Cibus

Cibus, which raised EUR ~82m new equity two weeks ago to fund growth, announced after market close on 23 September that it has acquired five grocery stores in Denmark for an underlying property value of DKK 107.7m (EUR ~14.5m). The properties are acquired from grocery chain Dagrofa ApS in a sale-and-leaseback transaction with closing set for 1 October. Dagrofa is Cibus’ largest tenant in Denmark and accounts for ~5% of group net rental income after the thransaction. The lettable area of the stores is 6,400 square metres and four of the stores are SPAR-branded and one is Meny-branded. The average remaining lease term is ~9.5 years and the acquisition is financed with an LTV of ~50% through a bank loan. According to the company, the acquisition is EPS accretive. The acquisition increases the property value by 0.8%. The net yield accretion is not disclosed. With its strengthened balance sheet from the share issue and an EPRA NRV premium of ~30%, Cibus is in a favourable position to continue value-accretive acquisitions and we expect further similar transactions going forward.

Cibus' Q2 2024 income from property management (IFPM) was 6% above Infront consensus, but the results included several one-offs, both positive and negative. Overall, the results were largely as expected, with net operating income in line with Infront consensus when adjusting for an EUR 1.8m insurance compensation. Earnings capacity-based IFPM per share grew again, by EUR 0.01 q/q to EUR 0.97, marking the fourth consecutive quarter of increases. Cibus remains well hedged for the next 12 months with a 97% hedging ratio. It has refinanced all its bonds and its bond maturities are covered until early 2027. We make minor estimate changes after the Q2 report, and our fair value range remains at SEK 150-180 per share. The share is trading at a 20% premium to EPRA NRV, which we believe enables potential larger, equity-financed M&A in the medium term, in addition to smaller acquisitions such as the one Cibus carried out in Q2. Marketing material commissioned by Cibus.

Cibus posted Q2 results largely in line with expectations. Reported Income from property management (IFPM) was 6% above Infront consensus and included EUR -1.6m net of one-off items, relating to insurance compensation, bond refinancing, FX and extra admin costs related to options programme. Net operating income adjusted for insurance compensations was bang in line. Fair value changes were EUR -8.3m with a slight increase in valuation yield (6.5%) with Finland and Denmark in particular impacting. Earnings capacity-based IFPM per share was slightly up q/q at EUR 0.97 from EUR 0.96 which is a key focus for the company. Net financial expenses in earnings capacity is EUR 51.0m versus EUR 51.3m in Q1. EPRA NRV was EUR 11.8 (SEK 136), down from EUR 11.9 in Q1. Cibus is currently trading at a 26% premium to EPRA NRV and an implied yield of 5.9%. Cibus has effectively capped interest rates until H1 2025 and the average interest rate was 4.5% versus 4.6% at the end of Q1. We expect a neutral share price reaction on the Q2 report. The sustainable 6% dividend yield should also offer support.

Ahead of Cibus' Q2 2024 report, we incorporate the acquisition of six properties, announced in late May. We also include the costs for early bond redemptions and employee-related options, which will burden the Q2 results. Cibus has extended its maturities by issuing EUR ~190m in three new bonds, and most of the old outstanding bonds have been called, although a tail of EUR ~32m will be called in H2. We believe Cibus will continue to add smaller acquisitions with existing funds, while larger acquisitions would need an equity component, which appears feasible again, as the share is trading at a ~20% premium to Q1 EPRA NRV. We raise our fair value range to SEK 150-180 (130-160) to reflect the healthier balance sheet as well as changes in the peer group valuations. Marketing material commissioned by Cibus.

Cibus acquires six grocery-anchored assets in Sweden for SEK 87.5m (EUR ~7.6m), adding 0.4% to Cibus total portfolio value. The assets are located in Värmland, and have a lettable area of 8,900 sqm. Coop is the anchor tenant in five asset and ICA in one asset. The weighted average lease maturity is five years, in line with Cibus’ total assets. The net yield is not disclosed, but we believe the acquisition could add net rental income by EUR ~0.6m. Cibus claims that the acquisition is EPS accretive. With bond maturities and hedging in good shape it is positive to see acquisitions, albeit a small one in this case, back on the agenda after the most recent previous acquisitions made in late 2022.

Cibus' Q1 2024 income from property management (IFPM) was 7% below Infront consensus, adjusted for one-offs. Administration costs were elevated due to the CEO change and net financial costs were slightly higher than we expected. Earnings capacity-based IFPM per share grew by EUR 0.01 q/q to EUR 0.96, marking the third consecutive quarter of increase. Cibus remains well hedged for the next 15 months. Cibus has refinanced all its bonds, and bond maturities are covered until early 2027. We make minor estimate changes after the Q1 report. Our fair value range remains at SEK 130-160 per share. The share is trading in line with its EPRA NRV, which we believe could pave way for potential equity-financed M&A in the medium term. Marketing material commissioned by Cibus.

Cibus posted Q1 net operating income of EUR 28.1m, up 2% y/y and 1% below Infront consensus. Income from property management (IFPM) excluding one-offs was EUR 12.5m, up 6% y/y but 9% below our estimate, and 7% below consensus. The reported IFPM was EUR 12.2m. Reported IFPM included EUR -0.3m of one-off items (FX differences). Fair value changes were EUR -22.3m (1.2% of portfolio) as average valuation yield expanded by ~0.1pp and was 6.5% (6.4% in Q4 2023). Also, a writedown was made on an asset in Lahti, leased to Kesko, from where Kesko will move out in 2-3 years. Discussions are ongoing to find a new tenant/solution for the property. Earnings capacity-based IFPM per share was slightly up q/q at EUR 0.96 from EUR 0.95 owing to higher rental income. Net financial expenses in earnings capacity is EUR 51.3m versus EUR 51.5m in Q4. EPRA NRV was EUR 11.9 (SEK 138), down from EUR 12.5 in Q4. Cibus is currently trading at a 2% premium to EPRA NRV and an implied yield of 6.5%. Cibus has effectively capped interest rates until H1 2025 and the average interest rate was 4.6% versus 4.5% at the end of 2023. We expect a slightly negative share price reaction on the IFPM miss and relatively large negative fair value changes. However, the sustainable 7.5% dividend yield should offer support.

Last week, Cibus issued green notes of EUR 80m and SEK 700m and launched a tender offer for bonds maturing in 2024 and 2025. The new bonds issued have maturities of four and 3.5 years, respectively. Earlier this year, Cibus also issued a EUR 50m three-year bond, and thus the company has covered all bond maturities until January 2027. The bond maturity profile is extended by almost two years and the average bond margin drops by more than 2pp. We believe this will secure Cibus' dividends going forward; we expect an unchanged dividend of EUR 0.9 per share for the coming years, paid in monthly instalments. We also believe that Cibus could consider making selected acquisitions, although to a limited extent given its LTV of ~57%. We raise our fair value range to SEK 130-160 (120-150) now that the refinancing issues have been resolved. Marketing material commissioned by Cibus.

Cibus announced yesterday evening it has issued a 4-year EUR bond of EUR 80m at Euribor 3m plus 400bps and a SEK 700m SEK 3.5 year bond at Stibor 3m plus 350 bps in order to replace shorter bonds (with credit margins of 400-700 bps) where a tender offer was launched on 18 March. This will prolong maturities for bonds from 1.4 years to 3.8 years and reduce the average interest rate margin of the bonds by ~2.3 pp. At the end of 2023, Cibus had 14% of its debt financing in bonds and 84% in secured bank loans (and a EUR 30m hybrid bond). The average margin on the secured bank loans was 1.7% at the end of 2023 with an average maturity of 1.9 years. The refinancing with new bond issues provide additional flexibility to the financing structure and should be considered positive news for Cibus, in our view.

Cibus' Q4 2023 income from property management (IFPM) was 7% below Infront consensus, adjusted for one-offs. Earnings capacity-based IFPM per share increased by EUR 0.02 q/q to EUR 0.95, giving support to a EUR 0.90 dividend going forward. Cibus remains well hedged for the next 18 months. We cut our adjusted EPS estimates by 5-7% due to slightly lower rental increase assumptions and somewhat higher interest costs. Our fair value range is unchanged at SEK 120-150 per share, based on a mix of P/EPRA NAV and peer valuation. The share is trading at a ~15% discount on EPRA NRV, which corresponds to an implied yield of 6.9% versus the reported 6.4%. The unchanged dividend of EUR 0.90 should be sustainable given the extensive hedging valid until mid-2025. Marketing material commissioned by Cibus.