Q3 21 was further confirmation of a polarising market: CBD experiencing nice performances whereas peripheral locations continue to loseng steam. The heart of Gecina leans on CBD.
Companies: Gecina (GFC:EPA)Gecina SA (GFC:PAR)
Gecina’s H1 21 figures showed the great resilience of Paris CBD, where the bulk of its €20bn assets leans (€4bn in La Défense). End-market data don’t show a strong adjustment in either rents or price per sqm in Paris CBD, even if the same parameters are a bit more worrying at the fringe of it.
Adjusted for exceptional items, the performance of Offices was -0.7% in Q1 21. Net of the positive indexation of 0.8%, the negative 1.5% mirrored the 130bp degradation in occupancy yoy (-140bp sequentially). Gecina is highlighting an improving end-market. As far as we are concerned, we believe in a catch-up phase.
Gecina’s guidance doesn’t account a strong increase in forward vacancy nor diminishing rents. It highlighted the +2.7% in Paris CBD (Offices) and the +7% in Residential values, both in FY 20. However, Gecina’s assets were up 1% in H1 20 and down 1% in H2 20 (sequentially). Nothing worrying at pixel time.
Companies: Gecina SA
The Q3 20 performance was good overall with still high rents in the City of Paris inducing a positive reversion. Gecina confirmed, unsurprisingly, some growing uncertainty in both the first and second inner rings.
Office values were safe in Paris CBD in H1 20 (or two-thirds of Gecina’s portfolio) due to stable but toppish rents. Reversion now clearly turned into negative territory in both the 1st and 2nd inner rings of Paris. This was the logical continuation of the fragilities identifiable since mid-2019.
Shopping malls have experienced down values in Europe since 2018 but Offices reached their tops in February 2020. We now anticipate a 10-15% cut in values, as a minimum. It was 18% in 2008-09. We now factor it in our model for Gecina.
One again, in FY 19, revaluations were very positive in the French Offices’ market. Provincial assets (Lyon, Bordeaux…) registered 7% valuation growth (mostly in H2 19). It led Gecina’s net capitalisation rate to 3.90% (Offices, all areas) with another slight yield compression of 20bp. The latter favoured the best central locations, while the inner and outer rings of the City of Paris were much less resilient. Gecina’s recent share price reaction confirmed vulnerability to macros. Negative stanc
The Q3 19 set of figures demonstrated the resilience of Gecina’s assets, i.e. its Prime Offices and apartments in the very heart of the City of Paris. There was no red flag but some fragilities have become progressively more concrete in both the first and second rings around the City.
Confirming market information, the Offices segment of the City of Paris signed another good half, including a slight yield compression of 14bp. The trend weakened clearly in La Défense where we can worry about the coming over-supply and was negative in both the 1st and 2nd rings around Paris (rental values are now in negative territory).
The Parisian office market shows remarkably robust figures in terms of vacancy and rents in Q1 19. Nevertheless, we cannot consider it as completely immune to macro issues. We therefore adopt a more cautious stance by adjusting both the target price and recommendation.
Good FY 18 figures. The good pipeline ensures 2019-2021 average 4% growth in revenue and net recurring profit in our view. However current Capitalization Rates on some assets are approaching the limit of potential value destruction.
Gecina continued benefiting from positive trends in the Paris Region office market, particularly in Paris CBD. Demand remained good, pumping up rental prices.
Gecina benefited from positive trends in the office market in Paris and favourable funding conditions (targeting LTV below 40%). Rental activity was supported by the lack of available spaces (in Paris mostly, where 89% of Gecina’s portfolio is located). Management raised its earnings guidance to +8% (vs. +6% previously) growth in recurrent EPS and an organic growth of +2% for offices (as estimated in our model). We stick to our earlier positive stance on the stock.
Gecina’s GRI increased by 3.5% yoy (2.1% lfl) to €558.9m (higher that estimates), and EBITDA was up by 3.8% yoy, to €453.5m. This has led to a 4.6% increase in recurrent net income to €363.5m, exceeding the company’s initial expectations. The performance was driven by Eurosic’s integration and the optimisation of financial expenses. We will revise upwards our numbers, including Eurosic’s integration.
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Aviva’s trading update came with some satisfaction, albeit in line with what it had been guiding. All indicators are “on track” as communicated by the firm. The interesting area will come, in our view, from the pressure that activist Cevian is exercising on the firm to distribute more excess capital.
Companies: Aviva plc
We update our forecasts to take account of (1) Group 2020/2021 Annual Report & Accounts released in September (2) 1Q IMS released in October (3) End October 2021 FUM update in early November. Key points include:
Group Funds Under Management “FuM” remain circa US$11 bn; in October there was a small uptick which may indicate small net inflows.
Strong investment performance across CLIG’s investment strategies (Exhibit 3 shows performance over 5 years relative to peers and benchmarks).
Companies: City of London Investment Group PLC
Mercia has provided a positive update on a number of fronts. H1 adj. operating profit is running materially ahead of market expectations. Another performance fee has been crystallised in the NVM VCTs (£1.6m net). Valuation gains in H1 were better than expected driving >£10m H1 comprehensive net income. We incorporate this into our model, driving a +72% upgrade to FY22e adj. EBITDA (+23% u/l to £3.7m excl. performance fees) and a +4% increase to our NAV. We reiterate our 50p/sh SOTP valuation dri
Companies: Mercia Asset Management PLC
A key focus for the company in 2021/22 was to de-gear the Balance Sheet with sales at or above book value. Two separate property sales in Bristol, One Castle Park (£20m) and 135 Aztec West (£3.9m), have been agreed well ahead of their March 2021 book value and when the former completes in mid-December pro forma net LTV will reduce to c29%. Further sales of assets where the company has carried out its business plan can be expected, which would provide even greater financial firepower for acquisit
Companies: Circle Property Plc
Deltic Energy has announced the completion with its joint-venture partner, Cairn Energy (CNE.L), of a 3-D seismic survey of approximately 680 km² over P2428. The licence is located in the heart of the SE-NW trending Carboniferous sandstone and Zechstein carbonate fairway towards the northern margin of the SNS (Southern North Sea) gas basin. The survey was focused on the Plymouth Zechstein reef prospect which is held 60% by Cairn and 40% by Deltic. Significantly, Deltic sees Plymouth as an analog
Companies: Deltic Energy PLC
MJ Hudson (MJH) has delivered a solid set of FY21A results, with organic revenue growth of +14% YoY (FY20A 4%) and Adj EBITDA of £5.6m (broadly in line with our £5.7m forecast). Pro forma EBITDA for the group at June-21A stood at £6.8m (and is c£7.0m once SCFL, acquired post period end, is included). We note that our FY21E Adj EBITDA forecast is currently £7.1m, and hence factors in only minimal organic growth, despite the fact that positive momentum from H2/FY21A has continued into the current
Companies: MJ Hudson Group Plc
Gore Street’s confirmation of a 90MW capacity increase at Kilmannock is a clear positive in our view and takes the fund’s portfolio to over 600MW of projects either operating or under construction. These are split between the GB market and the all-Ireland market with the fund now owning the largest portfolio of storage assets in Ireland. In the GB market price volatility continues to be strong and we expect the fund’s assets to be benefiting from this.
Companies: Gore Street Energy Storage Fund PLC
Gore Street Energy Storage Fund (GSF) has announced that Kilmannock, one of the Company’s ROI
assets in construction, has secured an additional grid connection volume allocation of 90MW (in
addition to the 30MW). The initial 30MW benefits from a six-year fixed price contract, while the
remaining capacity can primarily derive revenues from extra capacity which could be used forwholesale
trading or the volume uncapped DS3 market (Delivering a Secure Sustainable Electricity System). GSF
Augmentum Fintech (“AF”) has seen continued positive performance during H1, with a +£26m net investment return on the portfolio whilst deploying £45m. Successes include positive returns on Interactive Investor (“ii”), Tide, Grover and Zopa – as well as the maiden disposal (Dext). With ii appearing to be on the cusp of graduating, we look at the next cohort: assuming strategic execution, and with some already linked to IPOs, we see several £1bn+ valuations. We think that these four alone (out of
Companies: Augmentum Fintech
Revolution Beauty has released H1 results, confirming trading remains in line with full year expectations, despite well flagged input cost pressures. Today’s announcement unveils the roll out of a major new US retail partnership from Q4, as well as the launch of several new product categories, underpinning growth expectations into FY23 and beyond.
Companies: Revolution Beauty Group plc
Companies: Brewin Dolphin Holdings PLC
Companies: Chrysalis Investments Limited
The NAV of NextEnergy Solar Fund (NESF) was 103.1p as at 30 September 2021 (98.9p as at 31 March 2021). This has been driven by higher power price curves and higher market views of inflation. NESF has also diversified into the energy storage sector through a £100m joint venture partnership with Eelpower, with the first 50MW acquisition signed and being prepared for construction. Portfolio electricity generation +1.1% is above budget for the first half of the year. NESF has declared 3.58p of divi
Companies: Nextenergy Solar Fund
Companies: Real Estate Credit Investments Limited
Companies: Equals Group Plc