Aroundtown shares rise based on Investing.com’s updated FFO I guidance

Investing.com — Shares of Aroundtown SA (ETR:) rose on Wednesday after raising its full-year Funds from Operations (FFO I) growth guidance.

At 5:55 am (0955 GMT), Aroundtown was trading 3.7 percent higher at €2.355.

Aroundtown revised its full-year FFO I estimate up 3%, adjusting the range from €280 million – €310 million to €290 million – €320 million.

This adjustment translates to an estimated EPS of €0.27 to €0.29 per share, beating the consensus estimate of €0.286 per share.

“Results largely came in ahead of consensus, particularly earnings figures and LFL rent growth due to rent returns and indexation,” analysts at UBS said in a note.

The company reported like-for-like rent growth of 2.9% for the first half of 2024, a slight increase from the 2.8% reported in Q1.

This increase was driven by a 3.1% increase in rents in place, although occupancy had a minor negative impact of -0.2%.

The strongest rent growth was seen in the residential sector, which saw an increase of 3.8%, followed by hotels with 2.6% and office space with 2.4%. The EPRA vacancy rate fell marginally by 10 basis points to 7.9%, indicating stable demand in key segments.

On the asset management side, Aroundtown has made progress on asset disposals, signing €475 million to date and closing €340 million of that amount. This is part of the company’s broader plan to streamline its portfolio and improve financial stability.

Despite these positive updates, Aroundtown shares continue to trade at a substantial 67% discount to NAV, compared to an 18% discount for European real estate peers excluding the UK.

Morgan Stanley points out that while improved FFO I guidance and rental growth are positives, the company’s high financial leverage and reduced asset valuation returns remain significant concerns.

EPRA’s high LTV ratio of 62% and substantial discount to NAV reflect ongoing market challenges. Morgan Stanley has set a price target implying a 75% discount to NAV, resulting in a rounded price target of €1.50 per share.

UBS analysts, on the other hand, point to the positive impact of FFO I guidance and rental growth on Aroundtown’s financial performance. The increase in FFO I guidance is viewed as a sign of the company’s operational strength and effective asset management. However, UBS also sees a substantial downgrade, highlighting ongoing concerns about high leverage and potential further writedowns.

Analysts at UBS and Morgan Stanley point to some key risks. UBS notes that reliance on acquisitions could hurt FFO growth if market conditions change or if management overpays for assets.

The high level of acquisition activity can also put pressure on the company’s ability to drive value creation.