UBS: GTC Poland is Eastern Europe real estate top pick

The bank has initiated coverage with a Buy rating and a 17 target price, a 20% premium on the market price

UBS has picked Kardan NV (TASE: KRNV;AEX:KARD) sub-subsidiary Global Trade Centre Poland SA (WSE:GTC) (GTC Poland), held through Global Trade Centre Real Estate NV (TASE:GTC) as its preferred real estate stock in Central and Eastern Europe. UBS has initiated coverage of GTC Poland with a Buy recommendation and target price of 65 zloty (17), a 20% premium on its current price of 54 zloty. The company has market cap of 3.18 billion.

The Swiss bank says, GTC offers good exposure to the retail, office and residential markets in the Central, Eastern and Southeast Europe regions. We believe the company is well positioned to benefit from the high and sustainable growth in the Central, Eastern and Southeast Europe property markets. We expect the company to post 27% growth in adjusted net asset value, with the 1.7 billion development pipeline and 1.4 billion residential sales program the main internal drivers of this strong growth.

Managements excellent track record makes us comfortable about the execution of the program. We see like-for-like rental growth and further yield compression as additional value drivers. GTC is our preferred play in our CEE real estate universe.

Our price target of 17 is based on a 50% premium to the revalued 2008 estimate net asset value. It reflects a strong growth outlook, driven by its development pipeline, high quality management and first-mover advantage in Southeast Europe. GTC is currently trading at a 27% premium to our revalued 2008 estimate net asset value. We believe that GTC offers attractive value at current levels.

Regarding the Eastern European market, UBS says, The key drivers of the regions attractive growth outlook are the strong macro environment, the favorable supply/demand momentum and the continuing flow of funds, in our view. While we are positive about Central and Eastern Europe, we think that the South Eastern Europe and Commonwealth of Independent States (CIS) regions have the best growth potential.

GTC Poland operates throughout Eastern Europe through subsidiaries. Its flagship project is the 57,000-square meter Galleria Mall in Bucharest, Romania, which is due to open in 2009. The company predicts 17 million in annual rent from the property.

Kardan rose 0.4% in morning trading on the both the TASE and Amsterdam Bourse and GTC Real Estate rose 3.4% on the TASE, but GTC Poland fell 0.7% in Warsaw.

Published by Globes [online], Israel business news - - on October 18, 2007

Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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