Limited negative revaluations in H1 23

Following the reports from Wereldhave (covered) and Carmila (not covered), Mercialys confirmed a limited level of negative revaluations of around 4% over six and twelve months.

Occupancy losing steam in Q1 23

As the first retail landlord to release its Q1, Mercialys has underscored the ending of the catch-up in retail occupancy. This was confirmed by Wereldhave earlier today.

Nice cash-back in 2023-24

Mercialys closed its FY 22 with an affordable LTV ratio of 35%. This should support dividend payments in 2023-24 i.e. a 19% cash back.

Appraisers favour stable values in September 2022

In Q3 22, the top-line was almost flat ex-indexation. Guidance was confirmed. Betting on a cash dividend in 2023.

Further slight improvement in Q2 22

Mercialys’ local footprint again worked well in H1 22. As far as the operational performance alone is concerned, Mercialys performed better than Klépierre, questioning the significant difference in terms of discount vs. NAV.

Play Mercialys' local footprint

Business looks to be stabilising with the bulk of the operational recovery how behind us. Prepare to play dividend yields rather than capital gains.

Slight FFO increase awaited in FY 22; play the dividend

Mercialys’ guidance of a 2% rise in FFO in FY 22 reflects the landing performance of spared local assets. The 21% return expected in 2022-23 (dividend only) looks sufficient to support our Buy recommendation. Risk-reward looks favourable.

Still far from 2019 but an improvement in Q3 21

Both vacancy and collection rates improved in Q3 21. Due to the favourable base effect in Q4 21, wait for a good year-end for 2021. Guidance maintained.

Some clear but limited sacrifices on the rents side

Mercialys issued a new FY 21 guidance of FFO above FY 20’s low €95m. Both the low LTV ratio and nice local exposure make it a good candidate for a resilient share price despite lowering underlying rents in such a special period.

Q1 21 under the sign of last French lockdown

Q1 21 performance was the first “almost clean one” as one-off impacts resulting from 2020 dissipate progressively. With Mercialys being the first shopping malls’ landlord to release Q1 results, it allows a sector read-across before the full Q1 21 earnings season.

Another transitional year in 2021

Support for tenants and non-recurring provisions for doubtful receivables weighed €30m, i.e. 16% of FY 19 revenue. H1 21 will show other charges probably but the latter should diminish progressively.

The contrarian's corner: buy it

The Q3 20 performance was much better than in Q2 20, the latter having been twice better than peers, retrospectively. Both footfall and retailers’ sales are back to normative levels, as far as Mercialys is concerned. We admit that the crisis is far from ending. However, we believe that the risk reward is improving progressively.

The shock in H1 20; the trend as from H2 20?

H1 20 was safe with a stable FFO. However, H2 20 will be much harder with a 10-15% decline in FY 20 FFO (guidance) or a 20-30% decline in H2 20 alone. It reflects the lag effect of some rent cancellations, granted in Q2 20, but not in fact the negative contribution of increasing bankruptcies. Values were pretty resilient in H1 20, much as for the full Property companies up to now.

Waiting for the first guidance

The good Q1 20 revenue did not reflect the current macro issues. Mercialys was unable to provide us with a guidance. The exit door could close in the coming months. Try to exit in favour of a bear market rally.

Values slighty declined in France in H2 19

At constant perimeter, asset values declined by 0.7% in H2 19 and 1.4% in FY 19, i.e. at a stable pace, sequentially. NAV was safe in FY 19.

Strong H1'23 results; forecasts upgraded

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Strategic progress drives robust growth

H1 interims are in line. Argentex has delivered strong growth (+28% yoy revenue) by driving growth initiatives. New technology-enabled products have been launched, including Alternative Transaction Banking, which are already delivering compelling growth ahead of expectations. Pressing into Europe via the Netherlands is also delivering strong growth. At the core, client KPIs remain strong. We leave our forecasts unchanged, with revenue momentum continuing into Q3. We believe the current 12.4x Dec

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Equals Group (EQLS LN) - Interims justify rise in forecasts

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LIBERUM: Alpha Group International: Underlying strength

H1 23: focusing on capital generation

Promising results for M&G in H1 23. The new CEO, Andrea Rossi, continues to execute the company’s new strategy, and we have confidence that he is positioning M&G to surpass its financial targets for the 2022-24 plan. The H1 23 operating capital generation results significantly outperformed expectations, exceeding the consensus by more than 50%. This substantial capital accumulation is poised to deliver strong returns to shareholders, rewarding them for their patience during this transitional per

Gore Street Energy Storage + (GSF, House Stock, 84p) - Steady NAV growth

Robust interims; small reductions to FY24 forecasts

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Taking the Upper Brand: Brands Sector Overview

The earliest dated brand has long been contested; the majority point to Kongō Gumi, a family run construction company that specialised in Buddhist temples in Japan; its documented record of ownership goes back to 578 AD. Like Kongō Gumi, several different brands have withstood the test of time, albeit without then same degree of longevity. The term brand originates from the 1500s and means "to burn" in Ancient Norse and was initially used to mark cattle for ownership. This practice can be consid

Interim Results

FSFL, a UK centric solar electricity generator, delivered a solid H1’23 total return (-2.4%) in a difficult environment. During the period, the fund continued with its forward sales (locking in cashflows for the next 2.5 years), increased its discount rate by c50bps to 7.5% (UK), maintained its medium term inflation (2024-2030) assumption of 3.0% and announced plans to recycle 200MW of assets into higher returning projects. During 2023 the sector has de-rated as investors, grappling with valuati

Morning Note – 6 September 2023