Socimis Are The Star Players In The RE Sector In 2015

22 April 2015 – Expansión

The value of companies in the sector has increased by 30% on average in 2015 / The Socimis Merlin, Lar España and Hispania are the analysts’ favourites to benefit from the recovery in the property sector.

The real estate sector is gathering strength on the stock exchange. So far in 2015, (the share values of) companies linked to the property sector have increased by 30% on average on the stock market.

Experts think that now is a good time to invest in these securities, given the strong economic outlook for Spain and the signs of recovery in their businesses. Investment in the real estate sector amounted to €2,463 million during the first quarter (of 2015), i.e. three times as much as during the same period last year. Analysts do not rule out that investment this year may exceed the record high of €11,470 million reached in 2007.

Factors in its favour

“Several factors point to an improvement of the sector: the rise in mortgage lending, the increase in (the volume of) sales, the reduction in the housing stock, and the increase in house prices”, says Victoria Torre, at Self Bank.

Nevertheless, the experts are not convinced: not all companies represent (good) investment opportunities. For Bankinter, it is still too early to back the traditional real estate companies and property developers, whose securities are small in size and have scarce liquidity. For that entity, the best opportunities in the sector are the Socimis (listed real estate investment companies). One of the major attractions of these companies is their returns: they pay out at least 80% of their profits to their shareholders and their returns per dividend can reach 4%.

The favourites in the sector

Merlin Properties is Bankinter’s favourite listed Socimi because it considers that it has an established investment portfolio, visibility over earnings and acceptable levels of liquidity and capitalisation. Juan Moreno, at Ahorro, also backs that company, whose (share price) has increased by 29.88% during the year. “Although (its shares) are trading slightly above our valuation (they closed trading yesterday at €11.76), we consider that the current environment of excess liquidity and low interest rates justify its current prices. The Socimi’s differentiating factor is its size, which allows it to access transactions for which there is less competition”, he explains.

Moreover, the returns on its dividends amount to 3.8%, i.e. the highest in the real estate sector. The six companies that track its value are advising (investors) to buy its shares. UBS gives it an upside potential of 6%, up to €12.41.

Another one of the options preferred by investors is Lar España. The company is a good way of betting on the recovery in the market for shopping centres. “It has just acquired the As Termas shopping centre for €67 million, which will help it to grow and boost its results”, says Remo Bosch, from the firm RBL Asesores. Lar’s share price has increased by 16% in 2015 and it has an upside potential of 10%, according to the consensus of analysts consulted by Bloomberg.

Moreno also thinks that Hispania is attractive. “It is proposing transactions that generate value, such as its agreement with Barceló, which in our opinion will generate €1.90 per share for every shareholder”, he says. He gives its shares a target price of €13.10, i.e. 4.5% above yesterday’s closing price.

Original story: Expansión (by D. Esperanza)

Translation: Carmel Drake