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Unibail-Rodamco-Westfield: Capital Structure Creates A Good Entry Point For Long Calls

Dec. 05, 2021 12:56 AM ETUnibail-Rodamco-Westfield SE (UNBLF)6 Comments
Ivo Kolchev profile picture
Ivo Kolchev


  • Q3 results demonstrate operations can stabilize at a level around 10% lower than 2019. I estimate the current run-rate for Adjusted Recurring EPS to be around 7 EUR/share, absent restrictions.
  • Higher cost of debt and lower valuation net initial yield make for a tough comparison with European peer Klepierre.
  • The Loan-to-value should dip below 40% even if assets are disposed of at around the current marked-implied net initial yield of around 5.75%.
  • The current Adjusted Recurring EPS multiple of around 8.3 is very attractive but is likely to be watered down by disposals.
  • The most attractive way to position in the shares seems to be via long call options or via a long straddle.

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Investment Thesis

I believe Unibail-Rodamco-Westfield (OTCPK:UNBLF), which I will refer to as URW here after, offers an interesting long call opportunity at the current share price, driven by a weak performance over the past 6 months, down

This article was written by

Ivo Kolchev profile picture
I ventured into investing in high school in 2011, mainly in REITs, preferred stocks, high yield bonds. More recently I have been combining long stock positions with covered calls and cash secured puts. I approach investing purely from a fundamental long-term point of view. Currently I mostly write articles for various websites. Previously I have worked as a data analyst at Dynamo Software serving clients in the asset management industry, at the Bulgarian stock exchange cash market operations desk using the T7 trading system, as an analyst/portfolio manager focused on Western Europe, as well as a junior accountant for special purpose vehicles issuing CLOs & CDOs . I just started a PhD in Finance (topic is valuation of banks, REITs, insurance companies and asset managers) and have passed the Level 3 of the CFA exam.- Disclosure: I am not a financial adviser. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of WRDEF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

Darren McCammon profile picture
France just voted to require proof of vaccination to go into bars and restaurants (maybe malls too?).

I don't find comparing Debt/Market Cap very useful as it penalizes a firm for being rated too cheap by Mr. Market. I'd use LTV to compare debt levels between Klepierre and URW.
Ivo Kolchev profile picture
@Darren McCammon the passport will for sure create some near term uncertainty, we'll see, as for the debt to market cap you are right, it may point to that the company is undervalued, using several measures is always the best approach, LTV is also nice as long as valuation assumptions are comparable, the yields used for LTV calculation at URW are among the lowest in the sector, somewhat justified by premium assets, but still something to be aware of. So far restrictions in the US seem rather limited so it should create a favorable disposal environment in 2022 and 2023.
tonor profile picture
Nobody will buy URF’s malls today. Brookfield is tired of the game, Blackstone isn’t interested, Starwood failed miserably. My view is Simon is waiting for URW’s US mall pain to feel more severe, then in a few years negotiate a deal.
Bitzap profile picture
Their plan is to divest a large chunk of the portfolio, which will most likely keep bringing NAV down for years. Avoid. Buy Klepierre instead.
The overleverage means this company is a sinking boat. You have to be quite skillful to make money out of this situations so is probably for the few rather than for the many. Plus there is no dividend. If you want to make a sound investment in this area I would stick with Klepierre, which has much lower leverage and is showing strong signs of being able to recover pre-Covid earnings. I would not be surprised if we see Klepierre getting close to 40 euros in 2 to 3 years which means a 100% upside + dividends.
URW is a desaster. Only a bet of getting better. But "hope dies at last" says a russian wisdom.
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