There’s little reason to expect performance to be impaired
Cibus’ portfolio performed as expected with Q1 rental income at EUR 14.0m vs our EUR 13.9m estimate, while net rental income amounted to EUR 13.0m (vs our EUR 13.0m expectation). We did expect temporarily elevated administration costs due to the Coop acquisition, as the company suggested, and estimated the Q1 figure at EUR 1.1m. The figure came in at EUR 1.5m and thus the EUR 11.5m Q1 operating income missed our EUR 11.9m estimate. Meanwhile we overestimated financial costs (excluding currency losses) since net operating income excluding currency losses was EUR 7.7m, compared to our EUR 7.6m estimate. In terms of earnings capacity, the updated property expenses line is higher than we expected while the administration cost line is slightly lower. We make only small revisions to our estimates.
Cash flow is solid, yet valuation is not immune to macro
In our view Cibus’ figures and comments prove the pandemic will have little impact operationally. While in the big picture retail rents are likely to be under pressure (mainly due to shopping centers) in our opinion there’s no valid reason to expect this will apply to daily-goods stores. Cibus hasn’t noticed changes to deal flow and bank financing prospects. We see the daily-goods property market remaining stable and would not expect distressed sellers to surface in any meaningful numbers. Even though the pandemic will provide strong tailwind for online grocery sales the fact remains that such operations still struggle profit-wise in the Nordics. We expect Cibus will continue to generate robust cash flow as before. We view wider property valuation trends as the main risk for Cibus’ shareholders: uncertainty runs high and it remains to be seen how exactly e.g. telecommuting practices will affect office vacancy rates.
We reiterate our SEK 150 TP and BUY rating
Cibus continues to scan e.g. the Norwegian market, but for now the focus is on Finland and Sweden. The purchased Swedish properties are being converted into Coop stores (Coop purchased them from Netto last year); Cibus says the conversion is progressing well. We retain our SEK 150 TP and BUY rating.
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