The Ibex 35 companies erase the collapse of the stock market due to the frustrated change of their tax regime

Barring any last minute surprises this Thursday, Spanish SOCIMIs will continue to benefit from their special tax regime which allows them to pay corporate tax at 1%. And you can feel it on the floor. The companies within Ibex 35, Inmobiliaria Colonial and Merlin Properties, are rebounding on the stock market and now trade above previous level make it known that the Government and its partners were preparing a tax reform which directly affected these real estate companies and compromised their future dividends.

But ultimately, the proposal remained a proposal after the Finance Committee this week. Although the government is still in the negotiation phase with the rest of the political parties, it seems unlikely that a tax reform will be carried out for investment groups in real estate assets which devote at least 80% of their profits to the distribution of dividends. Since the lowest observed last week, Merlin has rebounded by 8.9% while Colonial has advanced by 6.6% to 5.54 euros per share.. That is to say, they erase the last collapse and Merlin returns its annual accounts positive, with an increase of 4.2%, while Colonial reduces its decline for the year to 15.3%, compared to almost 21% that he lost after knowing the tax.

Several analyst firms left their valuations under review because they expected that these companies would be forced to allocate a lower amount to shareholder remuneration or that their ability to generate cash would be diminished. Colonial estimates that its earnings per share could fall between 1% and 2% if it had to pay tax under the same conditions as the majority of companies in this country. In the case of Merlin, its cash flow (FFO, funds generated by operations in a real estate company) would be reduced by 8.5%, as Renta 4 points out. But the reality is that today, the valuations of Ibex 35 SOCIMI are higher than they were two weeks ago.

The market consensus collected by FactSet estimates that Merlin Properties’ price target is 12.97 euros, implying a potential of almost 26%. With this assessment, the company It would be listed again, more than four years later, above pre-pandemic levels. And the truth is that up to a dozen experts see Merlin setting new all-time highs on the stock market in the coming years, surpassing the current levels set at 13.41 euros.

On the side of Inmobiliaria Colonial, the consensus price target amounts to 6.97 euros, which would imply a journey also ahead by 26%. Trading at this level would mean seeing Colonial back to June 2022 levels. That same Wednesday, JB Capital showed new optimism with SOCIMI and raised its recommendation from Hold to Buy.

During this whole process, both companies presented their results for the third quarter of the year, which exceeded market expectations, according to Bankinter.

Even with these latest increases, both companies continue to offer attractive stock discounts to their asset value (NAV). Specifically, Colonial is acquired at a 43% discount to its net asset value. The property company established in its half-year results (the data is reviewed every six months) the value of its assets at 9.66 euros per share. This figure implies a further reduction compared to the 10 euros set at the end of 2023. The reduction is even greater from one year to the next, while in the first half of the previous year the NAV was 10.88 euros. .

For his part, Merlin’s discount drops to 32%. In its case, however, the company changed the value of its assets upwards at the last review, to 15.11 euros, compared to 15.08 euros per share at the end of 2023. However, as with Colonial, the figure is lower than the same period of the previous year, 15.36 euros.