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On Wednesday, Kepler Cheuvreux analyst Frederic Renard adjusted the firm’s stance on Care Property Invest (CPINV:BB), downgrading the rating from Hold to Reduce, while simultaneously increasing the price target to €13.00, up from the previous €12.00. This decision comes despite Care Property Invest’s recent announcement of positive first-quarter results and an increase in its financial guidance.
The company’s first-quarter performance was bolstered by a one-time event, leading to an upgrade in its earnings guidance from at least €1.07 to €1.08. Renard suggests that Care Property Invest may be understating its projections and could potentially raise its guidance further within the year. However, he also points to concerns regarding the company’s growth potential due to a limited development pipeline.
Renard further notes the company’s current loan-to-value (LTV) ratio, which stands above 45% prior to dividend payments. This high leverage ratio could restrict the company’s ability to grow, and Renard speculates that a capital increase might be necessary. Alternatively, Care Property Invest could choose to either delay investments to reduce leverage or proceed with asset disposals, both of which carry their own risks to earnings.
The downgrade by Kepler Cheuvreux is described as a tactical move, acknowledging the inherent risk in the context of ongoing mergers and acquisitions within the healthcare sector. Renard also points out specific features of the Belgian market, such as finance lease arrangements in Care Property Invest’s portfolio, which could influence consolidation trends.
Despite the positive quarterly report and the potential for increased guidance, Kepler Cheuvreux’s downgrade reflects a cautious approach to Care Property Invest’s stock, considering the uncertainties surrounding its growth prospects and financial strategy.
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