Gagfah Raises Profit Forecast After Rental Income Increases

Gagfah SA, the third-biggest owner of German homes, raised its earnings forecasts for this year and next after the company generated more rental income and paid less interest on loans in the first quarter. The shares climbed to the highest in six years.

Funds from operations excluding asset sales, a measure of a real estate company’s ability to generate cash, will be as much as 86 euro cents ($1.20) a share in 2014, the Luxembourg-based company said in a statement today. That’s up from a January forecast of as much as 82 cents.

Gagfah has been selling properties to help refinance debt and withdraw from regions that aren’t vital to its business. The company’s first-quarter FFO rose to 22 cents a share from 12 cents as rental income increased 2.2 percent, according to the statement.

“Our efforts to further improve our operating performance are clearly paying off,” Chief Executive Officer Thomas Zinnoecker said in the statement.

Gagfah gained as much as 2.7 percent to 11.9 euros in Frankfurt, the highest since May 2008. The shares have advanced 12 percent in the past six months, raising the company’s market value to about 2.6 billion euros.

Gagfah confirmed a plan to pay a 2014 dividend of as much as 25 cents a share for 2014. The last dividend paid was for 2010, according to data compiled by Bloomberg.

The dividend for 2015 will be as high as 50 cents a share, Gagfah said. FFO for that year will be 91 cents to 93 cents a share.

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