13 May 2021 12:00

With the reopening of the shopping centers the rise of IGD’s stock shape

Investors’ attention is now focused on the opportunities created by the economic recovery expected to materialize in the second part of the year when the last anti-Covid restrictions will also be eliminated as the vaccine roll-outs are completed. The 10.7% rise in IGD’s stock price since the beginning of the year reflects these expectations, but not completely: there is still room for further upside in this new scenario.


Source: Italian Stock Exchange and EPRA data compiled by IGD


In the first four months of the year, IGD’s stock rallied (+10.7%), slightly higher than the Italian stock exchange index (+8.9%) and decidedly better than the benchmark real estate sector index, the EPRA/NAREIT Developed Europe (+4.2%). Only the retail real estate index has risen slightly more than IGD since the beginning of 2021 as result of a strong rebound in the wake of a long and profound correction: in 2020 the EPRA/NAREIT Developed Europe Retail index, in fact, fell 50.9% versus a drop of 41.9% for IGD’s stock.

Today investors view the most credible scenario as strong economic recovery in the second part of 2021. Even though the third wave of the pandemic brought new lockdowns throughout Europe, the markets are focused on the medium-term prospects when the vaccine campaigns are expected to result in a level of immunity that should preclude any further major limitations on mobility and socialization.

If in February fears that an overheated economy could result in inflation – with spikes in bond yields – as of March these concerns waned. The stock markets also benefited from the statements made by the central banks which excluded the possibility of restrictive monetary policies in the near future.

Once the concerns seen in February about higher interest rates were overcome, in the last two months the stock markets have pegged their hopes on the vaccine roll-outs which have become key: only when the anti-Covid measures have been eliminated will the fiscal policies enacted to sustain investments and consumption be able to fully express their positive effects.

In the first few months of the year investors have, therefore, preferred cyclical sectors and those that benefit from higher commodity prices, along with financial stocks. They have also looked for stories with highly visible growth prospects and compelling multiples, targeting value stocks.

The performance of the real estate sector varied greatly from segment to segment: while the stocks tied to logistics, given the clear growth prospects, continued to be the favorites along with a few self-storage and healthcare operations, while offices and residential were part of broader “stock picking” strategies. As for retail, which continues to be the hardest hit by the anti-Covid restrictions, the investors were more interested in the property companies with food anchors and retailers of essential goods, like electronics, in their shopping centers.

With regard to IGD specifically, after having closed 2020 at €3.60 euro, on 10 February it reached its first period high of €4.17. After the results for FY 2020 were published on 25 February and it was announced that in order to ensure the Company’s financial sustainability a dividend would not be paid, the price entered a new period of correction during which on 25 March the stock hits its new low for the year of €3.39. The understanding – which materialized gradually after the publication of the Annual Report 2020 – that 2020 was the most difficult year in IGD’s history and that the results could have been much worse if management hadn’t acted effectively, as well as the fact that at €3.4 IGD was very undervalued and the announcement of new reopenings as the vaccine roll-outs progressed, rapidly drove IGD’s stock price back toward the highs for the year.

At the price recorded at 30 April, of €3.94, there is still ample upside as demonstrated, on the one hand, by the strong discount with respect to the NAV/NRV 2020 of €10.38 and, on the other, the marked difference with respect to the average target price of the brokers covering the stock of €4.60.