Laatste bericht GS inzake ECP van 28 augustus 2020
Eurocommercial has just released its results for 12M ended June 2020, with EPRA NAV/sh 3% above Visible Alpha Consensus Data and 15% above GSe, reflecting only 2.9% valuation declines over the 6M period to end June. Driven by the (albeit limited) property value declines, LTV rose 150bp over 6M to 45.5%. FY19/20 EPS was 39% above GSe due to the different accounting treatment of incentives and unpaid rents.
On rental collection, we note Eurocommercial has agreed €19.7mn of rent concessions (ex Sweden) during the lockdown period, implying 41% rent concessions for the second quarter. Of the c. 59% not under concession, the company collected 78%, implying an effective collection rate for the quarter of c. 46% based on total rent due (GSe). Deals have been agreed with 83% of tenants so far.
As at end July 2020, footfall was 83% of levels at the same period last year, while like-for-like retailer sales were 90% of 2019 levels (June 20 vs. June 19).
No dividend has been proposed. However, an Extraordinary General Meeting will be convened for 29 October 2020, after which point the dividend/outlook will be announced.
We expect this release to have limited impact on the trading of the shares.
We highlight the following key points:
12m Price Target: €7.50
Price: €9.42
Downside: 20.4%
Sell
Market cap: €753.6mn / $888.5mn
Enterprise value: €2.5bn / $2.9bn
3m ADTV: €2.2mn / $2.5mn
Netherlands
Europe Real Estate
M&A Rank: 3
Leases incl. in net debt & EV?: No
GS Forecast
6/19 6/20E 6/21E 6/22E
Revenue (€ mn) 206.3 176.1 170.1 191.9
EPS (€) 2.40 1.72 1.63 2.04
Earnings yield (%) 8.3 18.3 17.3 21.7
Dividend yield (%) 7.5 14.9 14.9 19.1
EPRA NAVPS (€) 44.56 36.93 25.39 21.65
Prem NAVPS (%) (34.8) (74.5) (62.9) (56.5)
EBITDA/EV (X) 0.1 0.1 0.1 0.1
ROCE (%) -- -- -- --
ROAE (%) 6.3 5.2 6.7 12.1
12/19 3/20E 6/20E 9/20E
EPS (€) 0.58 0.59 (0.01) 0.19
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 27 Aug 2020 close.
Key financial metrics:
12M direct investment result per share (EPS) was €2.41, 39% above GSe (€1.73) and down 1% yoy (€2.42). Our estimates were on a cash basis, and thus not directly comparable with company-reported EPS.
End June EPRA NAV/sh was €42.62, 3% above Visible Alpha Consensus (€41.3), 15% above GSe (€36.9) & down 4% yoy (€44.56). Portfolio revaluations were -2.9% over the 6M to end June.
No dividend has been proposed. However, an Extraordinary General Meeting will be convened for 29 October 2020, after which point the dividend/outlook will be announced.
Operating metrics:
Collection rates: Eurocommercial has agreed €19.7mn of rent concessions (ex Sweden) during the lockdown period to be amortised from 2H20 plus an additional €2mn in Sweden already expensed over 4Q19/20. Adding back €2mn to €51.1mn of rent for 4Q19/20 implies 41% rent concessions for the quarter (although the lockdown started slightly earlier than 2Q in Italy). Of the c. 59% not under concession, the company collected 78%, implying an effective collection rate for the quarter of c. 46% based on total rent due (GSe). We note deals were agreed with 83% of tenants so far.
Lfl retailer sales for June 2020 (as proportion of June 2019 levels) were 90% overall, including 81% in Belgium, 95% in France, 82% in Italy & 97% in Sweden.
As at end July 2020, footfall was 83% of levels at the same period last year.
Over the 12M period ended June 2020, 205 leases were renewed/re-let, creating an average uplift of minimum guaranteed rent of 9.2%. This compares to 226 leases renewed/re-let and a 8.0% uplift for the 12M to end March 2020. Of the 205 deals signed, 25 were agreed between April and June.
Total vacancies were 1.2% of rental income at June 2020.
Balance Sheet / other:
LTV at end June 2020 was 45.5%, up 150bp end December 2019 (44%). The overall cost of debt was 2.0%, lower vs. March 2020 (2.1%).
At FY19/20, portfolio valuations were down 2.9% since December 2019 (vs. flat over 6M to Dec. 19).
We rate Eurocommercial's shares Sell with 20% downside to our 12-month EVA®-based price target of €7.50. The key risks include stronger-than-expected French, Italian and Swedish real estate markets, a faster roll-out of the pipeline as well as a more favourable interest rate environment than we expect.