LHV Institutional 'EfTEN Real Estate Fund III AS (EFT1T ET) Company Update, August 26th, 2021'
* EfTEN Real Estate Fund III is a regulated, evergreen, closed-end fund focused on real estate investments. The Fund invests directly in commercial real estate in the Baltic states, primarily targeting properties that are already cash-generating. EfTEN targets properties that are strategically located in the retail, office, and logistics segments, with reliable tenants and predominantly long-term leases. EfTEN’s goal is to achieve a long-term dividend payout ratio of 80% of free cash flow (EBITDA minus interest payments, minus loan principal repayments, minus income tax expenses from profit).* In order to assess the value of the Fund, we used six metrics, including 1) P/E, 2) P/B, 3) EV/EBIT, 4) Cash Distribution Yield, 5) P/EPRA NRV & Net Initial Yield correlation, and 6) Cash Distribution Discount Model (‘CDDM’). We decided to prefer the correlation implied P/EPRA NRV and CDDM as more prominent valuation metrics for the Fund, compared to other peer valuation metrics. Thus, we have given P/EPRA NRV a 40% weight and the CDDM a 20% weight in the total value, leaving the total contribution of other metrics at 40%, including a 10% weight for each multiple.
* Please note that our valuation of the Fund is largely dependent on the peer comparison analysis of different market multiples and, as such, has been significantly influenced by the recent rapid growth in the stock prices of publicly-traded real estate funds in comparison with our previous quarterly update on EfTEN. Over the last three months, the stock prices of the selected peer companies have increased nearly 20% on average. Overall, we decided to upgrade our FVR further from EUR 20.30-21.70 to EUR 22.00-23.40 per share. This report contains a full set of financial forecasts and is useful for gaining an initial insight into the company. Please also refer to the tables and charts in the attachment.
LHV Bank is an independent pan-Baltic bank, based on Estonian capital. The company was founded in 1999 by two founders of Hansapank (today’s Swedbank in the Baltics) and has been offering a full range of investment services for 15 years. In May 2009, LHV received a credit institution licence allowing it to provide all banking services.
The head office is situated in Tallinn, Estonia. Cross-border services are offered in Vilnius, Lithuania and in Riga, Latvia. LHV provides brokerage (institutional and retail), asset management, banking and capital markets services. Compared to other banks, we are more innovative and have more solid experience in investment and entrepreneurship.
The Bank, together with the Group asset management company employs over 320 people. LHV Group shares are listed on Nasdaq Tallinn.
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