14 May 2019 17:48

IGD’s stock price outperforms the benchmark indexes

In the first months of 2019 stock markets rallied across the board, with prices recovering after the sudden and profound correction that took place in the latter part of 2018. The 2019 rally was sustained by the central banks’ more accommodative approach, in light of the economies showing weakened growth, but without imminent risk of a recession; the expectation that the outcome of the USA-China trade talks would be less negative than expected also materialized in the first part of 2019; a belief which has only been tested in the last few trading sessions.

In this environment IGD’s stock price climbed 24.5% against the price recorded at year-end 2018, while the Italian index rose 16.3% and the European real estate index, EPRA NAREIT Europe Index, 12%.

IGD’s outperformance was sustained, in addition to the decided rebound that followed the penalizing valuations recorded in December 2018, by the results for FY 2018 which confimed the company’s solid fundamentals and the ability to achieve the targets included in the Business Plan 2018-2021.

Source: Italian Stock Exchange and EPRA data compiled by IGD


The prices of European real estate stocks got fresh energy from the ECB’s decision to maintain interest rates unchanged through the end of 2019 as a more accommodative stance was deemed necessary to sustain inflation in economies where growth remains relatively stable. The elements tied to retail consumption and the uncertainties of Brexit are, however, still not favorable to the prices of real estate equities.

On the other hand, the risk perceived by investors about a possible recession remains small in light of the scenario that has prevailed over the first few months of 2019. The figures relating to GDP in the first quarter have also made the need to stimulate growth through economic policies less urgent and financial stability has become the priority.

Ten years after the beginning of the expansion phase of the economic cycle, in the first quarter of 2019 GDP grew 3.25% in the US. In the Eurozone it was up 0.4% in the quarter. GDP also recovered slightly in Italy, +0.2%, after declining in the last two quarters of 2018. The topic of debt sustainability has, instead, returned to the forefront. Companies with high levels of debt are viewed with sceptisism given a possible rise in the cost of debt beginning in 2020. This resulted in performance differentiation based on the health of the single company and the exposure to global market conditions in a risk on environment in which investors, in the first part of 2019, seemed generally in favor of equity investments.

Despite the significant rebound recorded in the first four months of 2019 and outperforming the benchmark indices, at recent prices (around 6.7) IGD’s stock is still trading at a strong discount against the NNNAV per share of 11.45 calculated year-end 2018 and compared to the consensus target price of 8.08 expressed by the brokers covering the stock which indicates there is still ample room for further upside.