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Czech markets  |  September 13, 2012 07:49:51

ORCO: Time to buy?

We reduced our target price for the shares of € 4.3 ORCO at € 1.65 with a recommendation to "keep". The success of the restructuring process, in which it was able to convert ORCO significant portion of their bonds for shares, and a shift in loan refinancing GSG gives the company a chance to survive. Upon conversion of bonds into shares of the company should be practically free bonds (left only about 76 million), the uncertainty in the context of a rescue plan should be overcome.

Shift, however, significantly increased the number of shares - from 17.1 million to 108.3 million. Book value per share is expected to fall this year to EUR 5. The higher number of new shares would reduce the net asset value (NAV) from € 22.4 to € 5.58 per share.

GSG also signed preliminary refinancing plan in the amount of EUR 270 million, which exceeded our estimate. Refinancing debt GSG together with the previous exchange bonds for shares gives us a solid chance of survival.

ORCO - investment recommendations


  • An exchange of bonds into shares at a price above the current market value

  • Positive revaluation of the growing availability of rented premises in the German GSG portfolio

  • A renewed decline in yields in the region

  • Refinancing more than 90% of the debt in the amount of EUR 286 million related to the GSG portfolio.

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  • Impaired financing and difficult to refinance short-term debt outstanding and the possible forced sale of assets

  • The negative influence of the number of new shares in the markets

  • The decline in income from rents and low interest coverage in the event of a recession in the CEE region


Despite the fact that it is at present (due to the restructuring and unclear strategy refinancing short-term debt) is relatively difficult to estimate the medium-and long-term cash flow ORCO , the valuation of the company, we have used the standard DCF model. The risk-free rate in the detail of the model was set at 3.2% and the continuing phase, we used a rate of 3.5%. First of all, thanks to the successful restructuring of bonds are slightly increased growth in the continuing phase of 2% and a beta was due to the risk profile of the company set to 2

Our one-year target price was set at € 1.65 per share.

How expensive are the shares of Orco over the competition can be found on the web investment .

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