Cibus Nordic - Yield not yet entirely digested

Cibus’ portfolio performed as expected in Q3 as the EUR 12.5m net rental income figure was in line with our estimate. Admin and financial expenses were elevated due to administrative transition as well as IFRS 16 adjustments and other financial costs. We make minor changes to our estimates, retain our SEK 135 TP and HOLD rating.

Admin and financial expenses were temporarily elevated

Cibus’ portfolio developed without surprises during Q3 as the properties generated EUR 13.2m in rental income (vs our EUR 13.3m estimate). Property expenses also were largely as expected, and thus net rental income amounted to EUR 12.5m (we expected EUR 12.4m). Cibus is currently in the process of developing its organization and so transitions administration as well as asset management back to itself. This meant central administration as well as financial costs were temporarily elevated during the quarter, with admin expenses amounting to EUR 1.2m (compared to the normal EUR 0.9-1.0m level), and thus operating income stood at EUR 11.3m (vs our EUR 11.5m estimate). Cibus also made IFRS 16 related adjustments to its reporting, and now records site leasehold fees among its financial expenses, the effect being roughly EUR 0.15m per quarter. Net financial expenses totaled EUR 4.0m in Q3, and Cibus sees the level at around EUR 3.4m going forward.

Q3 was quiet in terms of portfolio development

There were no changes to Cibus’ portfolio during the quarter as the company still holds 139 Finnish properties valued at EUR 862m. Net debt LTV ratio and occupancy rate were basically unchanged at their respective 59% and 95% levels. Average lease-length remains at 5.0 years. Likewise, annual net rental income capacity continues to stand at EUR 49.9m, implying EUR 46.2m operating income potential. Cibus says it expects to list on the Nasdaq Stockholm Main List by Q3’20. Cibus continues to actively monitor the Nordic property market beyond Finland.

Cibus’ portfolio still offers a 100bps yield pick-up

We leave our operative estimates largely intact following the report. We retain our TP of SEK 135 per share, rating HOLD. Cibus’ portfolio net yield, at 5.1%, remains almost 100bps above that of a typical listed Nordic Real Estate portfolio.

Open Report