UPDATE: ISI Group Initiates Forest City Enterprises at Strong Buy on Discounted Valuation
ISI Group initiated coverage on Forest City Enterprises (NYSE: FCEA) with a Strong Buy rating and a $22 price target.
ISI Group analyst Samit Parikh noted, "Forest City is a deep value investment in our opinion, trading at a 37% discount to our ~$27 NAV (8.2% implied cap rate), and 15% discount to GAV (adjusting value for leverage). Shares are trading at such a discount for a variety of reasons which we believe could reverse over the next 12+ months, including leverage, which is too high at 12.6x net debt to annualized EBITDA (59% debt to GAV), income upside that has not been realized in large development projects over the past 2 years, and lack of visibility with the dedicated REIT community as the company is not a REIT and out of most benchmarks, and multiple business segments makes it difficult to analyze and value."
Forest City Enterprises closed at $16.92 on Thursday.
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