On Wednesday, JPMorgan raised its stance on Covivio (COV:FP), a real estate investment company, from Neutral to Overweight. The firm also increased the price target for Covivio’s shares from €57.00 to €64.00. The upgrade comes amid JPMorgan’s view that the company currently trades at attractive valuation levels, including a 30% discount to its Net Asset Value (NAV), which is notably higher than the European sector average discount of 20%.
Covivio’s portfolio, which includes a significant 20% allocation to hotels, is identified as a structurally growing asset class with strong operational momentum. Additionally, positive operational trends in French offices and German residential properties contribute to the favorable outlook. According to JPMorgan, these factors present an improved risk-reward scenario for Covivio, even after its approximately 9% outperformance against the EPRA index since August 24.
The analyst highlighted that recent marketing activities indicate a renewed investor interest in office spaces, an asset class that represents half of Covivio’s exposure. This shift in investor sentiment could potentially lead to a rotation into this asset class. Furthermore, JPMorgan anticipates that the company’s financial performance for the fiscal year 2024 will surpass current Bloomberg consensus estimates and company guidance, projecting an EPRA earnings per share (EPS) of approximately €470 million compared to the consensus of around €460 million.
The report also points to possible consensus upgrades driven by Covivio’s strategic emphasis on hotels. European hotel performance is on the rise compared to 2023, with Revenue Per Available Room (RevPAR) in Europe showing an average increase of about 4%. This growth is supported by higher occupancy rates and average prices, suggesting a continuation of the positive momentum in the market.
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