Discount to NAV still (too) strong

– We change our target price calculation method from purely DCF-based to a 90% DCF and 10% NAV per share weighting, as the company increasingly focuses on selling properties if reasonable prices are achievable. As a result, we increase our 12M target price to EUR 3.6 (from EUR 2.5) and confirm our Accumulate recommendation.

– The stock is traded at clear discounts compared to its Austrian real estate peers, based on P/BV and P/NAV, which is partly justified, given the low liquidity of the stock. We continue to include a 10% liquidity discount in our calculations.

– We slightly increase our EPS estimate for 2009 (from EUR -0.76 to EUR -0.56), due to a slightly lower estimated revaluation loss. For the following years, the EPS estimates are nearly unchanged (EUR 0.56 for 2010e and EUR 0.75 for 2011e).

– The company is still in negotiations to refinance some EUR 93.3mn in short-term loans. The management is rather relaxed about these negotiations, as the recent and further envisaged property sales have taken pressure from the company.

– The company applied a very intelligent hedging strategy, as it only secured about 1/3 of its outstanding loans against interest rate increases at the beginning of 2009. The company increased this hedging ratio to about 50% at the end of March and has thereby fully made use of the currently low interest rate levels. The company plans to increase the hedging ratio further, as soon as there are first signs of interest rates rises.