Globalworth Real Estate Investments Limited (LON: GWI)

Globalworth Real Estate Investments Limited is an FTSE listed one of the leading real estate companies in Central and Eastern Europe, focusing on Poland and Romania. The Company acquires, develops, and manages commercial real estate assets, mainly in the corporate sector, catering to a growing variety of multinational corporations in the region.

Recent trend of dividend payments

   (Data Source: Refinitiv, Research done by Kalkine Group)

The board of the Company remains confident about the growth and follows a 90% payout dividend policy despite being hit by the Covid-19 pandemic in FY20. In FY21, the Company announced an interim dividend of EUR 0.15 per share which will be paid on 1 October 2021 (Ex-Dividend: 9 September 2021)

Growth Prospects

• Strengthening Through Selective Investments: The Company reviewed the development and investment pipeline considering the Covid-19 pandemic and focused only on development projects with significant pre-lets or advanced levels of construction. As a result, the Company reduced additional investment, which resulted in a strong cash position to capture the market or invest at the right price and time.
• Strong Portfolio: GWI has a standing portfolio value of €2.8 billion, and the Company made 37 investments with 64 standing properties offering 1.3 million sqm. Looking at the history, the Company has added €2.1 billion in the portfolio from FY16 to FY20, indicating strong asset management.
• Maintained Operational Efficiency Despite Pandemic: The Company’s portfolio comprises office and industrial spaces with limited exposure to retail. Therefore, it created a natural hedge against the pandemic volatility. The rate of collections for rents invoiced and due remained high at 99% during FY20, which resulted in a minor effect of 2.3% on the net income during the year.

Key Risks

• Macro Conditions: Negative trends in economic activity, and specifically the real estate markets in Poland and Romania, may affect the occupier demand, rental rates, and investment valuation in respect of the Group’s properties.
• Poor Investment Execution: Poor execution of the Group's strategy of investing in high-quality properties at sufficiently attractive valuations would affect the Group's maximization objectives in NAV and EPS.
• Valuation Risk: Any error or negative trend in valuations of properties would significantly impact the results (NAV and EPS) of the Group.
  

Now we will analyze some key fundamental and shareholders statistics of Globalworth Real Estate Investments Limited. 

Financial and Operational Highlights (for the 6 months ended 30 June 2021 as of 31 August 2021)

(Source: LSE Website)

• Net Operating Income decreased by 9.4% to €72.2 million compared to the H1FY21, mainly due to Covid-19 effect on markets.
• The Company's portfolio value increased by 1.3% to €3.1 billion, mainly due to new acquisitions and net positive impact from developments.
• The total annualized contracted rent increased by 1.0% to €185.2 million, comprising 91.4% from office and industrial properties and 94.7% in active leases.
• The standing portfolio footprint net increase of 31.7 thousand sqm to 1.3 million sqm of GLA in 66 standing properties.
• The Company acquired two high-quality logistics / light-industrial facilities in the western part of Romania with a total of 27.0 thousand sqm for €17.9 million, which are 100% let to two multinational tenants on 15-year lease agreements.

Financial Ratios (H2FY20)

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 10 September 2021, at 10:00 AM GMT, GWI’s shares were trading at EUR 6.00, down by 0.33% against the previous day closing price. Stock 52-week High and Low were EUR 7.50 and EUR 4.80, respectively.

On a daily chart, the stock price is sustaining between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the MACD line remained above the signal line, indicating potential upside momentum in the near term. 

Valuation Methodology: Price/Book Value Approach (NTM) (Illustrative)

Business Outlook

GWI delivered a resilient performance in H1FY21, driven by acquisition and development work done by the Company despite the Covid-19 pandemic. The Company remains optimistic about the growth in FY21, driven by a new project pipeline and strong demand for commercial properties in the region. Furthermore, GWI continues to pay a high dividend to its shareholders despite high investment in the project pipeline. The Company anticipates strong momentum in the region as more and more MNC’s enter the market. GWI maintains a solid financial position with a current ratio higher than the industry median of 0.85x. Overall, GWI focuses on high yield sites while maintaining a healthy dividend pay out to its shareholders. 

Considering the strong project portfolio, robust cash position, dividend policy, attractive project pipeline, with support from the valuation as done using the above method, we have given a "BUY" recommendation on Globalworth Real Estate Investment Limited at the current price of EUR 6.00 (as on 10 September 2021 at 10:00 AM GMT), with lower- double-digit upside potential based on 0.95x Price/NTM Book Value (approx.) on FY21E book value per share (approx.).

 

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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