On Thursday, JPMorgan shifted its stance on Klepierre SA (LI:FP) (OTC: KLPEF), raising the stock from Underweight to Neutral and increasing the price target to €29.00 from €22.00. This change reflects a more positive outlook on the company's property value trends and rental growth.
The upgrade comes as Klepierre shows signs of resilience in rental growth evolution, countering previous concerns about a weakening European consumer and normalizing operational metrics. JPMorgan acknowledges that while the risk of a weaker consumer remains, their base case top-line estimates have been updated to reflect this.
JPMorgan has also adjusted its earnings per share (EPS) estimates for Klepierre, anticipating a 2% and 4% increase in '24 and '25, respectively. The forecasted improvements are attributed to higher top-line growth, driven by better-than-expected like-for-like (LFL) growth forecasts, contributions from value-accretive acquisitions, and lower debt costs.
The bank now projects an approximate 2.2% per annum EPS growth over the next three years for Klepierre, a revision from a previously flat growth expectation. The potential for even higher growth is linked to the possibility of lower interest rates.
Highlighting the company's performance in the first half of 2024, Klepierre's property values increased by 2% on a LFL basis. This marks a significant turning point for the company, with December 2023 identified as the time when property values began their upward trajectory. JPMorgan models a conservative 1% per annum LFL value growth over the next three years but sees potential for higher gains.
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