FastPartner - Strong cash earnings growth expected (ABG Sundal Collier)
2018-07-19 16:33
We expect CEPS to grow by ~9% y-o-y for FY’18
NAV growth of >7% p.a. even with flat property values
19% discount to the sector on 2018e P/CE
Recurring PTP grew 15% y-o-y to SEK 197mRental income increased 8% y-o-y to SEK 357m, while NOI grew 11% to SEK 254m, partly driven by acquisitions as well as general rental growth. FastPartner displayed its operational leverage, keeping its central admin expenses flat y-o-y, despite a larger property portfolio, while lowering its average interest expenses compared to Q2 last year. On the back of this, the growth in recurring PTP of 15% y-o-y (13% adj. for non-recurring JV income from co-ops) outpaced the top-line growth and amounted to SEK 197m. We expect FastPartner to deliver 9% y-o-y CEPS growth for FY’18 and 13% in FY’19, supported by acquisitions, projects and lowered funding costs. We see further upside to our estimates from additional projects in the project portfolio, which are not included in current forecasts.
~1.9% value uplift took EPRA NAVPS to SEK 54 in Q2
FastPartner lifted its property values by SEK 394m, or ~1.9% of the total portfolio value, which took EPRA NAVPS to SEK 54, corresponding to y-o-y growth of ~23% (adj. for DPS). The value uplift partly stemmed from higher rental levels but was also due to slightly lower yield requirements (5.4% vs 5.5% in Q2’17 for the total portfolio). We expect an additional 1.25% value uplift during 2018 due to the strong rental market and value creation in project development. The value growth, coupled with ~3% contribution from cash earnings and a ~SEK 2 per share (SEK 440m) effect from divested building rights to Slättö, would take EPRA NAVPS to SEK 60 by year-end 2018.We argue that the risk of falling property values is limited at a ROE with unchanged property values of 7.3%.
Valuation in line with the sector on NAV but discount on CE
The stock is currently trading at a 2018e P/CE of 15.7x compared to the Swedish sector average of 19.7x, and at an 11% discount to 2018
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