Q3 21 was further confirmation of a polarising market: CBD experiencing nice performances whereas peripheral locations continue to loseng steam. The heart of Gecina leans on CBD.
Companies: Gecina (GFC:EPA)Gecina SA (GFC:PAR)
Gecina’s H1 21 figures showed the great resilience of Paris CBD, where the bulk of its €20bn assets leans (€4bn in La Défense). End-market data don’t show a strong adjustment in either rents or price per sqm in Paris CBD, even if the same parameters are a bit more worrying at the fringe of it.
Adjusted for exceptional items, the performance of Offices was -0.7% in Q1 21. Net of the positive indexation of 0.8%, the negative 1.5% mirrored the 130bp degradation in occupancy yoy (-140bp sequentially). Gecina is highlighting an improving end-market. As far as we are concerned, we believe in a catch-up phase.
Gecina’s guidance doesn’t account a strong increase in forward vacancy nor diminishing rents. It highlighted the +2.7% in Paris CBD (Offices) and the +7% in Residential values, both in FY 20. However, Gecina’s assets were up 1% in H1 20 and down 1% in H2 20 (sequentially). Nothing worrying at pixel time.
Companies: Gecina SA
The Q3 20 performance was good overall with still high rents in the City of Paris inducing a positive reversion. Gecina confirmed, unsurprisingly, some growing uncertainty in both the first and second inner rings.
Office values were safe in Paris CBD in H1 20 (or two-thirds of Gecina’s portfolio) due to stable but toppish rents. Reversion now clearly turned into negative territory in both the 1st and 2nd inner rings of Paris. This was the logical continuation of the fragilities identifiable since mid-2019.
Shopping malls have experienced down values in Europe since 2018 but Offices reached their tops in February 2020. We now anticipate a 10-15% cut in values, as a minimum. It was 18% in 2008-09. We now factor it in our model for Gecina.
One again, in FY 19, revaluations were very positive in the French Offices’ market. Provincial assets (Lyon, Bordeaux…) registered 7% valuation growth (mostly in H2 19). It led Gecina’s net capitalisation rate to 3.90% (Offices, all areas) with another slight yield compression of 20bp. The latter favoured the best central locations, while the inner and outer rings of the City of Paris were much less resilient. Gecina’s recent share price reaction confirmed vulnerability to macros. Negative stanc
The Q3 19 set of figures demonstrated the resilience of Gecina’s assets, i.e. its Prime Offices and apartments in the very heart of the City of Paris. There was no red flag but some fragilities have become progressively more concrete in both the first and second rings around the City.
Confirming market information, the Offices segment of the City of Paris signed another good half, including a slight yield compression of 14bp. The trend weakened clearly in La Défense where we can worry about the coming over-supply and was negative in both the 1st and 2nd rings around Paris (rental values are now in negative territory).
The Parisian office market shows remarkably robust figures in terms of vacancy and rents in Q1 19. Nevertheless, we cannot consider it as completely immune to macro issues. We therefore adopt a more cautious stance by adjusting both the target price and recommendation.
Good FY 18 figures. The good pipeline ensures 2019-2021 average 4% growth in revenue and net recurring profit in our view. However current Capitalization Rates on some assets are approaching the limit of potential value destruction.
Gecina continued benefiting from positive trends in the Paris Region office market, particularly in Paris CBD. Demand remained good, pumping up rental prices.
Gecina benefited from positive trends in the office market in Paris and favourable funding conditions (targeting LTV below 40%). Rental activity was supported by the lack of available spaces (in Paris mostly, where 89% of Gecina’s portfolio is located). Management raised its earnings guidance to +8% (vs. +6% previously) growth in recurrent EPS and an organic growth of +2% for offices (as estimated in our model). We stick to our earlier positive stance on the stock.
Gecina’s GRI increased by 3.5% yoy (2.1% lfl) to €558.9m (higher that estimates), and EBITDA was up by 3.8% yoy, to €453.5m. This has led to a 4.6% increase in recurrent net income to €363.5m, exceeding the company’s initial expectations. The performance was driven by Eurosic’s integration and the optimisation of financial expenses. We will revise upwards our numbers, including Eurosic’s integration.
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Companies: MJ Hudson Group Plc
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Companies: Caracal Gold PLC
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