Catena: COVID-19 increases e-commerce demand - Introduce

Limited exposure to tenants in risk groupsWe hosted a video conference with the company on Thurs 14 May. Catena believes that the rental market has recovered after a standstill during the second half of March, and says it has ongoing discussions with potential new tenants. According to the company, it has SEK 14m of rental income to renegotiate for the rest of 2020. Typically, a renegotiation entails the tenant prolonging a lease, with unchanged rents in smaller cities and a rental uplift in the bigger cities. We argue that Catena’s tenant exposure is attractive due to stronger counterparts such as ICA Gruppen, Postnord, Apotea and DHL, which are riding on fast-growing e-commerce trends. The company has a limited exposure to tenants in risk groups (tenants within events, sports and fashion retail amount to <5%).>

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Ambitions to expand in Denmark
In January, Catena acquired three properties in Denmark for SEK 235m at a NIY of 5.4%. Catena’s previous exposure to Denmark was just one property and management confirmed that its expansion in Denmark would continue. Catena considers Denmark to be attractive since: 1) it is a fragmented market, 2) the market can offer cheaper prices than Sweden, 3) it offers close proximity to the Fehrman Belt Fixed Link (a tunnel which will connect Denmark and Germany and is expected to be completed in 2028, and 4) it is a good strategic fit to the existing portfolio in Skåne. Catena has a land bank of 5 million sqm and an investment value of SEK 14bn, which it aims to develop over more than ten years.

’20e P/CE of ~18x vs sector at ~15x
Catena’s share is down by 25% YTD and 36% since peaking in February; consequently, the ’20e P/EPRA NAV multiple has contracted from ~190% to ~146%, implying the share is trading above the sector average at ~81%. The 2020e P/CE of 18x corresponds to a premium of 16% to the Swedish sector average at ~15x. However, we expect that Catena will grow its CEPS faster than the sector.

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