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Cibus Nordic - A strong base for Swedish expansion

Cibus Nordic enters the Swedish property market with the EUR 180m portfolio acquisition of 111 Coop supermarkets. We view the deal as a fine way to gain more property mass and extend geographical reach in a controlled manner. Our new TP is SEK 155 (150), rating HOLD.

We believe Cibus is an ideal owner for the supermarkets

Cibus acquires a portfolio of 111 properties located in Southern Sweden for EUR 180m. The portfolio of grocery properties belonged to Coop, the second largest grocery retailer in Sweden (19% market share), which had acquired the portfolio last year from Netto. Coop will provide some SEK 3m into each store for rebranding purposes and sign 10-year triple-net lease contracts. In this sense the new Swedish portfolio is even more cost-efficient from Cibus’ point of view. The longer lease contracts will lift Cibus’ WAULT to 5.5 years from 4.9 years. Coop has in total about 800 stores in Sweden; thus the 111 properties mean Cibus’ relationship with Coop can be compared to that with Kesko, considering Cibus’ properties amount to more than 10% of Kesko’s facility sourcing. The properties now acquired are relatively modern (83% were either constructed or renovated during the last 15 years), and are mostly located in residential areas, traffic routes and city centers. The typical property is only some 1,000 sqm in area (compared to old Cibus’ 3,500 sqm), so they can be best described as rather small supermarkets. As Coop is now in the process of rebranding the stores the inventory selection is set to expand from 1,800 items per store to 6,000.

The deal is valued at a yield above that where Cibus trades

The price implies a yield of almost 6%, which is undemanding as Cibus trades only slightly above 5%. Cibus’ net debt LTV ratio stays close to the old almost 60% level. Cibus fully used the mandate to issue 6.22m shares and thus raised EUR 84m new equity via a directed share issue. The EUR 123m new senior bank debt carries a 2% interest; Cibus consequently has some EUR 25m more cash in its balance sheet to make add-on acquisitions in Sweden. Cibus expects the deal to close next week, on Mar 10.

Cibus’ valuation and yield development

Cibus trades at a 100bps wider yield compared to the median NTM EBITDA/EV of a listed Nordic Real Estate company. Cibus managed to issue new equity at a 1.18x P/NAV (or 2.7% below the day’s closing price) to fund the Swedish expansion, which we see as a strong signal that investors view Cibus’ book value as quite conservative. We have updated our estimates; we expect Cibus’ rental income to continue to increase at the rate of inflation, and we estimate annual operating income at more than EUR 10m higher going forward.

The deal adds some EUR 10m in operating income capacity

The deal is good news for Cibus as portfolio diversification further improves. Our TP is SEK 155 (150), remain HOLD.

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