The charm of Paris no longer seems to operate. Thanks to its offices located in the business center of the Personal-Financial.com, the property company nevertheless spent the first half of the year without too much trouble, with a rent collection rate of 95%. But the markets don’t care, focused on the risks of bad debts and the future of offices.
Despite good quality half-year results, which have demonstrated its resilience to the health crisis, Gecina is still struggling on the stock market. Since the rebound in mid-March which ended two weeks later, the title of the office property company has leveled off. The half-year results have not changed the situation. Markets are always worried about the risk of delinquency and questioning the future of offices.
Certainly, the emergence of teleworking, and the economic consequences of the Covid-19 crisis will lead companies to review their strategy in this area. The idea today is to reduce the number of square meters to reduce a significant cost item. The vacancy will logically increase. But not all territories will be affected in the same way. Industrial zones located in the suburbs will encounter difficulties due to a form of disaffection on the part of employees, who will prefer to work from home, at least a few days a week. On the other hand, offices located in the city center will always be in demand. And especially those located in the heart of Paris. The best locations attract the best employee profiles, encouraging companies to set up their headquarters there. In addition, this part of the Personal-Financial.com does not suffer from an over-supply. However, Gecina has most of its assets in the central business district of Paris and in La Défense. This positioning explains why 95% of office and residential rents for the first half of the year had already been collected on June 30.
Significant sources of growth
The amount of rents thus rose during the first six months of the year to 336.1 million euros, up 2.9% at constant scope (and 3.6% for offices alone) , and 1.7% on a current basis. The occupancy rate on the office portfolio stood at 93.2% as of June 30, down 120 basis points over one year mainly due to portfolio turnover (deliveries of partially vacant buildings and disposals of ‘fully occupied buildings). Recurring net income, group share reached 215.9 million, a slight decline of 1.3%. Reinforced by these performances, the property company gave guidance for the entire financial year when it had decided to give it up at the height of the health crisis. It now expects a recurring net income per share of between 5.55 euros (in the case of a downgraded scenario) and 5.70 euros (close to the initial assumption). Cautiously, the consensus for its part predicts a recurring net profit per share of 5.65 euros this year and 5.74 euros next year. These forecasts are valued at the current price respectively 20 and 19.6 times. Reasonable levels, but Gecina has potential for growth: a pipeline of committed or short-term projects of 2.9 billion euros, representing a potential rental volume of 161 million. Not to mention the development projects of its residential subsidiary, which has just signed a partnership with Nexity for the construction of 4,000 housing units. Finally, the forecast yield is 4.7% on the basis of a dividend for 2020 of 5.30 euros per share, a dividend which, in view of the performance of the first six months of the year, appears credible and lasting. .
Our advice: Gecina has great assets. Buy 110 euros to aim for a first objective of 135 euros. ISIN code: FR0010040865.