While FY15 kicked off with the lucrative disposal of the Gateway project and strong land banking activities, the performance slumped in 2H15. Furthermore, FY15 had to become the year of the merger between Immobel and Allfin (30% shareholder), but the talks collapsed. So what does the future now hold?

Immobel 2.0. The new management team will shift focus towards more recurring income, likely on the back of a higher portion of residential and mixed projects. We understood that a minimum of 10 to 15k sqm is targeted, which would be more aligned with Immobel’s expertise. The new team will revamp the business by the adding of new projects and increasing pipeline rotation.

FY16 result could surprise. We expect the net result to vanish this year, plummeting from € 20m to € 1m. In FY16, we however bank on a revival in net result towards € 6m or even € 16m (incl. the sale of the Black Pearl). In FY17, we bank on € 21m. This corresponds to EPS forecasts of € 0.24 in FY15, € 4.00 in FY16 and € 5.14 in FY17 and DPS estimates of € 0.0, € 2.00 and € 2.50 respectively.

Investment case: Immobel benefits from a well-diversified portfolio and sound balance sheet. In the short to mid-term, we see 4 triggers: 1) despite a gloomy but transparent portfolio update, we believe that the operational performance in FY16 might surprise positively. The disposal of some projects will free up cash to reinvest, while EU interest in the Black Pearl could lift the net result, 2) increased pipeline rotation and more recurring income should improve the earnings profile, lifting the ROE towards 10% (vs. 5.7% average FY10-15E), 3) Merger still in the air? We expect a second attempt in the mid-term and 4) we believe the share reaction to the profit warning is overdone. We value Immobel at € 50 (30% upside) offering a nice entry point.