 Own works capitalised Other operating income 9, , , , , ,448.0 EBITDA-profit (cash-driven operating profit) 295, , , , , , , % Gains from Fair Value Adjustments (IAS 40) 47, , , , , , ,000.0 Losses from Fair Value Adjustments (IAS 40) -81, , , , , , ,452.0 Net result from Revaluations (IAS 40) -33, , , , , , ,548.0 Depreciation and amortisation of long-term assets -6, , , , , , ,120.0 Depreciation of properties of Trading-Portfolio Result from investments in joint ventures 0.0 8, , , , , ,210.0 Operating Profit (EBIT) 255, , , , , , , % Net financial result -171, , , , , , ,208.0 Pre-tax profit (EBT) 83, , , , , , , % taxes on income -33, , , , , , ,789.0 tax-rate 39.7% 16.3% 30.1% 22.6% 23.2% 23.2% 23.7% minorities -2, Net Profit after minorities 48, , , , , , , % number of shares without own shares ('000) 87, , , , , , ,405.0 Earnings per share (Euro) % Dividends per share (Euro) Book Value per share (Euro) % NAV per share (Euro) NNNAV per share (Euro) % Key Data Shareholders' Equity 1,865, ,951, ,120, ,204, ,328, ,423, ,569, % Property assets let (only fully owned from 2014 on) 3,108,487 2,092,917 2,478,600 3,219,333 3,325,477 3,578,400 3,813,145 thereof Germany ('000) , , , ,677.8 thereof Austria ('000) thereof CEE and SEE ('000) 1, , , , , ,525.3 Gross yield property assets let 7.0% 6.6% 6.5% 6.1% 5.9% 6.0% 6.0% Vacancy rate property assets let 11.6% 9.3% 7.3% 8.0% 10.5% 9.5% 10.5% Property assets under current construction 486, , , , , , , % RoE (pre-tax) 4.5% 4.3% 14.9% 10.8% 10.3% 8.8% 11.5% RoE (after tax) 2.6% 3.7% 10.8% 8.5% 8.1% 6.9% 9.0% Total balance sheet sum 4,910, ,670, ,983, ,309, ,567, ,695, ,996, % Equity ratio 38.0% 53.2% 53.2% 51.2% 51.0% 51.6% 51.4% 0.2% 5 5 SRC Equity Research

6 SRC Research - The Specialist for Financial and Real Estate Stocks - SRC - Scharff Research und Consulting GmbH Klingerstr. 23 D Frankfurt Germany Fon: +49 (0)69/ Mail: scharff@src-research.de Internet: Rating Chronicle Date Rating former share price former target CA Immo May 24, 2017 Buy CA Immo March 22, 2017 Buy CA Immo November 24, 2016 Buy CA Immo August 25, 2016 Buy CA Immo May 25, 2016 Buy CA Immo April 20, 2016 Buy CA Immo March 24, 2016 Buy Please note: The CA Immo share price mentioned in this report is from 23 August CA Immo mandated SRC Research for covering the CA Immo share. Disclaimer 2017: This equity research report is published by: SRC-Scharff Research und Consulting GmbH, Klingerstr. 23, D Frankfurt, Germany (short name: SRC Research). All rights reserved. Although we feel sure that all information in this SRC report originates from carefully selected sources with high credibility, we cannot give any guarantee for accuracy, trueness and completeness. All opinions quoted in this report give the current judgement of the author which is not necessarily the same opinion as SRC- Scharff Research und Consulting GmbH or another staff member. All the opinions and assessment made in this report may be changed without prior notice. Within the scope of German regulative framework the author and SRC-Scharff Research und Consulting GmbH do not assume any liability for this document or its content being used. This report is solely for information purposes and does not constitute a request or an invitation or a recommendation to buy or sell any stock that is mentioned here. Private clients should obtain personal advice at their bank or investment house and should keep in mind that prices and dividends of equities can rise and fall and that nobody can give a guarantee of the future development of equities. The author of this report and the SRC-Scharff Research und Consulting GmbH commit themselves on a unsolicited basis to having no long or short-positions in equities or derivatives related to equities mentioned in this report. Reproduction, distribution or publishing this report and its content as a whole or in parts is only allowed with approval of SRC management written form. With acceptance of this document you agree with all regulations mentioned here and all general terms and conditions you will find at anytime at our website SRC Equity Research