Cibus Nordic |

A diversified daily-goods property portfolio

| Sweden

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Financial overview

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Cibus Nordic - Yield not yet entirely digested

18.11.2019 | Company update

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.

Cibus Nordic - Operating profit as expected

15.11.2019 | Earnings Flash

Cibus posted Q3 results largely in line with expectations. Operating income (rental income less property and central administration expenses), at EUR 11.3m, was close to our EUR 11.5m estimate. Larger than expected financial expense items meant profit from property management was a little soft as Cibus is developing its own organization.

  • Q3 rental income amounted to EUR 13.2m vs our EUR 13.3m estimate.
  • Net rental income stood at EUR 12.5m, compared to our EUR 12.4m expectation.
  • Operating income was recorded at EUR 11.3m while we expected EUR 11.5m.
  • Net operating income (profit from property management) was EUR 7.3m, falling short of our EUR 8.5m projection due to higher than expected financial expense items. Cibus is in the process of transitioning administration as well as asset management back to the company from third-parties.
  • Annual net rental income capacity stands at EUR 49.9m (unchanged).
  • The property portfolio is valued at EUR 862m, which translates to an EPRA NAV of EUR 11.4 (previously EUR 11.3) per share.
  • Net debt LTV ratio was 58.9% (previously 59.0%) at the end of Q3.
  • Occupancy rate stood at 94.5% (94.3% in Q2’19).

Cibus Nordic - Still more yield left to bite

02.09.2019 | Company update

Cibus’ Q2 rental income of EUR 12.6m was a little soft (we expected EUR 12.8m) due to a change in tenancy, while EUR 0.3m in accruals also had a negative impact. However, the fundamentals remain as before, strategy is on track and there is further room for yield compression. We update our TP to SEK 135 (125); rating remains HOLD.

Cibus is well ahead of its EUR 50m annual acquisition goal

Cibus completed the acquisition of five properties during the quarter (the total number now stands at 139), meaning Cibus has already acquired EUR 45m worth of properties this year, thus bringing the portfolio gross asset value to EUR 862m. The net debt LTV ratio increased to 59.0% during the quarter, up from the previous 56.7%, however Cibus’ average interest rate on borrowings declined by ca. 30bps, to 2.6%. Adjusted EPRA NAV increased slightly to EUR 11.3 (11.2) per share.

Occupancy temporarily lowish due to a tenancy change

Cibus reported a little soft Q2 net rental income due to a change in tenancy as occupancy rate dropped to 94.3% (has typically been above 95%). Another one-off was a EUR 0.3m accruals charge, and thus net rental income stood at EUR 11.5m vs our EUR 12.0m estimate. The most important forward-looking metric, namely net rental income less central administration costs, increased by EUR 2.0m to EUR 46.2m. We see the current portfolio posting EUR 46.7m next year, which translates to a 5.2% yield.

Cibus continues to grow the portfolio, attracts new investors

So far this year Cibus has announced EUR 45m in Finnish daily-goods property acquisitions, meaning the company is now well ahead of its stated annual EUR 50m investment target for the year. The portfolio is now worth EUR 862m in terms of gross asset value, comprising of 139 properties located around Finland and with a total lettable area of some 500,000 sqm. Central portfolio metrics such as occupancy rate (94.3%), weighted average unexpired lease term (5.0 years) and net debt LTV ratio (59.0%) have remained steady. The tenant mix stays anchored to Kesko (54%) and Tokmanni (28%), with S-Group (7%) and others (11%) making up the rest. During the last twelve months the company has been able to improve its cost of borrowing by around 60bps as the interest-bearing liabilities’ average interest rate now stands at ca. 2.6%.

Cibus has also continued developing its own organization with the help of few recruits, and in the long-term may eventually enter the Swedish property market. Funds managed by Sirius Capital Partners sold three quarters of their stake in May, which we see as a positive development as it widens Cibus’ institutional investor base and so makes it easier to arrange e.g. an equity issue in connection with a major portfolio acquisition.

Cibus trades above GAV and NAV, but yield still attractive

Cibus’ shares have rerated during the last year, now trading at a premium on book value. In early 2019 Cibus was trading at ca. 0.95x EV/GAV and 0.85x P/NAV, whereas the respective multiples now stand at 1.05x and 1.10x. We estimate the corresponding yield compression at 75bps. Meanwhile major Nordic Real Estate companies’ yields have also compressed, and Cibus’ absolute yield spread has stayed largely unchanged at ca. 100bps. The high underlying portfolio yield, as well as the resulting 7% dividend yield (itself a function of the property yield, leverage and dividend payout ratio), means Cibus’ shares have further potential. We update our TP to SEK 135 (125), valuing Cibus at a 1.10x P/NAV multiple (1.05x EV/GAV). Our rating stays HOLD.

Cibus Nordic - Expenses higher than expected

30.08.2019 | Earnings Flash

Cibus’ Q2 rental income stood at EUR 12.6m, in line with expectations. Property expenses were slightly higher than we expected, and thus net rental income, at EUR 11.5m, was less than our EUR 12.0m estimate. Central operating metrics remained largely unchanged.

  • Q2 rental income amounted to EUR 12.6m vs our EUR 12.8m estimate.
  • Net rental income was EUR 11.5m, whereas we expected EUR 12.0m. Property expenses were some EUR 300k higher than we expected. Annual net rental income capacity now stands EUR 49.9m from Q3 onwards (Cibus previously estimated the figure at EUR 49.3m).
  • Operating income (net rental income minus central administration costs) stood at EUR 10.5m vs our EUR 11.0m projection.
  • The portfolio’s GAV amounted to EUR 862m (a total of 139 properties), while EPRA NAV rose to EUR 11.3 (previously EUR 11.2) per share.
  • Net debt LTV ratio rose to 59.0% (56.7% in Q1’19).
  • Occupancy rate was 94.3% (95.1% in Q1’19).

Cibus Nordic - Property income as expected

16.05.2019 | Company update

Cibus’ Q1 developed without surprises as NOI, at EUR 12.1m, was 1.7% above our estimate. Cibus is now well on track to achieving the annual target of EUR 50m in dailygoods property acquisitions this year. At the end of Q1 the portfolio GAV stood at EUR 821m and is expected to reach EUR 850m by the end of Q2 as already announced deals will be closed. We update our estimates to reflect the situation as expected from Q3 onwards. We update our TP to SEK 125 (120) per share while our rating remains HOLD.

No significant changes in key metrics during Q1

Valuation per sqm (EUR 1,740), EPRA NAV (EUR 11.2 per share) and net LTV ratio (57%) all improved a bit. Occupancy rate declined by a percentage point to 95%. Cibus’ average borrowing rate now equals 2.8%, and there is still room for improvement as the third senior debt facility is yet to be refinanced. The EUR 135m bond is trading above par and Cibus is likely able to refinance at a rate more than 100bps below the current coupon.

The portfolio WAULT remains stable at 5.0 years

The portfolio is stable in terms of the weighted average unexpired lease term. The measure has proved steady at around 5.0 years as the portfolio has an even number of leases coming up for renewal each year. The leases are typically extended with the same terms for the next 5 years. Cibus also continues with its plans to develop the organization while monitoring the Swedish property market even if there are yet no concrete entry plans.

We update estimates based on earnings capacity for Q3

Cibus has so far this spring announced EUR 30m in acquisitions; these are reflected in the current earnings capacity figure for Jun 30 (the deals will close in Q2). We therefore update our estimates from Q3 onwards. Cibus now trades close to par in terms of EV/GAV and P/NAV. In our view a slight premium (somewhere in the 0-10% range) can be justified as the valuation methodology for individual daily-goods properties doesn’t capture the risk diversification effect Cibus can achieve with its property portfolio (currently numbering 132 assets). We update our target price to SEK 125 (120) per share and retain our HOLD rating.

Cibus Nordic - Income slightly above our estimate

15.05.2019 | Earnings Flash

Cibus’ Q1 net rental income came in a bit above our expectations. Q1 earnings capacity was unchanged, but is expected to increase by about 3% by the end of Q2 as recently announced acquisitions will be closed.

  • Net rental income amounted to EUR 12.1m vs. our EUR 11.9m estimate.
  • Central administration expenses totaled EUR 1.0m vs. our expectation of EUR 0.9m. EBIT therefore stood at EUR 11.2m vs. our EUR 11.0m projection.
  • Gross asset value was EUR 821m (EUR 816m previously).
  • EPRA NAV was booked at EUR 11.2 (11.1) per share.
  • Occupancy rate stood at 95.1% (96.0%).
  • Net LTV amounted to 56.7% (58.4%).
  • The current NTM earnings capacity (in terms of net rental income minus central administration expenses, or EBIT) stood unchanged at EUR 44.2m as of Mar 31, 2019. Cibus expects the figure increase to EUR 45.6m by Jun 30, 2019 as the recently announced property acquisitions will be included in the portfolio.

Cibus Nordic - Property income to grow further

28.02.2019 | Company update

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).

Cibus Nordic - Dividend proposed at EUR 0.84 (0.80)

27.02.2019 | Earnings Flash

Cibus disclosed a new dividend policy with quarterly increases. From now on, the company targets a 5% annual increase in dividends.

  • Rental income for the Jul-Dec 2018 period amounted to EUR 25.0m, and NOI totaled EUR 23.4m. Occupancy rate was 96%.
  • The portfolio had a year-end gross asset value of EUR 816m.
  • Cibus expects to make acquisitions to the tune of EUR 50m during 2019.
  • The quarterly increasing dividend means that the first partial payment will be EUR 0.2062 per share, the second EUR 0.2087 per share, the third EUR 0.2113 per share and the fourth EUR 0.2138 per share.
  • NOI capacity remains at EUR 47.8m.
  • Since the March 2018 IPO, acquisitions and refinancing have helped cash flow to improve by 10%. While the portfolio is currently exclusively invested in Finnish properties, Cibus restates its long-term plan to enter other Nordic markets.

Cibus Nordic - A routine trip for groceries

28.11.2018 | Company update

Cibus’ quarterly results closely reflected the company’s earnings capacity. We update our estimates to account for the acquisition of six properties the company announced in early November. The add-on properties are expected to contribute ca. EUR 2m in annual rental income. We retain our BUY rating and target price of SEK 120 per share.

The portfolio now includes 132 properties

Following the company’s latest acquisition of six Finnish daily-goods properties (all let to Kesko and Tokmanni), the portfolio now has a total lettable area of some 477,000 sqm and NOI capacity of EUR 47.8m. The latest add-on portfolio was acquired at a total cost of EUR 30m, the acquisition yield estimated at 6.5%. Consequently, Cibus’ portfolio gross asset value currently stands at around EUR 815m. After subtracting the central administration and net financial costs, Cibus now has capacity to pay ca. EUR 30m in annual dividends. The dividend guidance currently remains at EUR 0.2 per share per quarter, or EUR 24.9m on an annual basis.

EPRA NAV increased to EUR 11.2 (11.0) per share

Going forward, Cibus’ financial year will follow the calendar year. This means the company’s next year-end report will be published in late February 2019 for the period covering the second half of 2018. Meanwhile board member Jonas Ahlblad will serve as an interim CEO until a new CEO has been appointed. During the coming months we are expecting the company to announce the refinancing of two bank loans. Cibus might increase its borrowings and use the proceeds to acquire additional daily-goods properties in Finland. We expect the completed refinancing to meaningfully cut the company’s average borrowing rate, which currently stands close to 3%.

Retain BUY rating with TP of SEK 120 per share

We update our estimates to reflect the latest add-on acquisition. We expect the company to announce further portfolio acquisitions during the next quarters. We retain our BUY rating and target of SEK 120 per share.

Cibus Nordic - No surprises; updated earnings capacity provides color on the latest transaction

27.11.2018 | Earnings Flash

Cibus’ Jul-Sep 2018 quarter proceeded in-line with estimates. Net rental income and operating income came in as guided by the company’s earnings capacity. From now on, dividends will be paid on a quarterly basis.

  • Operating income during the quarter, at EUR 7.2m, was consistent with the annual earnings capacity previously communicated by the company for the period (EUR 28.8m).
  • Cibus previously announced an acquisition of six daily-goods properties in Finland at a cost of EUR 30m. The updated earnings capacity hints at an acquisition yield of ca 6.5%, i.e. an increase of EUR 2.0m in rental income. Correspondingly, the annual NOI capacity now stands at EUR 47.8m vs. EUR 45.8m previously. The six recently acquired properties are all let to Kesko and Tokmanni.
  • Going forward, Cibus will pay dividends quarterly. Moreover, Cibus’ financial year will now follow the calendar year, meaning that the company’s next year-end report will be published in Feb 2019 for the period Jul-Dec 2018. Meanwhile board member Jonas Ahlblad (Sirius Capital Partners) will serve as an interim CEO until a new CEO has been appointed.

Cibus Nordic - Initiating coverage with BUY

23.10.2018 | Company report

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.

Cibus company presentation 02072019

Cibus Nordic - Company presentation

02.07.2019

Annual and sustainability reports

07.03.2019

Annual Report 2018

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Cibus company presentation 02072019

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Cibus aims to increase dividend payments by 5% annually

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