Mixed set of 3Q17 results
Mixed set of 3Q17 results
Merlin’s 3Q17 results were distorted by the merger with Metrovacesa in October 2016. Gross rental income (GRI) decreased by 2.2% from the previous quarter to €117.2Mn with occupancy rates decreasing by 70b.p. QoQ to 92.4% (Office -120b.p. QoQ to 88.1% in 2Q17, shopping malls –20b.p. QoQ to 89.1% in 3Q17, and logistics -60b.p. QoQ to 98.0% in 3Q17).
EBITDA increased by 9.6% QoQ to €85.0Mn in 3Q17 with a 72.5% margin. It is mainly explained by the lower management fee (€5.0Mn in 3Q17 vs. €7.9Mn in 2Q17) and provision of the management incentive plan (€13.3Mn in 3Q17 vs. €19.7Mn in 2Q17). The last one has no impact on the cash flow. FFO (Funds From Operations) remained unchanged at €64.6Mn in 3Q17 vs. the prevous quarter.
Merlin Properties’ NFD (Net Financial Debt) increased marginally to €4,809Mn as of September 2017, implying a LTV of 45.6%. This is very much in line with our expected LTV of 44.5% by the end of 2017.
We maintain unchanged our Buy recommendation
The slight reduction of occupancy rates in 3Q17 could cast a shadow a robust FFO. Nevertheless, in our opinion it is part of the business as usual and we maintain unchanged our estimates for the end of the year. The share price represents a 7.5% discount to its EPRA NAV (€11.89/share in June 2017) and an 14.0% discount to our valuation of €12.8/share. We maintain unchanged our Buy recommendation.
Merlin Properties SOCIMI SA is a Spain-based company engaged in the operation of a real estate investment trust (REIT). The Company focuses on the acquisition, management and rental of commercial properties located in the Iberian Peninsula, primarily in Spain. The Company's activities are divided into the following segments: Office buildings, operating a portfolio of office space; High-street retail, engaged in leasing retail stores; Shopping centers, engaged in managing department stores; Logistics, operating logistics warehouses and distribution centers, and Others. The Company's other activities include property management services rendered to third parties.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
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