Steep rise of 2014 profits – net profit after minorities
+14% above the previous period - And another
good year ahead – target up to Euro 9.50

Today, the pan-European real estate investor S IMMO announced
his prelim figures for fiscal 2014. By comparison to
the previous year the operating profit (EBIT) steeply hiked by
45%, in absolute terms from Euro 95.7m to Euro 138.7m.

With regards to the net profit after minorities, S IMMO reported
an increase of 14% from Euro 27m to Euro 31m.
The growth was supported by rental successes in SEE, even
in the difficult market of Budapest. Here it was possible to
renew existing rental contracts with a volume of 7,000 sqm
and to let a volume of 9,000 sqm new. S IMMO has a high
occupancy rate of 91.1%.

Another value driver was the booming real estate market, in
particular the German capital Berlin, were S IMMO recently
initiated a “Shopping Tour” and acquired some promising
land bank in Berlin Friedrichshain and Neukölln and properties
like “Spreehöfe”. All in all, S IMMO bought four commercial
buildings in Berlin / Potdsdam with a gross floor
space of 35,000 sqm. In contrast to the recent acquisitions, S
IMMO also made some steps to streamline the portfolio by
selling some assets. In 2014 the firm mainly sold three residential
and one commercial building in Berlin, as well as one
commercial building in Austria, totalling to Euro 52m.

In 4Q 2014 S IMMO issued a 5 year corporate bond with a
low coupon of 3.0% p.a. and a size of Euro 100m. It was
three times oversubscribed. To further improve and simplify
the financial structure S IMMO recently decided, on 2 March,
to exchange up to 62.5% of the outstanding participation certificates
into a 10-year straight bond (3.25% p.a. coupon). After
a successful transaction the overall financing costs will
further shrink which is a relief for the future P & L. Another
good point is that the interest hedge derivatives will decline
continuously in coming years, which will have another positive
effect on the equity capital and the P & L.

After the healthy picture of 2014 numbers with a favourable
picture of operating performance and a steep growth
of profits, we stick to our Accumulate rating and decided
to lift our target price to Euro 9.50. Furthermore, we
might expect the management to propose a higher dividend
payment of 22 Cents, after 20 Cents for FY 2013.
Despite the healthy picture, keep in mind that the 2014
results were flattered by relatively high revaluation gains.

This sets a high hurdle for coming years to exceed these
profits. But in our view it is still possible to manage a further
rise of the bottom line by a much lower net financing
result as the amount of interest hedge derivatives will decline
by > 50% the next three years.


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