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NEINOR HOMES: MEETING WITH THE COMPANY (ANÁLISIS BANCO SABADELL)

Highlights from the meeting held today with the company’s management team:
 They consider that the sector prospects are reasonably positive, even despite the economic situation, as in terms of supply few developments were initiated in 2020 and they are expected to stand below normal levels in 2021, and thus we could see new home shortage in some regions in 2022 and 2023. The dynamics of supply suggest there could be price tensions in some regions, which is not positive for those developers with financial muscle to develop, as is Neinor’s case.
 2021 Outlook. The company is comfortable with its € 150 M EBITDA guidance and € 50 M dividend target (~6% yield, to be paid in the 1Q’22). The group considers that the market consensus might be overly cautious due partly to Covid-19, as it assumes around € 115 M (€ 129 M BS(e)).
 Long-term prospects. The company believes that with the deliveries to be provided by QBT, it would be already close to stabilisation phase, and in the long-term, avoiding any guidance, the group should be able to pay out a dividend of at least the 2022 target amount (the € 50 M previously outlined), although this would depend on the materialization of a relevant acquisition of land assets.
MARKET IMPACT
The messages are nothing new, but they are still positive. We believe the management team is confident in how operations are progressing, as well as in the positive aspects of the merger with QBT. We also believe the merger with QBT could generate value; however, this is not priced in, as HOME’s share price has fallen -4% since the announcement vs. +0% IBEX, +15% MVC and +5% AEDAS. The deal must still be approved in both companies’ AGMs on 31 March, and although it not a sure thing that QBT’s shareholders are on board with the merger (there is a 4% gap in the exchange ratio compared to market prices), we think it will be approved in the end (26% of the capital has pledged to accept, and the proxy advisors recommend voting in favour).
In terms of NAV/share the merger could have a positive effect of +8% according to our pre-synergies estimates (and a much bigger impact after operational and fiscal synergies). QBT’s excessive debt level, with a 51% LTV in a company that never overcame all its “legacy” problems, the recession brought on by Covid-19 and the agreement with lending banks are the reasons behind an appealing selling price for HOME.