Report
Xior Model update : trading growth for safety
There are many possible strategies to deal with a tightening credit market. At first, Xior tried to grow itself out of problems with a quantum step bid for Basecamp. Over summer, it was confronted with a steep market correction that cut off its financing options. Interest rates shot up and an equity issue, if approved, became EPS dilutive as the share price fell further below its NTA. Luckily, it had de-risked the BC acquisition by fixing the CiK issue price at 44 per share. At the FY22 results, a new pipeline was presented that more or less confirmed signals given at its CMD in November last year. About half of the combined pipeline shifted out of the horizon and also a lot of project completions were delayed into FY24-25. A modest divestment program is under way and could add another 50m to cash, but more aggressive divestment options exist.At the moment, we believe that an ABB or CiK of minimum EUR 60m is advised to keep LTV below 50%. This has pushed our estimates slightly below their guidance for FY23. We take into account a CoD% of 2.3%, including 34% of capitalized interest vs. their 2.4% guidance. An equity issue lowers Debt and CoD% as new debt is much more expensive, but increases the share count and dilutes EPS either way. Depending on the discount to NTA, equity or debt becomes the best financing option. Hence, a large share price movement becomes self-fulfilling and complicates the valuation.
On the positive side, the PBSA market is not suffering from yield expansion. The EPRA NIY stood unchanged at 4.4% yoy. Lfl growth is strong at 4.2% and demand remains healthy with further upward pressure on ERV as capped indexation comes through and churn is relatively high. The Xior valuation is cheap as the stock trades 31% below NTA, while the company has de-risked a debt-spiral scenario significantly. We like the current valuation and maintain our target at 44 per share, a 2% premium to NTA.
Underlying
Xior Student Housing N.V.
Xior Student Housing NV is a Belgium-based company active in the field of residential Real Estate. The Company's offer is mainly for students and it includes several types of rooms for rent, including a student house in Leiden.
Provider
KBC Securities
We are a financial services provider for several types of professional clients, each with distinct needs.
Wim Lewi
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