Studentbostäder i Norden: New equity at a hefty discount to NAV - ABG

Defensive rights issue below NAV… …but strengthens the balance sheet Two largest owners increase their holdings Share issue at a ~54% discount to reported NAV Late yesterday, Studentbostäder i Norden (SBS) announced a directed issue of 24,970,060 shares at SEK 5.01. This corresponds to SEK 125m or an increase by ~13% of outstanding shares. The issue is made to the two largest owners, Fastator and Otre, which held ~39% of SBS’ capital prior to the issue; hence, taking above their pro-rata shares. The issue price of SEK 5.01 is ~30% above last closing price, yet dilutive as it reflects a ~54% discount to last reported NAV. Important to track the interest coverage ratio SBS is one of the companies in our coverage with the highest leverage, with a net LTV of 62.9% as of Q1’22. With the announced acquisitions, we currently estimate a net LTV of 66.4% in Q2’22, which would, all-else-equal, decrease to 64.6% if we include the share issue before transaction costs. SBS has a target LTV of <70%. the reported icr as of q1’22 was ~1.7x and the target is to be above 2.0x long term. for its outstanding bonds, the covenant is to stay>1.5x. With an interest maturity of ~1.8 years, we argue that the ICR covenant is the most important to track. With soaring interest rate expectations, it is key that future refinancing in the bilateral bank market is not done at too high of a spread. Moreover, this is the first data point in the Swedish real estate sector of a directed share issue at a hefty NAV discount in 2022. However, it strengthens SBS’ balance sheet and is fully supported by its main owners. High growth and low multiples – at a high risk The share issue mathematically lowers NAVPS by ~6% and proforma, the share is trading at a discount of ~62% to NAV, compared to residential peers such as Balder, Trianon and Wallenstam at an average discount of ~40%. On our post Q1’22 estimates, we expect SBS to generate an EPRA NRV CAGR of ~16% in 2022-2024e (above peers). However, both the project volume and the gearing are higher in SBS, and the ICR is currently below the company target of 2.0x, which pose as a key risk. 70%.>Läs mer på ABG Sundal Collier