SPG/Klépierre: a positive harbinger for URW?

Simon Property Group is monetising around half of its 22.4% stake in Klépierre. What are the implications for Klépierre and at sector level?

Good revenues but we will be monitoring the side parameters.

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

Inflation weighs 84% of organic top-line growth

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.

Better than the peers in Q1 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.

Closing the chapter of strong recovery

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.

Operational performance stabilising progressively

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.

Welcome contribution from one-offs in H1 22

The guidance was raised due to positive one-offs. Vacancy stopped improving, thus confirming the stabilisation since December 2021.

First concerns about consumer spending

Klépierre addressed the thematic of consumer spending while confirming its guidance. The H2 21 recovery in occupancy stalled in Q1 22.

Further recovery in H1 22; don't think of it in 2023

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.

Positive one-offs in Q3 21.

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.

Resilient values in H1 21

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.

Convalescence begins

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.

FY 21 won't improve that much after all?

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?

Stabilising figures in Q3 20. Will this be enough?

Prior to the impact of further lockdown measures adopted in early Q4 20 across Europe, Q3 20 was stabilising vs. Q2 20. Both tenant revenues and footfall were stabilising at c.10% below their 2019 levels. The good news, however, was that rents did not collapse in Q3 20. The question remains whether this recovery will be sufficient to avoid a recap. March 2021 (annual figures, including values) will at least provide the answer.

A trend of above 6% negative revaluation per annum

The negative revaluation of 2.8% vs. December 2019 demonstrates a c. 6% annual pace. Valuers warned that valuation “could” adjust strongly in H2 20. Consumption was far from having fully recovered in Klépierre’s shopping malls in June 2020. Please wait.

LIBERUM: Plus500: Strategic progress pays dividends

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Morning Note – 18 April 2024

The Hardman & Co Monthly: April 2024

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Initial Equity Trading Comments - 19 February 2024

M Winkworth+ (WINK, House Stock at 163p) - Solid FY23A results, well placed to grow

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