Cibus: Expanding into Denmark through a EUR 280m transaction – adjusted EPS increases 8% we estimate - Nordea

Cibus is about to complete its first acquisition in Denmark with its intention to acquire a property portfolio consisting of 34 properties, with a property value of DKK ~2,080m (EUR ~280 million). The properties are located in Denmark and are rented out with an average lease length of 5.3 years with, among others, Coop Denmark, Salling Group, Dagrofa and Reitangruppen as tenants. The rentable area amounts to ~76,600 square metres, corresponding to a purchase price of EUR 3,655/m2. Cibus’s earnings capacity-based net operating incime (NOI) will increase to EUR 102.2m from EUR 85.5m at the end of 2021, implying an NOI of EUR 16.4m of the acquired portfolio. Hence, the net yield of the acquisition is ~5.9%, which we find attractive given Cibus’s average valuation yield of ~5.7% for the current portfolio and Cibus trading at an implied yield of ~4.6%. The transaction will be financed, among others, through a dire cted share issue of up to 4.4m shares (EUR ~95m on 24 March closing price of SEK 223.6). The shares that Cibus will acquire will be bought for ~DKK 1,045m (EUR ~140m) and the rest with debt and available cash. We expect net debt to increase by EUR 185m. The acquisition grows Cibus’s portfolio size and NOI by ~19% and we estimate EPS accretion to be around 8%, including the issuance of 4.4m new shares. The share has declined by 16% this week with no company specific news, which makes the deal somewhat less attractive given the higher dilution. We nevertheless expect a clearly positive share price reaction on the deal announcement, especially given the share price weakness over the last four days.