Inflation and debt costs to weigh on Klepierre's growth - JPM cuts

Klepierre SA

06/04/2022 07:07

** J.P. Morgan cuts Klepierre  LOIM.PA  to "underweight"
from "neutral" saying disposable income pressure due to
inflation and higher borrowing cost risks will weigh on French
mall operator's earnings growth
    ** The above, with inflation reducing household spending,
and in addition to structural pressures from online retail,
could weigh on retailer sales and obstruct cost reduction, JPM
says
    ** JPM notes that interest costs have become a headwind for
the sector and estimates that each 50 bps increase in
Klepierre's cost of debt reduces net cumulative cash flow growth
by 40 bps CAGR a year
    ** JPM says that in this context, Klepierre outlook is
getting tougher, as lower debt costs and reduced share count
drove the majority of earnings growth since 2017
    ** The brokerage continues to prefer firms with "pricing
power; beds and sheds", particularly Unite  UTG.L , Grainger
 GRI.L , Vonovia  VNAn.DE , Segro  SGRO.L  and Warehouses de
Pauw  WDPP.BR , all of which it rates "overweight"
    ** Among 20 analyst covering Klepierre, six rate it "strong
buy/buy", five "hold", and nine "sell/strong sell"
     

 (Reporting by Diana Mandiá)
 ((diana.mandiaalvarez@thomsonreuters.com))