Cibus Nordic - Property income to grow further

Name: Evli
Price range: $

Cibus updated its dividend policy. Dividend payments will now increase on a quarterly basis (at a 5% annual pace). While there have been no major changes in the underlying portfolio fundamentals, the company has managed to increase its cash flow by 10% since the March 2018 IPO due to acquisitions and refinancing activities. The portfolio now holds 132 Finnish properties with a gross asset value of EUR 816m; 2019 pipeline might add another EUR 50m.

NOI capacity unchanged at EUR 47.8m, income at EUR 31m

Profit from property management was 1.5% below our expectations. Administration costs were higher during Q4, amounting to EUR 1.4m vs the budgeted EUR 0.9m cost. The higher expenses were attributable to the CEO departure. Cibus has now shifted to financial year that follows the calendar year. Dividends will be paid out on a quarterly basis; the first 2019 payment has a June record date. From now on, Cibus targets a 5% annual increase in dividends. In our view, Cibus has ample capacity to increase its annual payments. The proposed 2019 distribution of EUR 0.84 per share implies a total dividend of EUR 26.1m, or a 7.8% yield. We have estimated that the current portfolio has an annual distribution capacity amounting to close to EUR 30m. Cibus estimates its operating income capacity at EUR 31m, up from the previous EUR 30.6m figure.

EPRA NAV amounted to EUR 11.1 (11.2) per share

The central portfolio metrics were basically flat. Occupancy rate improved slightly to 96.0% (95.8%), with LTV at 58.4% (58.3%). Cibus has increased its bank financing to EUR 354m (EUR 325m), while the margin has decreased by 20bps, to 1.9%, and the weighted average tenor increased to 2.9 years (2.3).

Our target still stands at SEK 120, downgrade to HOLD

Our expectations for Cibus’ portfolio remain unchanged. We expect Cibus’ 2019 acquisition pipeline (approximately EUR 50m) to comprise mainly of grocery properties let to Kesko. We are waiting to see the acquisitions materialize. We retain our target price of SEK 120 per share and update our rating to HOLD (BUY).

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