3 March 2020 9:30

Compelling returns for shareholders in 2019

... but IGD's stock is still undervalued

IGD’s stock price rose 15.2% in 2019 and provided a Total Shareholder Return of 25.5%. Even at recent levels, however, the stock is still trading at an ample discount compared to its NNNAV per share of €10.92 and the consensus target price of €7.83 which indicates that the stock is still significantly undervalued.   

The Board of Directors proposed payment of a dividend of 50 euro cents per share for 2019, unchanged compared to 2018. If approved by shareholders during the Annual General Meeting, at current prices this would provide a dividend yield close to’8%. 

 

Source: Italian Stock Exchange and EPRA data compiled by IGD

 

From November 2019, when the last newsletter was published, through today IGD’s stock continued the rally begun mid-August and reached the period high of €6.44 on November 29th of last year. As of mid-November 2019, the stock returned to trading just above €6, testing the €6.4 level on several occasions.

The stock markets began 2020 with a generalized positive trend, boosted by Phase 1 of the trade agreement signed by the USA and China on January 15th, while the prospect of an organized Brexit provided the market with greater clarity. This, however, does not mean that sources of concern which increase the risk perceived by investors did not materialize in the first weeks of 2020. If tensions in the Middle East caused an increase in volatility, without compromising the upward trend of the main stock indices, the impact on global economic growth of the spread of the Coronavirus has yet to be understood.

Over the last few months the real estate sector has benefitted from the sector rotation of large institutional investors, with different asset managers taking on stocks trading at high multiples in order to invest in more undervalued sectors. While an ideal value stock, for the moment IGD has yet to benefit from this rotation as the focus is mainly on large caps.

IGD’s equity story, however, still stands on very solid and visible pillars: on the one hand the dividend yield 2019 which, if approved by shareholders, will be just below 8% and, on the other, the capital that should be invested in the PIR funds following approval of new legislation.

On 20 February 2020, before publication of the FY 2019 results, the brokers’ consensus price was €7.83 euro, well above the recent market levels. There is also still an ample discount with respect to IGD’s EPRA NNNAV per share, calculated based on the real estate appraisals at 31 December 2019, of €10.92.