UCB: 1Q12 indicates FY12 sales expectations are on track

Cofinimmo will publish its 1Q12 results on Wednesday 2 May before market. There will be no conference call.

The top lineis expected to be substantially higher as a result of the exceptional € 11.2m indemnity paid by Dexia for the Livingstone building. Other factors influencing the 1Q12 result will be the Avenue building in Antwerp and the nursing homes of the Silverstone portfolio. As such we expect rental income to come in at € 59m vs. € 46m in 1Q11. Furthermore, we expect larger relative property charges and an operating result before result on portfolio (EBITDA) equal to € 54m.

The acquisitions in the first semester led to an increase of the debt amount and as such we expect financial charges to increase to € 18m vs. € 14m in 1Q11. We estimate an increase in minority interests as the 5% interest of Senior Assist in Silverstone is now included.

All these factors lead to an expected net current result of € 33m or € 2.17 per share vs. € 25m or € 1.67/sh CCS. We believe however that CCS doesn’t take into account the exceptional indemnity paid by Dexia. Regarding the non-cash items, we expect the portfolio in 2012 to keep its value (after four years of negative revaluations). Therefore, we expect the fair value changes to be more or less neutral. Cofinimmo did not report any sale or divestment in the first quarter so we expect capital gains to be zero as well. The fair valueof Cofinimmo’s financial instruments is expected to be negative as long-term interest rates dropped in 1Q12 vs. 4Q11. However, as these changes are non-cash this impact is of minor importance. We expect Cofinimmo’s net result to equal € 32.2m vs. € 24.8m 1Q11.

Conclusion:
Our view did not change since our initiating report last month. We expect Cofinimmo in 2012 to further reduce its office portfolio and on the other hand to consolidate its diversification strategy. From a strategic point of view, we appreciate Cofinimmo’s diversified portfolio with long-term indexed contracts and its presence in niche markets such as nursing homes and student housing. But we can’t neglect the negative impact of the current malaise in the Brussels office market. Still half of Cofinimmo’s portfolio exists out of offices, of which 50% in the periphery and decentralized zone. These factors support our Hold recommendation and € 96 TP.