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Simon Property Group is monetising around half of its 22.4% stake in Klépierre. What are the implications for Klépierre and at sector level?
Companies: Klepierre (LI:EPA)Klepierre SA (LI:PAR)
AlphaValue
Q3 23 income accelerated significantly compared with H1 23. The other parameters were more in line with our expectations, with the vacancy ratio no longer improving and retailer revenues also normalising yoy. Italy and reversion, which weakened in Q3 23, were the most striking points. The granularity of Klépierre’s communication remains insufficient to better understand, and therefore anticipate, the underlying performance. For the time being, this strategy is favourable to the company’s share p
After adjusting for variable rents (+36%), car parks (+32%) among other slight restatements, we see a slight erosion in the underlying rental momentum despite the top line up 7.3% organically in H1 23.
We are lacking a couple of traditional operational metrics with which to evaluate Klépierre’s overall performance in the Q1 23 but inflation is playing its role and vacancy was stable sequentially.
Significant positive one-offs supported consolidated FFO in FY 22. Reported FFO per share should be down c.10% in FY 23 yoy even if +5% positive at the recurring level. €2.35 in FY 23 would mean remaining significantly below the FY 19 level of €2.79, nevertheless.
After persistent volatility for the top-line in Q1-Q2 22, Klépierre’s performance now looks to be progressively stabilising as it benefits from the rising contribution from inflation.
The guidance was raised due to positive one-offs. Vacancy stopped improving, thus confirming the stabilisation since December 2021.
Klépierre addressed the thematic of consumer spending while confirming its guidance. The H2 21 recovery in occupancy stalled in Q1 22.
Due to its own positioning (more global than local), Klépierre’s recovery should be strong in H1 22, for technical reasons first: sure, a favourable base effect will help. There are still a couple of quarters before landing in full.
Business is about to normalise progressively. The rent collection rate should soon be back to its usual pre-crisis level and new rent abatements are now targeting zero.
Despite a slower recovery that one could have expected in 2020, values were resilient in H1 21. The c.4% p.a. was half the FY 20 degradation pace. Even if we question the roughly stable appraisals, the fact is that the released figures were reassuring.
Klepierre confirmed other players’ views: shoppers are back in the shops as from reopening, targeting 90% of 2019 retailers’ revenue. No strong consumption catch-up (i.e. sales above 2019 levels) was observable to date, nevertheless. Klépierre’s shopping malls should reopen in full as from mid-May.
The company’s FY 21 guidance wasn’t that aggressive in assuming a lower FFO per share. Is this because some non-recurring items could be considered as recurring?
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