DNB Markets - MaxFastigheter: Lower Covid-19 hit than expected

Covid-19 had less of an impact on revenues than we had expected and the debt maturity improved after several refinancings: it is now 2.0 years on average, with no bond maturing until October 2021. Cash earnings and a minor unrealised asset value gain supported the increase in EPRA NRV to SEK45 (+2.1% QOQ), implying that the stock is at a 36% discount. We have adjusted our estimates and have tweaked our fair value to SEK31–42/share (SEK30–41) on our updated NAV forecast.

Q2 revenues better than expected. The company reported rent discounts related to Covid-19 of SEK1.5m, slightly below our expectations, with no tenant defaulting in the quarter, which helped its revenues beat our expectations by 2%. However, property costs were somewhat higher than expected, resulting in an EBIT 7% below our forecast. The company’s property asset value increased by 14% QOQ through acquisitions and projects, while +0.4% was reported in unrealised value gains.

Extended bond maturity, a new funding source, and a new CFO. The refinancing risk has been taken care of as the company has pushed out its loan maturity to 2.0 years after extending SEK200m of an outstanding bond from September 2020 to October 2021 (for a 1.5% increase in interest rate) as well as the extension of several bank loans. It has also expanded its number of banks from three to four, which widens its funding sources, and hired a new CFO with strong experience within financing.

Trimmed EPS forecast. We have made minor net rent adjustments and increased our net interest forecast. The vacancy rate was reported at 5.8%; we forecast an increase to 8% at end-2022e due to a weaker economic outlook. With its LTV of 55% and its financial target of a 60% maximum, we believe it could acquire assets of cSEK300m, growing its property portfolio by an additional 10% in H2, without raising any equity.

Fair value tweaked to SEK31–42/share. The stock is trading 36% below its EPRA NRV (peer group at a 6% premium) and at 8.5x 2022e P/FFO. However, we believe the planned growth will lead to segment diversification, economies of scale, and cash flow growth, which should drive the stock. Our fair value suggests a P/FFO of 9.5–12.5x on our 2022e, while peers Cibus, NP3, and Nyfosa are at 12.7x (based on consensus).

Best regards,
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Niklas Wetterling | DNB Markets | Equity Research | Real estate & Construction
DNB Bank ASA
Regeringsgatan 59 | Stockholm | Sweden
E-mail: niklas.wetterling@dnb.se | www.dnb.no