Recurring EPS down in Q3 23

The operating performance remained positive at the top-line level in the Q3 23, but recurring EPS was down. The latter compares with growth of 9.7% in the H1 23.

No negative revaluations in H1 23

Wereldhave’s top line benefited from its shift to tenants catering for daily necessities. This was sufficient to balance sector yield decompression in H1 23.

Occupancy losing steam in Q1 23 (bis)

Following Mercialys full set of figures earlier today, Wereldhave confirmed that occupancy ratios were down sequentially in Q1 23. As far as the sector is concerned, a material issue has emerged overnight.

Improving pricing power

Wereldhave looks to have stabilised at the end of 2022. The lower vacancy rate should enable improved pricing power as of 2023 even if some key issues remain.

Why buying bricks generating an 8.5% asset yield isn't the immediate priority

A sequential improvement in Wereldhave’s occupancy ratio was further proof of the management team’s good work. There are a couple of outstanding general issue boxes to tick before buying the stock.

Back to good old footfall in Q2 22

Consumers are fully back in Wereldhave’s shopping malls in Q2 22. The company has reconnected to pre-crisis levels. This hasn’t lead to consumers’ pre-crisis spending.

Look beyond much shorter issues

The Q1 22 performance was decent. However, the accumulation of risks looks to be a concern: construction costs, energy costs, inflation, interest rates.

Short-term optimum to be reached in FY 22-23?

Improving occupancy coupled with both stabilising rents and a better rent collection rate have led to beating the company’s FY 21 guidance. A further improvement is awaited in FY 22.

Back to a normative rent collection rate in Q3 21

Wereldhave’s tenants are now paying rents on time. The underlying business wasn’t that dynamic but Q3 21 provided additional proof of stabilisation.

€305m of disposals in France

On top of its H1 21 figures, Wereldhave disposed four out of six of its French malls for a cash consideration of €305m. The latter book value was €504m. Such a cash-in will rebalance the LTV ratio to a much affordable level of 42% pro forma.

Post-crisis consumer behaviour: online vs. offline

Guidance wasn’t lowered but FY 21 will come in at the lower end of it (€1.80 – €2.00 FFO per share) due to the H1 21 lockdowns. Net Rental Income was down 21% yoy. With the LTV standing at 46%, it is too high in our view, but disposals are on track.

Restoring a small dividend

Consolidated vacancy was up by only 50bp from 5.4% to 5.9% yoy. It was down 10bp (improvement) in Q4 20 alone. This confirmed URW’s behaviour in Continental Europe, with low additional vacancy attributable to the very low number of retailers’ bankruptcies.

Welcome respite.

Following Mercialys, Wereldhave has confirmed some early signs of stabilisation in Q3 20. Local units have proven more resilient than bigger or in-town ones. Wereldhave didn’t pass the pass anyway but, following the negative Q2 20, Q3 20 looks to be something of a respite.

Seeking for fresh cash

Our FY 20 EPS is too high and we will have to cut it. However, our valuation still accounts for the contribution of a capital increase in FY 21 and our target price should stay broadly stable. We maintain our Sell rating.

Please forget 2020, but what about 2021?

Wereldhave will be impacted by the “low” footfall of Q1 20, or “no” footfall of Q2 20. Progressive de-containment measures will probably lead to a long and slow recovery. The big issue will be the forward balance sheet. We stay negative.

Morning Note – 22 April 2024

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Morning Note – 29 February 2024

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