On Friday, Barclays (LON:BARC) initiated coverage on PSP Swiss Property (PSPN:SW), a prominent player in the Swiss commercial real estate market, with an Overweight rating and a price target of CHF135.00. The firm highlighted PSP's well-located assets and its lower leverage, which provides the company with the flexibility to focus on external growth opportunities. These opportunities are anticipated to arise in the upcoming quarters, a strategy that Barclays supports within the real estate sector.
The company's income returns are currently lower than some of its office sector peers, with a 4.1% yield expected to grow to 4.4% by the fiscal year 2028, compared to a flat 5.3% for other pure office coverage. Despite this, Barclays believes that PSP Swiss Property's robust capital structure and limited refinancing cost pressures offer a balanced profile for investors. The firm also commends PSP's prudent management approach and its exposure to a stable market.
The analyst from Barclays underscored the attractive pricing of PSP Swiss Property as a means to gain exposure to the Swiss commercial real estate (CRE) market. This market is favored by the firm, as indicated in their European Equity Strategy report from January 24, 2024, which discusses the upward trend in mergers and acquisitions and capital market activities within the sector.
The Overweight rating suggests that Barclays expects the stock to outperform the average total return of the stocks covered by the analyst in the sector over the next 12 to 18 months.
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