Weak profitability: The adjusted EBITDA margin (excl. results of property sales) was up sequentially to 38.9% in 3Q 17 but that is very weak in comparison to Austrian peers. We think the current level of the adj. EBITDA margin at IMMOFINANZ is low although the vacancy rate of the portfolio improved from 15.8% in 2014/15 to 7.1% in 3Q 17, the Russian portfolio has been sold and the group realised employee cost savings. Recurring earnings (FFO I) of EUR 3.5 mn were in positive territory but still very low3Q 17. Adding one quarter of annual dividend payments received (EUR 5.3 mn) would lead to EUR 8.8 mn of recurring earnings in 3Q 17, which implies an annualised return on EPRA NAV of 1%, which we think is still meagre. Using our FFO I estimate of EUR 96 mn for 2019e the RoNAV is still below 3%.
 
Demanding valuation: Our unchanged target price of EUR 2.00 is based on the average of DCF and RoNAV valuation methods as shown in more detail later in this report. In terms of P/FFO 2018e the group trades at 31.0x, which is far ahead of the peers average and in terms of EV/EBITDA 2018e IMMOFINANZ is also trading at a significant premium of 27.9x against a peers average of 21.3x. Given the current poor profitability excluding Russia and despite the expected improvement of earnings until 2019e we see no reason for further re-rating of the stock.