Cibus

Cibus' Q3 2023 income from property management (IFPM) was 16% ahead of Infront consensus, adjusted for one-offs. The decline in earnings capacity-based IFPM per share came to an end; instead, there was a EUR 0.02 q/q improvement, to EUR 0.93. This was mainly caused by the decline in the cost of debt from 4.6% to 4.4%. We make limited changes to our IFPM estimates for 2024-25. We raise our fair value range slightly to SEK 120-150 (110-140) per share, based on a mix of P/EPRA NAV and peer valuation. The share is trading at a ~20% discount to EPRA NRV, which corresponds to an implied yield of 6.8% versus the reported 6.2%. The EUR 0.9 dividend should be sustainable given the extensive hedging. Marketing material commissioned by Cibus.

Cibus posted Q3 net operating income of EUR 31.0m, up 18% y/y but included as much as EUR 2.7m in one-offs. Adjusted for one-off NOI was in line with Infront consensus. Income from property management (IFPM) excluding one-offs was EUR 14.2m, down 3% y/y and 8% above our estimate, and 16% above consensus. Reported IFPM included EUR -0.1m of negative one-offs in financial items. Fair value changes were EUR -5.4m (0.3% of portfolio) as yields expanded slightly and average valuation yield was 6.2% (6.1% in Q2). Earnings capacity-based IFPM per share was up q/q at EUR 0.93 from EUR 0.91 owing to slightly lower financial expense. Net financial expenses in earnings capacity is EUR 51.1m versus EUR 52.1m in Q2. EPRA NRV was EUR 13.0 (SEK 150), flat from EUR 13.0 in Q2. Cibus is currently trading at a ~25% discount to EPRA NRV and an implied yield of 7.1% versus the average valuation yield of 6.2%. Cibus has effectively capped interest rates until H1 2025. We expect a clearly positive share price reaction as balance sheet measures are coming through, the earnings capacity-based EPS turned to a positive trend and should support the EUR 0.9 being sustainable and underlying business is performing as expected.

Ahead of Cibus' Q3 2023 report, we trim our estimates to reflect changes in interest rates. We cut our income from property management (IFPM) and adjusted EPS estimates by 2-3% for 2023-25, due to higher net financials. We do not believe Cibus will carry out any meaningful M&A, as we argue that the company will focus on securing its balance sheet metrics for the foreseeable future. We also believe Cibus will strengthen its balance sheet, either through divestments or equity-like funding, as it likely needs to lower its net LTV from the current ~57%. As yields in the grocery-anchored real estate segment have been stable in recent years, we see limited risk of significant yield expansion and asset value declines. We keep our EPRA NRV-based fair value range of SEK 110-140 unchanged. Cibus is currently trading at a 33% EPRA NRV discount and an implied yield of ~7%. Marketing material commissioned by Cibus.

Cibus' Q2 2023 income from property management (IFPM) was in line with our expectations but slightly below Infront consensus, even adjusted for the EUR -0.8m in one-offs. Earnings capacity-based IFPM per share declined by 18% q/q, to EUR 0.91. This was mainly caused by an increase in the number of shares following the EUR 70m share issue, but also from the cost of debt rising from 4.3% to 4.6%. The company has purchased bonds in the market and increased its hedging significantly. We make limited changes to our IFPM estimates. Our fair value range is unchanged, at SEK 110-140 per share, based on a mix of P/EPRA NAV and peer valuation. The share is trading at a ~30% discount to EPRA NRV, which corresponds to an implied yield of ~7% versus the reported 6.1%. Marketing material commissioned by Cibus.

Cibus posted Q2 net operating income of EUR 28.1m, up 11% y/y on the back of acquisitions and in line with our and Infront consensus estimates. Income from property management (IFPM) was EUR 11.5m, down 15% y/y and 0% below our estimate, and 8% below consensus. Reported IFPM included EUR 0.8m of negative one-offs. Fair value changes were EUR -8.3m (~0.4% of portfolio) as yields expanded 5 bps and average valuation yield was 6.1% (6.1% in Q1). Earnings capacity-based IFPM per share was down q/q at EUR 0.91 from EUR 1.11 owing to increased financial expenses and increased share count. Net financial expenses in earnings capacity is EUR 52.1m versus EUR 49.9m in Q1. EPRA NRV was EUR 13.0 (SEK 153), down from EUR 14.4 in Q1, also mostly relating to increased number of shares. Cibus is currently trading at a ~30% discount to EPRA NRV and an implied yield of 7.0% versus the average valuation yield of 6.1%. Current hedges will cap interest rate of bank loans at 3.95% as of Q3 2023 through Q4 2024 and reach 4.05% in H1 2025. We expect a neutral to slightly negative share price reaction on the report.

Ahead of Cibus' Q2 report, we trim our estimates to reflect changes in interest rates, as well as taking into account its recent bond repurchases. We cut our income from property management (IFPM) estimates by 6-9% for 2023-25 and adjusted EPS by 7-10% due to higher net financials. We believe Cibus will focus on securing its balance sheet metrics and conduct limited, if any, M&A in the medium term. As yields in the grocery-anchored real estate segment have been stable in recent years, we see limited risk of significant yield expansion. We keep our EPRA NRV-based fair value range of SEK 110-140 unchanged. Cibus is currently trading at a 35% EPRA NRV discount and an implied yield of ~7%. Marketing material commissioned by Cibus.

Cibus's Q1 2023 income from property management (IFPM) was below Infront consensus, even adjusted for EUR -1.2m in one-offs. Earnings capacity-based IFPM per share declined by 9% q/q, to EUR 1.05. This was mainly caused by an increase in the cost of debt, i.e. 4.3% in Q1 from 3.9% in Q4. We cut adjusted EPS by 9-12% for 2023E-25E due to higher interest costs. We also cut our dividend estimates to a flat level of EUR 0.9 in 2023-25, as we believe Cibus will need to reduce its net LTV from the current ~56% level. Our fair value range is SEK 110-140 (120-160) per share, based on a mix of P/EPRA NAV and peer valuation. The share is trading at a ~33% discount to EPRA NRV, which corresponds to an implied yield of ~7% versus the reported 6.1%. Marketing material commissioned by Cibus.

Cibus posted Q1 net operating income of EUR 27.6m, up 27% y/y on the back of acquisitions and 1% above our estimate and 2% above Infront consensus. Income from property management (IFPM) was EUR 11.8m, down 19% y/y and 14% below our estimate and 16% below consensus. However, IFPM included EUR 1.2m of negative one-offs. Adjusting for these, IFPM was 5% below our estimate and 7% below consensus. Fair value changes were EUR -8.5 (~0.4% of portfolio) as yields expanded slightly and average valuation yield was 6.1%. Earnings capacity-based IFPM per share was down q/q at EUR 1.05 from EUR 1.16 owing to increased financial expenses. Net financial expenses in earnings capacity is EUR 49.9m versus EUR 44.3m in Q4. EPRA NRV was EUR 14.4 (SEK 163), down from EUR 14.7 in Q4. Cibus is currently trading at a 33% discount to EPRA NRV and an implied yield of 7.0% versus the average valuation yield of 6.1%. Current hedges will cap interest rate of bank loans at 4.55% as of Q3 2023 through Q2 2025. We expect a slightly negative share price reaction on weaker than expected IFPM.

Ahead of Cibus' Q1 report, we update our estimates (after our research restriction period ending) to reflect the directed share issue conducted on 23 March. We estimate that EPS dilution resulting from the share issue is ~10%. Cibus is currently trading at a 25% discount to EPRA NRV and an implied yield of ~6.8%. We believe Cibus will focus on securing its balance sheet metrics and conduct limited, if any, M&A in the medium term. As yields in the grocery-anchored real estate segment have been stable in recent years, we see limited risk for significant yield expansion. We lower our EPRA NRV-based fair value range to SEK 120-160 (140-180). Marketing material commissioned by Cibus.

Cibus's Q4 2022 income from property management (IFPM) was below consensus, even when adjusted for EUR -1.6m in one-offs. Earnings capacity-based IFPM per share declined by 9% q/q, down to EUR 1.16. This was mainly caused by an increase in the cost of debt, i.e. 3.9% in Q4 from 3.1% in Q3. Cibus cut its dividend to EUR 0.90 (from EUR 0.99) to reflect the changing interest rate environment. From the new dividend base, Cibus argues that it can pay an annually increasing dividend. The share is trading at a ~25% discount to EPRA NRV, which corresponds to an implied yield of ~6.5%. We cut adjusted EPS by 6-9% for 2023E-25E due to higher interest costs. Our fair value range is SEK 140-180 (160-200) per share, based on a mix of P/EPRA NAV and peer valuation. Cibus needs to refinance its EUR 61.8m bond expiring in Q3 2023, which will further increase interest costs. Marketing material commissioned by Cibus.