We’ve updated our model following the acquisition of the Crescend’eau retail park announced last Friday. This update also includes some disposals, an increased number of shares and a slightly lower yield in our growth projections. We therefore slightly trimmed our EPS estimates to € 3.47 in FY12/13 and € 3.74 in FY13/14. Hold rating and € 53 TP maintained.
We’ve updated our model following the announcement last Friday re the development of a new retail park (Crescend’eau) in Verviers together with Allfin Group. This project confirms our expected growth projections for the company. However, we lowered our rental income estimates as we had already pencilled in rental growth one quarter ahead of the delivery and we have also increased the number of shares given the equity funded initial investment.
As a result of our modifications, we slightly trim our FY12/13e EPS from € 3.54 to € 3.46. We additionally added some disposals in our model, as the company yearly improves its portfolio through the disposal of non-strategic assets. Furthermore, in our new growth projections, we revised the initial yields slightly downwards as a reflection of the market trend –i.e. increased demand and higher risk appetite result in lower yields. Hence, we revise our FY13/14e EPS from € 3.99 to € 3.74. This corresponds still to strong growth in DPS: € 2.9 in FY12/13e and € 3.1 in FY13/14e. Also the company’s NAV is expected to show structural growth.
As mentioned on Friday, we make no changes to our investment case. Retail Estates is the reference player in the retail market and differentiates itself through strong deal-making skills, a pro-active management strategy and its focus on the niche market of out-of-town retail. This results in a strategically well-located portfolio, occupied for more than 98% and this already over the past decade. Combined with a strong balance sheet, the company is able to perform strongly, resulting in annual EPS and NAV growth. Following our EVA and DCF valuation, we attain a theoretical fair value range between € 52.9 and € 53.4. We therefore reiterate our target price of € 53 p.s. and rate Hold.