Rating update about Vienna-based residential property player conwert Immobilien

SRC Research the bank-independent analysts house for Financials and Real Estate stocks today presents a rating update about Vienna-based residential property player conwert Immobilien. The company has an approx. Euro 2.7bn portfolio. The core portfolio of the company are residential properties in good German or Austrian locations with a superior quality which have a stake of 72% of the the total portfolio. The non core portfolio are commercial properties or properties which are not in the targeted regions. This part of the portfolio was already significantly reduced in the last year and in the first quarter of 2016. The stake of the non-core portfolio was at 28% at the end of March.

Today, the Austrian Blue Chip residential property player released its 1Q 2016 report. The company delivered a very good operating performance with higher net cold rents and a further shrinking vacancy, in particular (but not only) in the core portfolio. The net cold rent per sqm and month increased by 2.4% to Euro 6.44. In the core portfolio the NCR even hiked by 3.1% to Euro 5.84. With an intensive property management and after the sale of non core assets in the last year the vacancy of the overall portfolio came down from 9.4% to 7.2%. In the core portfolio the vacancy reduction was even more impressive, from 5.0% to only 3.5%. The good operating performance in the property portfolio helped to accelerate the FFO I number from Euro 12.7m to Euro 18.2m which is a steep hike of 43%. After the promising start into the new year the conwert management decided to lift the full year FFO I guidance from Euro 65m to Euro 70m.

The picture was also good on the trading activities. Year-to-date conwert sold about Euro 145m, even if there is only Euro 38m in the P & L of the first quarter. The high Euro 145m is an encouraging number for the company's full year target of Euro 300m to Euro 350m. It is noteworthy that conwert sold about 4% above book value with regards to the first quarter sale transactions. Keep in mind that about 90% of first quarter sales were non-core assets.

Even if the 1Q bottom line was impaired by non cash items regarding the change in the value of ineffective interest derivatives (Euro -15.5m), we decided to lift our conwert target price from Euro 15.00 to Euro 15.50 after the good operating performance in the initial quarter and the higher company's guidance for the full year FFO result. We also maintain our Buy recommendation, even after the good share price performance in recent days. For any queries regarding our conwert update please do not hesitate to contact us.

conwert Immobilien will join our 2016 investor event Forum Financials & Real Estate on 8 September at the Frankfurt Hilton. You will find more information and the opportunity for a cost-free registration on www.src-research.de/forum