Noval Property: a Greek real estate growth story (HOLD - initiation of coverage)
We initiate coverage of Noval Property with a HOLD rating and a 12M price target (PT) of EUR 3.1/share, implying 12% upside. Noval Property (Noval) is the second-largest REIC in Greece in terms of GAV (as of FY23). Noval owns a c.EUR 0.42bn, 247k sqm GLA standing portfolio of retail assets, offices, hotels, logistics and residential properties, as of YE23. It also owns land and developments worth c.EUR 0.15bn. Currently, more than half of the rental income is consumed by expenses, as Noval incurs taxes and other costs even for assets that generate little to no rental income currently. Going forward, we expect Noval to develop a number of modern, green properties on these captive land plots. On our estimates, this could increase the value of Noval’s portfolio from around EUR 0.6bn to over EUR 1.0bn by the end of the decade, and drive the FFO from c.EUR 8.5m in 2023 to around EUR 30-40m by 2030E (our FFO reconciliation includes interest income, unlike that of the company). Accordingly, we see Noval as an earnings growth story, a play on the development of Greek real estate, which is significantly undersupplied following 10-15Y of little to no construction activity. The proceeds from the EUR 120m, 7Y, 2.65% 2021 fixed-rate bond should keep the borrowing costs in check. Along with the proceeds from the IPO (in which Noval raised EUR 48m gross), this should ensure that Noval’s balance sheet (27% net LTV as of YE23, one of the lowest among its listed peers) remains conservative and supports the development-driven growth, in our view.
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