Still a buying opportunity

– Immoeast has made good progress in its restructuring process so far, reducing the risk of bankruptcy considerably. The confirmation of the financial statements by the auditors contributed to the reduction of this risk and therefore also had a positive impact on the stock price. After the rally seen in the last couple of days, Immoeast has closed its valuation gap to its Austrian peers, but is still traded at a large discount to its BVPS and NAV. Although there are still some restructuring issues open and property markets in CEE have not yet reached bottom, we remain positive on the stock and see it as buying opportunity. We upgrade our recommendation to Buy (from Accumulate) and increase our target price to EUR 4.2 (previously EUR 2.0).

– As in the previous quarters, 4Q was again heavily burdened by negative adjustments in the property and financial portfolio, extending the full-year 08/09 net loss to EUR 2.3bn. The strong increase in rental income (+23% y/y) was mainly due to the first-time consolidation of Immoaustria, which was transferred to Immoeast as of March 1, 2009. The jump in the stock price seen with the announcement of preliminary FY08/09 figures had in our opinion little to do with the figures itself, but more with the statements of Mr. Zehetner during the press conference. Besides his optimistic statements concerning the development of the company and his cautiously optimistic view on property markets, the most material news was the confirmation of the financial statements of Immoeast and Immofinanz by the auditors, which reduced the risk of bankruptcy to basically close to zero.

– We have also seen positive signals from property markets in the United Kingdom and France, where rental yields declined q/q for the first time since the start of the financial crisis. Germany and most core CEE markets showed a yield stabilization, while CIS and Hungary recognized a further increase. EMEA prime rents are still under pressure, declining by 2.9% q/q in 2Q09.