Klèpierre SA (PA:LOIM) is Europe’s top mall operator with over 100 shopping centers in more than ten countries. Malls, the saying goes, were getting killed by the switch to e-commerce and the pandemic only exacerbated that trend. However, not all malls were created equal.
Klèpierre does not operate just any mall. It owns the most luxurious properties in the best locations across Continental Europe. True, the stock is still in the doldrums due to Europe’s chaotic COVID response. But one needs to look no further than Simon Property (NYSE:SPG), Klèpierre‘s largest shareholder, to see what happens to top mall operators when restrictions are lifted.
Simon Property is up over 300% from its March, 2020, pandemic low at $42.28. As the business gradually returned to normal and pent-up demand materialized, the stock returned to fair value relatively quickly. In fact, in 2021 SPG is already on pace to reach and possibly exceed its record 2019 pre-pandemic FFO level.
Klèpierre Is Giving Investors A Second Chance
The same cannot be said about Klèpierre yet. In the first half of 2021, its malls were closed for an average of 2.5 months. Still, the company expects to deliver a respectable €2.00 (US$2.67) a share in FFO this year. Besides, its Elliott Wave structure points north, as well.
Unlike Simon’s 300% gain, the best Klèpierre bulls managed to achieve was a 158% rally between September 2020 and June 2021. Unfortunately, they gave half of it up over the following five months. From an Elliott Wave view though, the stock’s path looks like a clear 5-3 cycle.
The pattern is labeled 1-2-3-4-5 in wave (1), where wave 5 was an ending diagonal. The following decline to €17.93 can be seen as a simple A-B-C zigzag correction in wave (2) with a leading diagonal in wave A. If this count is correct, the trend can now be expected to resume in the direction of the five-wave impulse.
Given that Klèpierre is undervalued both on a NAV and P/FFO basis, we think targets above €30 (US$40.04) a share make sense in wave (3). The pandemic won’t last forever and while Simon Property is no longer a bargain, its European sibling is giving investors a second chance.