CA Immo Accumulate (old: Buy) Target: Euro 26.00 (old: Euro 25.00) 23 November 17 Price (Euro) 24.40 52 weeks range 25.48 / 16.05 Key Data ISIN AT0000641352 Reuters CAIV.VI Bloomberg CAI AV Reporting standard IFRS Market Cap (Euro million) 2,411 Number of shares (million) 98.8 Free Float 63% Free Float Market Cap (Euro million) 1,519 CAGR EBITDA cash profit ('16 -'19e) 19.0% Multiples 2016 2017e 2018e 2019e Market Cap/ Total revenues 9.3 8.9 8.8 7.2 PE-Ratio 12.6 11.6 11.4 9.2 Dividend Yield 2.7% 3.1% 3.5% 4.1% Price-to-Book-Ratio 1.05 0.97 0.92 0.86 P/ NAV-ratio 0.91 0.86 0.83 0.78 Key Data per share (Euro) 2016 2017e 2018e 2019e Earnings per share (EPS) 1.94 2.10 2.14 2.66 Dividend per share (DPS) 0.65 0.75 0.85 1.00 Book Value per Share (BVPS) 23.21 25.09 26.60 28.50 NAV per share 26.74 28.45 29.55 31.25 EPRA NNNAV 24.56 26.20 27.30 29.15 Financial Data (Euro '000) 2016 2017e 2018e 2019e Total revenues incl net disposal gains 258,543 271,560 272,577 332,717 Rental income 165,603 172,834 186,090 211,020 Admin expenses -44,140-38,955-37,556-37,887 EBITDA profit (cash-driven) 147,584 181,408 197,611 248,988 Net result from revaluations 138,260 44,000 80,315 103,548 Operating profit (EBIT) 293,833 276,046 281,719 356,272 Net financial result -56,228-34,556-35,455-42,557 Pre-tax profit (EBT) 237,605 241,490 246,264 313,715 Taxation -53,688-45,662-47,558-67,387 Net profit after minorities 183,910 195,828 198,706 246,328 Shareholders' equity (Euro million) 2,204 2,340 2,469 2,637 Property assets let (Euro million) 3,219 3,325 3,578 3,813 Property assets under development 438 176 255 346 RoE (pre-tax) 10.8% 10.3% 10.0% 11.9% RoE (after tax) 8.5% 8.6% 8.3% 9.6% Equity ratio 51.2% 51.2% 52.6% 52.8% Main Shareholders Immofinanz 26% Own shares 6% S IMMO 5% AXA S.A: 4% Financial calendar 2017 annual report 26 March 2018 AGM 9 May 2018 1Q 2018 24 May 2018 2Q 2018 22 August 2018 Analyst E-Mail Internet Dipl.-Kfm. Stefan Scharff, CREA scharff@src-research.de www.src-research.de www.aktienmarkt-international.at www.aktienmarkt-international.de A steep hike in 9M EBITDA by 11% and FFO I by 21% opens the way for very decent full year numbers further progress on the debt side target up to 26.00 Today, CA Immo published its 9M 2017 report and hosted a conference call. The numbers unveiled a steep growth of cash earnings driven by a strong letting performance and substantially declining financing costs. The occupancy levels in the standing portfolio increased in all three regions, Germany from 94% to 96% (49k sqm newly let in 9M), Austria from 95% to 96% and CEE from 91% to 92% (40k sqm newly let and 76k sqm contract extensions). The net rental income hiked almost 12% from Euro 109m to Euro 122m, despite some asset sales of non-core properties. The major drivers were besides the strong letting performance and further increasing occupancy - the purchase of Budapest Millennium Towers and the Buy-Outs of JV Partner Union Investment by buying the 49% stakes in Prague Danube House and Infopark in Budapest. The EBITDA was up by 11% from Euro 112m to Euro 124m. With regards to FFO I, the hike was even +21% to Euro 85m. The management confirmed the full year target to lift the FFO I to over Euro 100m. The recent acquisition of Warsaw Spire B (22k sqm / 6m rental income for Euro 100m, very solvent EU agency Frontex as tenant for next 7.5 years) will help to accelerate FFO from 4Q on. The financing side was another highlight. The financing cost came down from Euro 10.2m in 1Q 2017 to Euro 8.3m in 2Q 2017 and now to only Euro 7.9m in 3Q 2017. After the company worked on the early prolongation of bank loans to bring down cost of debt and to improve the debt expiry profile on a very low level, CAI issued a Euro 200m convertible in September with a 7.5 years duration and a very low 0.75% coupon. Half of the proceeds will be used to pay back secured loans in Czechia at 2.3% interest, the other half for some other properties in Bucharest, Warsaw and Austria, which have also significantly higher interest rates. This is a milestone as CAI locked in the historically low interest rate for many years, bringing up the hedging ratio to 89% and the average debt maturity to over 6 years. It also means an extension of the unencumbered asset pool, which is always an important issue to rating agencies. Keep in mind that the average financing costs even went below 2%, to 1.99%, as at key date 30 September. The group s net LTV was mainly unchanged at 37%, below the target range of 40% to 45%. The EPRA triple NAV went up by 5% to almost 26.00 (25.75). The share price went up 40% YTD and almost closed the NAV gap. For the future the investors will have an eye on the land reserves and development pipeline and the opportunities to grow the portfolio and unveil more development gains in the next 5 years. The investment properties under development are at almost Euro 540m and 87% is located in Germany and almost half of it is land reserves. The idea of broadening the value chain as announced in 2Q by embarking on indirect property fund business might accelerate the earnings from 2019 on. We lift target to 26.00. After the steep hike in share price we go down from Buy to Accumulate.
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 volume of about Euro 4.1bn and allocated in Germany (45% ), Austria (14%) and Eastern and South Eastern Europe (41%, thereof Hungary is 12% and Poland 10% and Romania and Czech Republic at 7% both). 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 2015. By doing this, CA Immo rebalances the group's portfolio picture towards office and 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. 2016 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 2006 2016 bond and the issue of 2016 2023 and 2016 2021 bonds) will help to further reduce the cost of debt (falling from 2.9% in 2015 to 2.3% in 2016 and probably below 2% in 4Q 2017). 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. In October 2017 the company issued a Euro 200m convertible running until April 2025 with a very low 0.75% coupon. 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 2016. 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 more than Euro 100m. CA Immo has also rock solid balance sheet metrics with an equity ratio of 52% and a net LTV of only very low 37% 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 about Euro 250m 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 1.8bn book value potential to be realized (with a targeted development margin of c. 20%). Source: Company Data, SRC Research 2 2 SRC Equity Research
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 2016 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%). At 9M 2017 even almost at 94%. 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. CAI is on track to boost FFO I from Euro 92m in 2016 to over Euro 100m for full 2017. With a gross initial yield of 6% 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 9M 17 l-f-l growth was at 3%. 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 now 24.20 per share. At the moment CAI has about 5.6 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
Occupancy goes up from a high level to almost 94%, after the little dip in first quarter, like-for-like rentals up 3%, overall portfolio not aggressively priced at 6.0%, many prominent new rentals in 9M Source: Analysts Presentation, 23 November 2017 The company is well on track to reach all 2017 targets for growth, value realization and a strongly improved debt side Source: Analysts Presentation, 23 November 2017 4 4 SRC Equity Research
31/12 IFRS ('000) 2013 2014 2015 2016 2017e 2018e 2019e CAGR '16 - '19e Rental income 281,470.0 145,195.0 154,817.0 165,603.0 172,834.0 186,090.0 211,020.0 8.4% Proceeds from property sale (Trading Portfolio) 29,211.0 14,870.0 9,535.0 28,099.0 27,700.0 20,150.0 41,227.0 Expenses from property disposal (Trading Portfolio) -16,957.0-6,145.0-6,446.0-18,669.0-20,184.0-14,520.0-31,201.0 Subtotal Trading Portfolio 12,254.0 8,725.0 3,089.0 9,430.0 7,516.0 5,630.0 10,026.0 sale margin (Trading Portfolio) 41.9% 58.7% 32.4% 33.6% 27.1% 27.9% 24.3% Proceeds from property sale (Hold Portfolio) 889,444.0 213,210.0 231,635.0 274,030.0 147,442.0 133,117.0 254,662.0 Expenses from property disposal (Hold Portfolio) -826,240.0-183,383.0-195,088.0-250,691.0-112,788.0-102,702.0-198,785.0 Result from property sales (Hold Portfolio) 63,204.0 29,827.0 36,547.0 23,339.0 34,654.0 30,415.0 55,877.0 sale margin (Hold Portfolio) 7.1% 14.0% 15.8% 8.5% 23.5% 22.8% 21.9% Operating costs passed on to tenants 68,513.0 33,471.0 38,290.0 46,906.0 46,356.0 43,895.0 47,899.0 Revenues from construction 1,751.0 0.0 0.0 0.0 0.0 0.0 0.0 Hotel operations (net) and income from services 1,518.0 17,746.0 16,470.0 13,265.0 10,200.0 6,547.0 7,895.0 Total revenues including the net gains from disposals 428,710.0 234,964.0 249,213.0 258,543.0 271,560.0 272,577.0 332,717.0 8.8% Operating expenses -77,890.0-39,261.0-44,567.0-52,726.0-44,480.0-41,152.0-46,788.0 Other expenses directly related to Hold-Portfolio -21,500.0-10,560.0-12,948.0-12,633.0-8,212.0-7,450.0-10,252.0 Expenses for construction -4,612.0-3,175.0-2,158.0-2,333.0-1,050.0-350.0-1,250.0 Admin expenses -38,158.0-44,386.0-42,452.0-44,140.0-38,955.0-37,556.0-37,887.0 Own works capitalised 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other operating income 9,226.0 11,469.0 1,470.0 873.0 2,545.0 11,542.0 12,448.0 EBITDA-profit (cash-driven operating profit) 295,776.0 149,051.0 148,558.0 147,584.0 181,408.0 197,611.0 248,988.0 19.0% Gains from Fair Value Adjustments (IAS 40) 47,834.0 34,121.0 257,563.0 179,094.0 86,445.0 105,665.0 125,000.0 Losses from Fair Value Adjustments (IAS 40) -81,555.0-38,331.0-43,744.0-40,834.0-42,445.0-25,350.0-21,452.0 Net result from Revaluations (IAS 40) -33,721.0-4,210.0 213,819.0 138,260.0 44,000.0 80,315.0 103,548.0 Depreciation and amortisation of long-term assets -6,342.0-10,285.0-2,915.0-3,460.0-1,745.0-1,852.0-2,120.0 Depreciation of properties of Trading-Portfolio -500.0 204.0 32.0 29.0-180.0-200.0-354.0 Result from investments in joint ventures 0.0 8,157.0 43,221.0 11,420.0 52,563.0 5,845.0 6,210.0 Operating Profit (EBIT) 255,213.0 142,917.0 402,715.0 293,833.0 276,046.0 281,719.0 356,272.0 6.6% Net financial result -171,641.0-58,346.0-86,702.0-56,228.0-34,556.0-35,455.0-42,557.0 Pre-tax profit (EBT) 83,572.0 84,571.0 316,013.0 237,605.0 241,490.0 246,264.0 313,715.0 9.7% taxes on income -33,185.0-13,773.0-95,174.0-53,688.0-45,662.0-47,558.0-67,387.0 tax-rate 39.7% 16.3% 30.1% 22.6% 18.9% 19.3% 21.5% minorities -2,050.0 0.0 0.0-7.0 0.0 0.0 0.0 Net Profit after minorities 48,337.0 70,798.0 220,839.0 183,910.0 195,828.0 198,706.0 246,328.0 10.2% number of shares without own shares ('000) 87,856.1 92,907.1 97,941.7 94,995.3 93,235.1 92,800.0 92,510.0 Earnings per share (Euro) 0.55 0.76 2.25 1.94 2.10 2.14 2.66 11.2% Dividends per share (Euro) 0.40 0.45 0.50 0.65 0.75 0.85 1.00 Book Value per share (Euro) 21.23 21.01 21.65 23.21 25.09 26.60 28.50 7.1% NAV per share (Euro) 20.47 19.75 21.90 26.74 28.45 29.55 31.25 NNNAV per share (Euro) 21.25 20.36 22.69 24.56 26.20 27.30 29.15 5.9% Key Data Shareholders' Equity 1,865,182.0 1,951,707.0 2,120,410.0 2,204,495.0 2,339,720.2 2,468,826.2 2,636,520.7 6.1% 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) 644.3 689.0 641.0 1,175.6 1,330.2 1,467.1 1,677.8 thereof Austria ('000) 671.9 664.0 587.6 551.3 565.3 572.5 610.1 thereof CEE and SEE ('000) 1,792.3 746.0 1,250.0 1,492.4 1,430.0 1,538.7 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 486,355 165,800 171,600 438,485 175,900 254,500 345,685-7.6% RoE (pre-tax) 4.5% 4.3% 14.9% 10.8% 10.3% 10.0% 11.9% RoE (after tax) 2.6% 3.7% 10.8% 8.5% 8.6% 8.3% 9.6% Total balance sheet sum 4,910,888.0 3,670,941.0 3,983,983.0 4,309,138.0 4,567,686.3 4,695,581.5 4,996,098.7 5.1% Equity ratio 38.0% 53.2% 53.2% 51.2% 51.2% 52.6% 52.8% 1.0% 5 5 SRC Equity Research
SRC Research - The Specialist for Financial and Real Estate Stocks - SRC - Scharff Research und Consulting GmbH Klingerstr. 23 D-60313 Frankfurt Germany Fon: +49 (0)69/ 400 313-80 Mail: scharff@src-research.de Internet: www.src-research.de Rating Chronicle Date Rating former share price former target CA Immo August 24, 2017 Buy 22.46 25.00 CA Immo May 24, 2017 Buy 21.17 24.00 CA Immo March 22, 2017 Buy 19.10 24.00 CA Immo November 24, 2016 Buy 16.34 22.00 CA Immo August 25, 2016 Buy 16.58 21.00 CA Immo May 25, 2016 Buy 16.40 21.00 CA Immo April 20, 2016 Buy 17.03 21.00 CA Immo March 24, 2016 Buy 16.75 21.00 CA Immo November 26, 2015 Buy 16.60 21.00 CA Immo August 26, 2015 Buy 15.79 21.00 CA Immo May 29, 2015 Buy 16.21 20.30 CA Immo March 23, 2015 Accumulate 17.37 20.30 Please note: The CA Immo share price mentioned in this report is from 23 November 2017. 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-60313 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 www.src-research.de. 6 6 SRC Equity Research