recommended as buy

broker report still bouncing between 40c -50c

Recommendation Buy
Risk Rating High
Current share price $0.43
12 month target price $0.60
Price range - high/low $0.25 - $1.405
Market capitalisation $252m
APN/UKA European Retail Property Group (AEZ)
manages 36 individual retail assets across Europe.
After stapling in July 2007, AEZ has expanded into
pan-European asset management, property
syndication and commercialisation activities.
AEZ is focussed on growing security holder value
through a combination of secure income streams
and capital growth initiatives.
We initiate coverage on AEZ with a Buy, High
Risk recommendation and $0.60/security DCF
based price target.
Investment View: AEZ has had a tough time with
the twin effects of the credit crunch and a difficult
European property market. Management has
responded quickly to steady the portfolio and begin
the process of restoring security holder value.
· Strong portfolio of assets. Characterised by
long leases, high occupancy, strong tenants.
· Earnings cut at interim FY’08. DPS now 9cps
p.a. with cash EPS rebased to 8.2cps FY’08.
· Headroom on debt. RBS has agreed to higher
LVRs and lower interest coverage covenants,
easing current pressure on the balance sheet.
· Immature property market. Europe is undersecuritised
and under-supplied in terms of retail
property, providing opportunities for AEZ to
export their skill in retail property management.
· Key drivers: Development of pan-European
property and asset management business.
Diversification of recurrent revenue streams.
· Key Risks: Executing new business strategy,
balance sheet issues, rising cap rates, European
recession, ability to raise third party equity.
Recommendation: Buy with $0.60/security price
target implies a 12 month total return of +45%.