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Icade hosted an investor day during which the company unveiled its new strategic plan ‘ReShapE'.After the agreement was announced last year to sell their healthcare portfolio to Primonial, the company is now at the helm of an EUR 6.5bn portfolio, of which 82% are offices (EUR 5.3bn).Icade's management has reviewed its assets in a deeply evolving environment to assess its resilience and capacity to retain tenants.Icade has devised a plan to keep the core office portfolio and the spend minimum level of capex to reconvert the non-core assets.As part of its strategic plan, Icade aimed to increase its share of
Icade Icade SA
ReShapE ambition makes strategic sense... Icade has announced its new 2024-28 plan and from a headline perspective, we believe ''ReShapE'' looks sensible. Identify and retain your best assets, sell or reposition your weakest using your existing sector skillset and expertise at attractive YoC and fund the capital recycling with no need for equity. ...but we are concerned that repositioning will be back-end loaded However, execution risks include the need for significant asset sales (healthcare and non-healthcare) and this to us looks more likely to occur primarily from 2026 onwards, i.e. with less disposal activity in 2024 and 2025. We therefore see risk that the next 12 months represents a slower start to the new strategy than the market is willing to wait for. No pain no gain, sure, but the pain still comes first. Notable changes to our forecasts Following the CMD, we have made a number of material revisions to our financial forecasts. These include: 1) Assuming that stage 2 of the healthcare portfolio sale now does not complete until 2025, vs 2024 previously (and there is risk that this could be pushed later), 2) We now forecast stage 3 (IHE) to be sold in 2026, 3) We cut our earnings forecasts to reflect rising vacancy expectations from non-renewal of leases in 2024-25, impacting earnings by c.EUR40m, 4) We cut our capital value assumptions for FY24, with NTA now troughing at EUR56 per share (FY24E consensus: EUR65) and 5) We cut our divi expectations to reflect our revised earnings and healthcare portfolio sale forecasts. Valuation: Cheap but limited near-term catalysts Icade trades at a 46% discount to our forecast trough EPRA NTA and offers a forecast 9.7% earnings yield from strategic ops. at the top end of FY24e guidance. Whilst this is higher or optically cheaper than the average of our coverage universe, we believe that material asset sales and new strategy execution is more likely to come from 2026 onwards, rather than 2024-25. As a result of fewer...
Gross rental income emerged at EUR 363.9m, stable YoY.Portfolio valuation lands at EUR 6.5bn on a proportionate basis, down -17.5 %2024 guidance for Net current cash flow from strategic operations between EUR 2.75-2.90 p.s.Icade hosts an Investor Day in Paris today to unveil their new ‘ReShape' strategy, which we attend.More details in our Note published this morning.
Icade will update the market on Monday 19 February with its new strategic plan, based on an assessment carried out on all of its businesses. Ahead of this, we publish our expectations for the medium-term strategic priorities, concluding there is upside risk to the market''s current expectations. Market expectations ahead of upcoming CMD are low We have spoken to a number of market participants and the consensus view is that expectations are low with regards to what Icade could announce at its Capital Markets Day next Monday to positively surprise the market. We view this in two ways - 1) If there is little new news from the CEO, the stock shouldn''t derate notably given the limited expectations in the first place; 2) If we do get some incrementally helpful commentary surrounding elements such as the healthcare portfolio sales process or a more rigid guide to use of proceeds, this should be taken well by the market. Eyes on healthcare planned disposals A considerable part of our capital recycling expectations for Icade over the coming 2-3 years in our view is predicated upon the company''s ability to execute on the remainder of the healthcare portfolio sale - namely the second tranche of Icade Sante and the Icade Healthcare Europe (IHE) portfolio. Any update on progress here would be welcomed by the market, as well as timing and scope of cashflows. Valuation screens cheap, as long as catalysts exist Icade currently trades at a 62% discount to last reported EPRA NTA per share at H123 of c.EUR80 and a 53% discount to our FY23e EPRA NTA per share of EUR65. Excluding income from the healthcare portfolio, the mid-point of company guidance implies a 10% earnings yield - attractive in our view. We do receive investor pushback on our Outperform recommendation for Icade, however we believe that there is potential upside to come from; 1) Asset yields peaking (and values troughing) by the end of 2024, 2) Further healthcare portfolio tranche sales, and 3) Development...
The contraction in Residential development is intensifying, with a record cancellation rate in Q3 23. The backlog is shrinking slightly. In our opinion, Q4, which is always very important in this business, is not looking good. In the Office Property segment, organic growth remains below indexation, but the occupancy ratio is improving a bit.
Gross rental income amounted to EUR 272m, up 2.5% on a LfL basis.The impact of indexation (+4.9% over 9M was partially offset by negative rental reversion for a few renewals).Average occupancy increased to 87.5% up 100bps vs. June 2023.Icade confirmed its guidance with a net current cash flow per share expected between EUR 2.95 and EUR 3.05.The strategic plan is being finalized and will be disclosed in early 2024.
Icade’s portfolio profile has changed significantly following the €1.4bn disposal of Healthcare. The new CEO will present a strategic roadmap in early 2024 at the latest.
Gross rental income emerged at EUR 181m, down -2.1% YoYOccupancy is down to 86.5% (-120bp over 6 months).EPRA earnings from Commercial property investment amounted to EUR 91.9m, down -7.0% YoY.EPRA NTA slid to EUR 79.3, down -11.8% over the period.The minimum special dividend to be distributed in 2024 is EUR 2.54 per share.A review of all businesses and assets is undergoing, with a new roadmap to be announced in late 2023 or early 2024.
While indexation of 5% further obscured the slight degradation in Offices, Residential Development showed a record cancellation rate in Q1 23, almost the double of the 2014-22 sequence.
Gross rental income amounted to EUR 83.3m, up 2.8% on a LfL basisOccupancy remained stable on average at 87.5% while occupancy in business parks slide to 83% vs. 83.7% as of end 2022.Icade pursued its disposal program with two new preliminary agreements signed for two office buildings in Marseille for more than EUR 100m.We will come back with new estimates and rating in the coming days.Icade will host a call today at 9:00am with the new CEO Nicolas Joly.More details in our Note published this morning
Icade - Earnings & valuation update
In a major move, Icade will divest its Healthcare business in full. This is likely to modify Icade’s big picture. The new strategy remains to be established.
Icade entered into an exclusivity agreement with Primonial REIM and Icade Santé's minority shareholders for the sale of its stake in Icade Santé and sale of the asset portfolio owned by Icade Healthcare Europe (IHE). Icade's investment is estimated at EUR 2.6bn for the entire divisionEPRA NIY on the healthcare portfolio stood at 5% as of December end, with EPRA NTA for Icade Santé being at EUR 100.3. We believe that the pricing in line with the latest NAV is a positive, solidifying the latest valuation of assets and will allow the company to set course for future growthOur estimates,
As property performed in line with both expectations and its peers, Residential development was resilient due to high reservations from institutional investors. Icade’s CEO will change this summer.
Gross rental income from Property Investments (PI) at EUR 565.3m (+2.6%), in line with our est. Direct results from Property Investments at EUR 381.8m or EUR 5.21/share, ahead of our estimates (EUR 369.5m/4.88 per share). Occupancy of Offices slightly improves to 89.0% (vs. 87.8% by end June) and to 91.5% overall. Property Development result also ahead of our expectations at EUR 37.0m (+52.7%).Group net current CF (NCFF) stands at EUR 416.8m or EUR 5.50/share (+5.9% vs. our estimate at EUR 5.32/share. The difference between NCCF and direct EPS (direct EPS of PI + development results) is depreciation which is
When looking at the Q3 22 figures alone, we don’t share Icade’s kind of optimism. H1 23 should show some fragilities in the French residential development business, in our view.
Icade experienced rising further vacancy in Offices sequentially. In residential development, the cancellation rate accelerated in Q2 22 alone. Guidance was confirmed, nevertheless.
In Offices, the pressure was concrete with a negative performance lfl. Rising construction costs in Icade’s development business will question French residential units’ affordability in 2023.
Yield compression in Healthcare has offset the impact of rising vacancy in Offices. The recovery recorded in Residential Development is about to stabilise in FY 22. The company’s guidance of +4% in FFO in FY 22 (before accounting for another tranche of disposals) doesn’t push to strong optimism.
Following stabilisation in Q2 21, vacancy was up 130bps sequentially in French Offices. Guidance unchanged. Nothing more about the Icade Santé IPO.
No major surprise in Q2 21 in the Property business: vacancy stands at a high level but was roughly flat sequentially. Reservations in the Residential Development business were flat sequentially too: strong lfl growth in H1 21 can therefore not be extrapolated to H2 21-2022. A negative base effect could occur in H1 22, in our view.
Q1 21 revenue was up 43% lfl with a negative contribution from the Property segment. Residential development was up 128% (lfl, IFRS) pushed by apartments delivered to the French Government arm (CDCH).
Much as Covivio and Gecina did earlier, Icade released a reassuring picture at pixel time (December 2020) as far as offices were concerned. It experienced some little negative revaluations too, but the balance sheet stays under control. It will pay a stable cash dividend of €4.01 per share.
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