Randviken delivered a solid Q1 report, with rental income and NOI 4-5% above our estimates, while net financial expenses came in higher than we anticipated. Since we initiated coverage on 30 March, Swedish interest rate expectations have skyrocketed, and the Swedish 10Y gov. bond moved up by ~70 bps in just ~4-5 weeks. Randviken has a relatively short interest maturity of ~1 year; we adjust our interest rate expectations, which impacts CEPS negatively, leading to estimate cuts of ~8-10%
Off-market acquisitions to drive double-digit top line growth
From an operational point of view, Randviken continues to drive growth from off-market acquisitions. The company managed to complete the acquisition of nine properties (~SEK 49m in rental value) during Q1, and has signed another five properties that are to be acquired during Q2’22. We appreciate the focus on smaller deals (~SEK 20m to SEK 100m per piece), as competition is lower. This allows the company to acquire properties above a NIY of 5% and keep an acceptable level of asset quality, showcased by the current WAULT of 6 years with a strong tenant base. With a solid cash flow generation, we estimate a 2022e NIBD/Recurring EBIT of ~14.7x and an ICR of ~2.5x (target >2.0x).
Fair value range down on est. changes and peer multiples
The share is currently trading at a 2023e P/CEPS of ~12x, which is ~10% below opportunistic peers such as Balder and Nyfosa, and ~40% below the light industrial and logistics peer Stendörren. We estimate that Randviken will be able to outgrow the real estate sector thanks to higher-yielding properties and slightly higher leverage, combined with its ability to find cash-flow accretive acquisitions. We adjust our fair value range to SEK 50-60 (66-79), on negative estimate revisions and significantly lower peer multiples. Stenhus Fastigheter has announced a public bid for all the outstanding shares in Randviken, a bid we find likely to be successful on the back of current acceptance ...
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