Investing In RE Companies: Analysts Share Their Top Picks

11 July 2016 – Expansión

The constraints that several British real estate funds are facing following Brexit has placed the focus on the RE sector once again. “With globalised markets, an event in one country has an impact around the world. In the short term, it is likely that property companies will decline in the United Kingdom, as well as in other European markets”, says Mar Barrero, from Profim, but she is certain that the chances of a contagion, affecting companies and real estate funds in Spain, are minimal.

Indeed, the effects of the result of the British referendum on the real estate market may also be positive. At least, that is according to Pablo García, from Carax Alphavalue. “If companies that are currently headquartered in London change their centres of operation, there will be activity in the sector to mobilise offices in Europe. In this context, Paris, Barcelona and Madrid would be well positioned”, he assured and, for this reason, he is positive about the sector.

Barrero justifies her optimism by the “purge that has taken place in the last 10 years, which has led to a significant cut in property prices”. “In Spain, we are in a different phase of the real estate cycle”, says Rubén de la Torre, from Andbank.

Merlin Properties: The industry giant on the stock market and one of the shares with the highest percentage of buy recommendations, according to the consensus of Bloomberg analysts, with support from 85% of them. After overcoming the risk of a possible interventionalist government, De la Torre points to its size as one of Merlin’s positive features. “Its listing on the Ibex gives it visibility and its merger with Metrovacesa will allow it to enter the orbit of many funds” says the expert. In addition, it has managed to diversify its profile through its latest acquisitions.

And as if that weren’t enough, its shares are trading at attractive prices, given that, according to the analyst, they are being traded at a discount of almost 20% with respect to their net book value. The Socimi has potential, according to the consensus, of 21% following a YoY decrease of 18.5%.

Colonial: This is Pablo García’s favourite security due to the quality of its assets and its exposure to the French market, which allows it to diversify. In any case, he believes that the growth of the company will come from its Spanish assets. According to other experts, the company’s decision to start paying dividends again (at the start of July, it paid its first dividend for ten years) is another of Colonial’s attractive features. 66% of the analysts advise buying this security, which they say has potential to increase by 19%. The share price has fallen by 1% so far this year.

Hispania: De la Torre says he also likes this share, “which is very linked to the hotel sector” (…). The company has recently closed a capital increase amounting to €230 million to finance new investments. 57% of the analysts advise buying this share, which has an upside potential of 18%. Its price has fallen by 9% so far this year.

Axiare: The only Socimi that is unlikely to increase its capital this year, given that its net debt is almost non-existent. (…). 63% of the analysts advise buying this security, which has upwards potential of 13%. This year, the share has fallen by 9.8%.

Lar España: A share that is very dependent on the economic cycle due to its significant exposure to the shopping centre segment. (…). 80% of Bloomberg’s analysts advise buying this share, with an upside potential of 38%. This year its price has decreased by 23%.

Other real estate companies: the stock market is also home to other real estate companies, which, due to their small size or limited monitoring by analysts, are at the mercy of speculative movements. Shares in Inmobiliaria del Sur, Quabit, Renta Corporación and Urbas tend to be highly volatile.

Original story: Expansión (by R. Martínez)

Translation: Carmel Drake

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