PARETO Securities UPDATE: Victoria Park - The current portfolio is not enough
The current portfolio is not enough Three recently announced acquisitions have pushed the share far ahead of our target price, which is justified. Nevertheless, the full potential in the total portfolio is fully reflected in the current share price, without discounting for time and risk. Additional acquisitions would also be a trigger to the case, but should need an equity injection and would hence be less share-driving. We hike our target price to SEK 25 (17.5) but reiterate our SELL recommendation. A larger balance sheet allows for a higher target priceThe new acquisitions (see next page for details) certainly lift the warranted value and are the main reason for our target price hike – long-term potential has indeed increased. However, the recent share rally has effectively erased the potential, since we once again believe the market has discounted more than the full potential from the added property assets, in terms of earnings/value-generating renovations. At SEK 25 (our new target price), the share trades at a 4% NAV premium in a “fully renovated portfolio scenario”, given the assumptions we use. A trigger to the case would be of course new acquisitions, which to some extent are already reflected in the current price, in our view. A required yield cut would be another trigger, but is not potent enough for us to take a positive stance. We calculate ~SEK 170m in H2 2016 unrealised value increases from investments (SEK 719m for full year 2016) and SEK 502m (including SEK 42m from Limhamn co-ops) for 2017E. Significant premium despite value growth aheadAlthough we are in general positive towards the business model, value creation to a moderate risk, we cannot justify a positive stance. We calculate SEK 425-450m in value-creating capex annually for 2017-2018E, which would provide SEK 400-500m in excess property values. That will take P/NAV to 144% in 2017E and 124% 2018E, which makes us believe that the share is fully valued near term. |