Rodamco is beginning to reap the benefits of its expansion towards the Far East and is expected to outperform its Dutch competitors in 1996.
Despite a dip in net profit last year to NLG 443m, from NLG 453m in 1994, Rodamco looks well-placed for the next 12 months, according to analysts at Amsterdam-based Kempen & Co. The merchant bank rates the stock as an outperformer.
Last year saw an active turnover in the portfolio: acquisitions and new investment commitments totalled NLG 1.4bn, while sales added up to NLG 650m. A revaluation of the portfolio saw a fall in the European properties of 1.1%, while North America showed an uplift of 1.4% and the Pacific region shared an increase of 6.4%.
Rodamco’s strategy of switching more money into the Far East is clearly showing results. Among the properties traded last year was the company’s 50% stake in the Strathpine shopping centre in Brisbane, Australia. Rodamco acquired the investment three years ago for A$ 52m and sold it last year for A$58m.
In local currency, Rodamco achieved an 11% annual return on the investment.
The strength of the guilder means that currency fluctuations continue to have a negative impact on the company’s indirect investment result (revaluations of the portfolio and the impact of currency movements). The value of the portfolio was revised downwards by NLG 44m last year as a result of currency changes. This was less dramatic than the decline in 1994, when negative currency movements added up to NLG 227m.
Rodamco has said it is expecting net profits for 1996 to dip slightly this year, but Kempen & Co analysts Broudewijn Brouwer, Arjan Knibbe and Max Berkelder are forecasting that Rodamco’s shares will show a higher total return than any of the other property companies quoted on the Amsterdam exchange.
They are estimating a return of 11.3% for the 12 months from the begining of April.
They point out that Rodamco still has significant cash reserves and add: “The two crucial factors for growth of profits in the next two years are the short-term interest rates and the pace of investment.”
The only other stock rated by Kempen & Co as an outperformer is Schroders Investment Property Fund, while four companies rate as underperformers: VIB, Rodamco Retail, Capa City and German City Estates.
VIB’s figures were disappointing, say the analysts. In spite of low expectations, the decline in profits was worse than anticipated. The reasons for this was the relatively high vacancy level in the portfolio (currently 8%) and the fact that VIB has only been able to reinvest a limited amount of the money it has raised through disposals.
Despite previously stating that it did not expect any further downward revaluations, VIB revised its portfolio down by 1.5% to NLG 2.3bn.
“We are not very optimistic about the prospects for growth in earnings per share over the next few years,” say the analysts.
Kempen & Co, tel +31 20 557 1571
