Portfolio scale-up enhances profit generation and eases risk profile
Atenor is a European real estate development company active in the sector's entire process, from identifying and acquiring locations to developing and selling them, with no direct involvement in construction. The company's portfolio includes 29 projects for more than 1.2m m², up from 9 projects in 2009. Atenor’s core focus is offices and, to a lesser extent, residential. Exposure to its domestic market, Belgium (33% of portfolio), is gradually fading, though at a higher pace since 2016 thanks to internationalisation. The group moved initially towards Central Europe, and, more recently to neighbouring countries, such as France and Germany, but also Portugal. Expansion is moulded on the success in Belgium and focused on capital cities offering attractive growth prospects as well as quicker investment procedures. We believe Atenor is well-positioned in European office real-estate development to take advantage of the underlying trend, with market demand increasingly shifting to assets requiring much higher technical and quality standards. In addition to higher portfolio rotation and profitability, we believe Atenor’s risk profile has improved through its internationalisation strategy thanks to diversification, with synergies from an experienced and stable workforce and management team as well as exposure to countries offering stronger growth prospects and shorter pre-building phases.
Atenor currently trades at a 12-months forward P/E of 9.8x based on consensus estimates, a slight discount to peers (10.1x) and at the lower end of the historical range of 4.3x to 26x (since 2003). We believe this discount is unjustified given (1) Atenor’s track record, (2) its superior returns compared to the peer group (ROE of 21% vs sector average of 17%) and (3) stronger expected growth compared to the peer group (32% EPS CAGR 2019-21e vs sector average of 3%).
Atenor Group is a holding company. Co., through its subsidiaries, is a real estate developer that specializes in large-scale, urban real estate projects that meet strict criteria in terms of location, economic effectiveness and respect of the environment including office buildings, mixed used and residential complexes. Co. has acquired diversified know-how which it uses to design and build projects in Belgium and other countries throughout Europe.
Merodis Equity Research offers bespoke equity research backed by our extensive experience in equity markets at top-tier investment banks in London, Paris and Brussels serving institutional investors worldwide. Analysts at Merodis Equity Research have achieved #1 Extel rankings in the past for Benelux equity research.
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