Barclays cuts VGP as investment slowdown puts profits at risk

VGP NV

02/11/2022 08:07

** Barclays cuts VGP  VGP1.BR  by two notches to
"underweight" from "overweight", citing its "difficult position"
as elevated near-term risks are not offset with higher returns
    ** Although the Belgian real estate developer has a strong
record of building, letting and selling assets, Barclays warns
that without an active investment market this strategy may come
to a standstill
    ** "With no further disposals to JV partner Allianz
 ALVG.DE , the company is reliant on other funding partners or
additional debt to build out the pipeline," the brokerage says,
adding this increases financial and operational risks in highly
uncertain macroeconomic times
    ** It sees VGP's future returns more at risk because of its
relatively high starting loan-to-value ratio of 55% and reliance
on "development returns and cash recycling"
    ** "Ultimately, VGP needs to sell assets to free up cash so
it can replenish the development pipeline and reduce financial
leverage" - Barclays
    ** But given the investment slowdown, the broker says it's
unclear when a transaction market will emerge and at what
pricing
    ** This makes VGP's short- and mid-term profits and
financial position highly uncertain, it says
    ** Out of seven analysts, Barclays is the only one with a
"sell"-equivalent rating, while four rate VGP "strong buy"/"buy"
and two "hold"
 (Reporting by Piotr Lipinski)
 ((piotr.lipinski@tr.com))