WOOD Flash – NEPI Rockcastle: 9M18 – NRI lagging our expectations, other KPIs look encouraging
NEPI Rockcastle (NRP) published a business update for 9M18 yesterday (26 November). The net rental income is lagging our expectations, which may lead us to adjust our FFO forecast down by around 5-10% for the year, which would bring it broadly in line with NRP’s guidance (the company reiterated that it expects the distributable earnings for 2018E to stand about 10% above last year’s result of EUR 0.48/share, which implies a 2018E result of c.EUR 0.53/share). The rest of the results were encouraging, in our view: the like-for-like (lfl) growth of rental income accelerated from 4.0% in 1H18 to 4.8% in 9M18. The lfl growth of tenants’ turnover also increased, from 7.7% in 1H18 to 8.5% in 9M18. Thanks to this, the effort ratio (calculated as base and turnover rent, service charge and marketing contribution, divided by tenants’ turnover) declined to 11.3%, from 11.7% during 1H18. Management also continued to reduce the portfolio of listed securities: at the end of September, it was valued at EUR 286m, down 25% since the end of June. That said, without more colour, we cannot say how much was driven by disposals, and how much is attributable to the broader market correction – the EPRA Index tracking European retail companies lost 9% over the course of 3Q18.NEPI Rockcastle is engaged in developing, acquiring and holding commercial properties, either directly or indirectly through the acquisition of listed equities.
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