GTC: Expansion in Romanian retail segment on the way

GTC informed about beginning of construction of three shopping centres in Romanian medium-sized cities – Buzau, Piatra Neamt and Suceava. This is only the start of GTC’s plan to build about 10-12 similar facilities in Romania within the next 4 years, where the main tenant should be SPAR food store chain.

Our view: The details about first three shopping centres have been on the market since GTC acquired necessary land for these projects during 2006. However plan to replicate the idea also to other 7-9 Romanian regional cities is new. Based on similar parameters to the first three project and our conservative assumption that company could deliver additional 100,000 sqm and achieve average rent of EUR 20/sqm with 8% market yield, our rough estimate is that it could add some PLN 2.5/share to our valuation. Although GTC doesn’t have the plots for these projects yet we see this expansion strategically positive, based also on the experience in CEE3 countries. It’s a bet on increasing property prices and purchasing power of citizens in the regions which not a lot of international players target at the moment, however they start to more and more evaluate them as the competition in Bucharest is increasing. We reiterate our Buy recommendation.