Globalworth Real Estate Investments Limited

Globalworth Real Estate Investments Limited (LON: GWI) is a FTSE AIM listed real estate entity active in Central and Eastern Europe.

Investment Rationale – HOLD at EUR 5.80

• Encouraging Market Dynamics: British house prices rose 3.4% in the three months to the end of November 2021, supported by low borrowing costs, strong job market, and a lack of homes.
• Solid Fundamentals: GWI has a strong portfolio value, strong asset management, and decent dividend yield to deliver significant value for its shareholders. Moreover, the economic activity is now expanding, and thus, GWI expects to pursue its expansion plans in Poland and Romania.
• Portfolio Growth: The total combined portfolio value increased by 1.3% to €3.1 billion as of 30 June 2021.
• Undervalued Multiples: On a forward 12-month basis - EV/Sales, EV/EBITDA, and Price/Book Value multiples of the Globalworth Real Estate Investments Limited are currently lower as compared to the corresponding multiples of the Residential & Commercial REITs industry.
• Technical Indicator: From a technical standpoint, 14-day RSI (~41.96) reflects that it is still close to the oversold zone and supporting the upside potential.

Risk Assessments

• Operational Risk: The lower occupancy in portfolios can impact the Company’s operating income. Moreover, the market conditions are expected to remain challenging as the new COVID-19 variant (Omicron) is emerging.
• Macroeconomic Risk: The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial and real estate markets. Adjacently, the anxiety over interest rates increase with a rise in US Treasury Yields can extend sell-off in the short-term.

Interim Results (for the six months ended 30 June 2021, as on 21 September 2021)

 (Source: Company Website)

• Revenue: The consolidated revenue declined by 5.2% in H1 FY21, reflecting the impact of the Covid-19 pandemic.
• Earnings: The earnings before tax were positive at €18.9 million in H1 FY21, against the loss before tax reported in H1 FY20.
• Strong Leasing: GWI reported a leasing transaction of 194,000 square meters (sqm) with 122 tenants during H1 FY21. The contract renewals represented 57.3% of total leasing activity in H1 FY21.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Valuation Methodology: Price/Book Value Approach (FY21) (Illustrative)

Conclusion

During the H1 FY21, the Company also acquired two light-industrial facilities in the western part of Romania for €17.9 million. Also, GWI’s portfolio is growing with new additions since its inception, while the Company has maintained a stable outlook from major credit ratings agencies. For H2 FY21, the primary focus of GWI will be the active management of portfolio of high-quality properties, so that the Company is able to quickly respond to new attractive opportunities. The stock made a 52-week high and low of EUR 7.50 and EUR 5.15, respectively.

Based on the continued strong total capital generation, decent pipeline of new propositions, solid balance sheet, supported by the valuation conducted above, we have given a “HOLD” recommendation on Globalworth Real Estate Investments Limited at the closing market price of around EUR 5.80 (as on 13 December 2021), while we look forward to taking fresh positions once the ongoing macroeconomic uncertainties fade away.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

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

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