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In Q3 23 business continued at a pace very similar to that of the start of the year. Occupancy rates are holding up and Mercialys is deploying an intelligent strategy for the long term. The portfolio remains an attractive value play.
Companies: Mercialys (MERY:EPA)Mercialys SA (MERY:PAR)
AlphaValue
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.
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.
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.
In Q3 22, the top-line was almost flat ex-indexation. Guidance was confirmed. Betting on a cash dividend in 2023.
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.
Companies: Mercialys SA (MERY:PAR)Mercialys SA (0IQU:LON)
Business looks to be stabilising with the bulk of the operational recovery how behind us. Prepare to play dividend yields rather than capital gains.
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.
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.
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 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.
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.
Companies: Mercialys SA
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.
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.
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.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Mercialys SA. We currently have 6 research reports from 2 professional analysts.
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Hardman & Co
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