Skip to content

Cibus Nordic - Initiating coverage with BUY

We initiate coverage on Cibus with BUY rating and target of SEK 120. We expect the grocery retail portfolio to generate stable and predictable inflation-linked cash flows while from a valuation standpoint there is room for further yield compression.

Solid grocery retail portfolio with anchoring tenant strategy

Cibus’ property portfolio is largely occupied by three leading Finnish daily-goods retailers. A natural outcome due to the market’s oligopolistic structure, we view the portfolio’s tenant risk as negligible. We expect the average lease duration to remain at its current level of ca. 5 years and the occupancy rate to stay at 95%. The portfolio’s rental income is fully linked to inflation while the properties’ operating costs are mostly borne by the tenants owing to the contracts being largely net lease in nature.

We like the portfolio’s large exposure to supermarkets

In our view the supermarket-size store is the most attractive and resilient type of daily-goods store, offering a good balance between logistic efficiency and daily convenience. 43% of the portfolio’s rental income is attributable supermarkets spread around Finland, while another 25% is contributed by discount stores located for the large part in Southern Finland.

Groceries to manage e-commerce in cities and rural areas

In our view e-commerce currently represents a manageable tail risk for grocery retailers. The economics of grocery e-commerce remain challenging, especially in a country as sparsely populated as Finland. We think supermarkets as particularly well-positioned to weather the e-commerce threat and even benefit owing to their status as a distribution network.

Initiating coverage with a BUY rating and TP of SEK 120

We expect Cibus’ income to grow in-line with the Finnish CPI and property expenses to stay at ca. 7%, paving the way for a highly predictable financial performance. As the shares currently trade slightly below par in terms of EV/GAV, we see potential for both price gain as well as solid income from dividends.

Open Report