MS changes preferences within real estate ahead of 2023, ups LEG, cuts Icade

PSP Swiss Property AG

24/11/2022 14:25

** Morgan Stanley takes another stab at what it thinks is a
likely scenario for European property markets with property
valuations for both the UK and continental Europe likely to fall
despite indexation driving rents
    ** It argues that transition from 2022, characterised by
rate hikes, to 2023, with expected recessionary pressures,
requires repositioning 
    ** MS shifts focus to companies' earnings visibility with
leverage remaining a key variable, while it expects real estate
market to pay more attention to rents rather than yields
        ** Moreover, the brokerage assumes a meaningful
reduction in dividends, which may not be share price positive
initially, but could ultimately turn the tide for some companies
    ** Morgan Stanley ups Germany's LEG Immobilien  LEGn.DE  to
"overweight" from "equal-weight" on the assumption that the
company will cut the dividend in full come 2023 to give comfort
on the balance sheet and highlight compelling stock valuation
    ** The broker raises PSP Swiss Property  PSPN.S  to
"equal-weight" from "underweight," recognising defensive
qualities of the Swiss real estate 
    ** At the same time, it downgrades Aedifica  AOO.BR , French
Icade  ICAD.PA  and the UK LondonMetric Property  LMPL.L , all
to "equal-weight" from "overweight," seeing more opportunity in
other peers
 (Reporting by Anastasiia Kozlova)
 ((Anastasiia.Kozlova@thomsonreuters.com))