The Zurich-based real estate and general contracting company Allreal was founded in 1999 and has been listed on the Swiss stock exchange since 2000.
Its real estate portfolio is valued at 3.6 billion for a market capitalization of 2.4 billion. Allreal is number 3 in Switzerland behind SPS and PSP.
Allreal is active only on the Swiss market and offers an interesting mix of residential buildings, commercial premises, parking spaces, warehouses, etc. Residential buildings have the advantage of being less subject to real estate cycles than commercial premises.
When acquiring new properties, Swiss real estate companies are facing strong competition from pension funds and insurance companies, which are keen on real estate in this period of low interest rates.
The equity of around 52% is very good for a real estate company. The return on equity (ROE) of 8.5% is also decent (in comparison: 6.4% at SPS, 10.4% at Intershop).
In addition, Allreal has managed to significantly reduce its vacancy rate in recent years (around 2.9% in 2017 compared to 5.1% in 2016 and 7.5% in 2015).
The dividend is quite attractive (current yield 3.5%), but we are not really dealing with a growing dividend, since it has only increased by 10% between 2010 and 2017. The dividend payout ratio generally hovers around 80%, which leaves little room for a substantial future increase.
The dividend does, however, have the advantage of being (for now) paid from capital reserves, making it tax-free. But given the decline in these reserves in recent years, there is no guarantee that this practice will last for more than a year or two.
Neither the price-earnings ratio (PER) nor the price-to-book ratio (PBR) are really appropriate for evaluating real estate values. The best measure is given by the NAV (net asset value).
At a price of 164.80, the premium compared to the NAV (which is around 132 fr. per share) is almost 25%. This premium is very high in historical comparison and limits the potential for appreciation. I was considering a purchase only at a price close to 150 fr.
There are currently much more attractive opportunities among Swiss real estate stocks...
Patient (Hannibal) reader, and the answer here, soon you will discover...
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Thanks dividinde for this analysis. A bit of Swiss real estate from time to time is good.
I share the same conclusions as you on this title: a little expensive and not really with a view to increasing dividends.
In short, we are VERY IMPATIENT to see your analyses of more attractive Swiss real estate companies!
Real estate in an asset portfolio always feels good. Especially in these times.
Yes, at this price it is too expensive and that is why, despite the quality of this company, I really cannot recommend the stock at the moment.
Patience, patience. (Baba au) Rome wasn't built in a day… 🙂