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On Tuesday, Goldman Sachs adjusted its price target on shares of Merlin Properties Socimi SA (MRL:SM) (OTC: MRPRF), marking it down to €13.80 from the previous €13.90. Despite this slight decrease, the firm maintained its Buy rating on the stock. The revision followed the company's nine-month financial results for the year 2024.
The Goldman Sachs analyst noted that the new 12-month price target represents a 1% decrease from the prior target, but still suggests a significant 39% upside potential for the real estate investment trust. The adjustment was attributed primarily to a 4 basis point increase in the weighted average cost of capital (WACC), which was influenced by a higher risk-free rate.
The firm also reviewed its earnings per share (EPS) forecasts for Merlin Properties for the period from 2024 to 2028. Estimates were altered to range from a decrease of 7% to an increase of 1%. This change takes into account several factors, including anticipated higher interest costs, which are partly due to increased investments in pre-let pipeline projects such as logistics.
Additionally, the analyst mentioned a slightly slower expected ramp-up in data center operations in 2025. This is because management is concentrating on pre-letting both buildings in Bilbao as part of a single deal.
However, this is somewhat offset by a modest increase in rental income assumptions for data centers, which have gone up by 5% following recent lease agreements that were signed at rates above initial underwriting projections.
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