Cibus: Graduating the property ladder – Evli Research

Cibus has performed according to expectations

Cibus’ portfolio performance has delivered the promises since the IPO in March 2018. Moreover, the portfolio’s exposure to supermarkets, in our view the preferred daily-goods store type, has increased following a string of acquisitions large and small. The company has also advanced on the organizational side. Cibus is now more independent entity, and Sirius’ partial exit made entry for other institutional investors easier and helped facilitate the Swedish property market expansion earlier this spring.

The Swedish market entry fits the strategy well

Cibus was able to acquire the EUR 180m Coop supermarket portfolio at a yield of close to 6%, which to us was a surprisingly high level, especially considering the portfolio’s quality, 10-year triple-net lease structure as well as Coop’s agreement to invest SEK 3m into each of the 110 stores for rebranding purposes (Coop acquired the stores from Netto last year). We view the portfolio a good base for further expansion in Sweden.

We base our TP on the portfolio’s current CF capacity

Cibus continues to trade at attractive levels relative to other listed Nordic property portfolios since Cibus’ assets are small in the institutional investor context and thus there’s a paucity of buyers as this specific asset class isn’t the most convenient way to deploy large amounts of capital. Single grocery stores can often be purchased at high yields. We’d describe Cibus a vehicle for capitalizing on the yield differential. Since Cibus’ portfolio is well diversified we see there’s scope for fair value gains every time Cibus buys a property. Having said that Cibus isn’t the only Nordic daily-goods property portfolio (although it’s the only publicly traded one) and so we view it prudent to focus on the current portfolio cash flow capacity. We value Cibus’ current cash flow prospects with a yield we see sufficiently below that of the underlying daily-goods property market (to account for diversification benefits) on the one hand, and adequately above that of the wider property market (the vehicular benefits shouldn’t be exaggerated) on the other. Our TP is now SEK 150 (155), rating BUY (HOLD).