Xior

On 30th May, Xior announced the acquisition of the Basecamp Group, a EUR 939m portfolio of mainly student housing assets. After an initial positive market reaction, the stock price slid in a tough market. Xior has a strong M&A track record and raises now the stakes as the low interest rate window of opportunity is closing. The complex structure of the deal has many moving parts as it depends on large capital increases and debt issues. We explain the financing and business assumptions behind our EPS estimates for FY22-24. In short, we found that our estimates are less sensitive to the issue price of the Contributions in Kind (CiK) than the rising interest rates. Also, the expectation that Xior capitalizes more than a third of the interest on the new debt, supports the EPRA EPS. Over the longer term, synergies will kick in from FY24 onwards. On the announcement, Xior raised FY22 EPRA EPS guidance from 2.00 to 2.07 vs. our exp. of 2.05 and FY23 EPS guidance from 2.20 to 2.38 vs. our exp. of 2.35. We give Xior the benefit of the doubt they can swallow the Basecamp deal and enjoy the a larger international footprint. The main risk to our case is the rising interest rates as central banks are pulling the inflation brake. We estimate that the recent interest rate increases have a -12.5% impact on our previous target, due to the large portion of new debt till FY25. We maintain Buy, but lower our TP from EUR 60.0 to 52.5. That is a 35% premium to last reported NTA.