18 May 2018 11:34
The point of view business results shopping centers

The Chief Executive Officer’s point of view

Dear Shareholders,

in these first few months of 2018 IGD posted a series of important results. After publishing the FY 2017 results which showed strong growth, on 18 April we successfully completed the €150 million capital increase and were able to then finalize the acquisition of a strategic portfolio comprising four shopping centers and a retail park from ECP for €195.5 million, including transaction costs. If we add the first quarter results to this picture, the beginning of 2018 is very encouraging.

Very briefly, the 16.7% increase in net profit recorded in the first quarter of 2018 reflects, on the one hand, improved operational management which fueled a 4.7% rise in EBIT, and on the other hand, the 13.3% drop in financial expense linked to the continuous decrease in the cost of debt which reached 2.75% in the first quarter.

The operating indicators confirm the validity of the commercial and asset management policies in place. There was an average upside on the new leases signed with mall tenants of 3.0% in Italy and of 1.5% in Romania. Occupancy is still high, reaching 96.8% for the Italian malls and 97.1% for the Romanian ones, while sales for retailers in Italian malls were 3.0% higher than in first quarter 2017.

As shown in our income statement, the strong performance of these indicators translated into a 5.2% increase in rental income, which reflects a rise of 2.5% and 4.1% in Italy and Romania, respectively, as well as the incremental contribution made by the ESP extension, inaugurated last June.

In the first quarter of 2018 FFO, or Funds from Operations, which expresses the result of our operational efforts quite effectively, rose €2.7 million against the same period of 2017 to €18.3 million.

The 17.5% increase in FFO is already in line with our guidance for FY 2018 which calls for an increase in this indicator of between 18-20%; however, as we will see the full contribution of the assets acquired last 18 April in the second half, we will be updating the estimate when the half-year results are announced in August. We are confident in an upward revision of the guidance.

We are convinced that the stock market will appreciate the confirmations that emerge from the performances posted in the quarter which come in the wake of the important results achieved in 2017.

Based precisely on the positive full year results and consistent with our commitment to providing our shareholders with attractive returns, the BoD proposed payment of a dividend of €0.50 per share, an increase of 11% against the 2016 dividend. With a view to rewarding the transaction subscribers, the new shares issued as a result of the capital increase will also be entitled to receive the dividend.

The dividend yield is not the only element, at this point, that makes our stock particularly interesting. If we take into account the independent appraisals made at year-end 2017, the EPRA Triple Net Asset Value post capital increase comes to €11.4 euro per share: a level which is well below recent prices and indicates, therefore, that there is ample upside. The stock is also trading at an ample discount to the target consensus price of the analysts covering the stock, currently €9.63.

By the end of the year Beni Stabili will likely be merged with its French parent company, Foncières des Regions: IGD, therefore, will soon be the biggest Italian SIIQ listed on the Italian stock market in the real estate segment. Even if we would prefer to see further growth in the Italian SIIQ sector, we believe this development will provide our stock with additional visibility.

Today, in fact, IGD represents a solid, growing company, with a real estate portfolio worth almost €2.5 billion, which could become a “billion company” , including in terms of market capitalization, if the value of its fundamentals and future growth prospects are fully expressed in its stock price.