On Monday, CFRA upgraded Klepierre (LI:FP) (OTC: KLPEF) stock, a French retail real estate investment trust (REIT), from Hold to Buy while maintaining a price target of EUR27.00. The firm's decision comes after observing a 6% decline in the company's share price over the past month, which it considers a significant movement for French retail REITs.
The upgrade reflects the analyst's view that Klepierre's fundamentals remain strong, as evidenced by the company's first-quarter 2024 gross rental income (GRI), which improved by 3.4% year-over-year to EUR296.4 million. The positive performance is further supported by a 4.3% year-over-year increase in retail sales and a 3% improvement in foot traffic during the same period.
Klepierre's recent strategic moves also contributed to the positive outlook. On May 27, the company completed the acquisition of RomaEst, a major shopping mall in Rome, for EUR200 million.
This acquisition is expected to add approximately 1% to Klepierre's total portfolio value. RomaEst is one of Rome's largest malls, boasting 97,000 square meters of space and an annual footfall of 10 million visitors.
The REIT is also anticipated to benefit from the recent interest rate cut by the European Central Bank (ECB) on June 6. The analyst predicts that the lower interest rates should lead to an improvement in Klepierre's EPRA Net Tangible Assets (NTA) per share in the second half of 2024, due to better property valuations.
The firm's forecast for Klepierre's funds from operations (FFO) remains unchanged, with a projection of EUR2.68 for 2024 and EUR2.75 for 2025. The maintained price target is based on a Price-to-Book ratio of 0.89x, which aligns with the company's seven-year average valuation.
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