Steady Performance in Q2 2022
Q2 2022 results
10 August 2022
- BREF continues to be one of the most stable performers in Q2. Regardless of the geopolitical hurdles that many face, the company’s stock has appreciated 20.9% YTD due to strong fundamentals in its portfolio, which is able to generate steady returns even in worst case scenarios. Portfolio’s potential is still greatly undervalued.
- Total revenues increased significantly in Q2 primarily due to the completion of the deal to sell their Bricolage Varna property. Additionally, they managed to sell the agricultural lands near Veliko Tarnovo. The Bricolage Varna exit recorded 3.6% CAGR not accounting for the rent revenue through the years. Both deals generated a very comfortable cash pillow of over EUR 7.5mln (EUR 6.8mln from Bricolage Varna and EUR 0.7mln from Veliko Tarnovo).
- This outcome allows the management to concentrate on the more important opportunities ahead associated with their Sofia office locations and gives them the cash to meet any unexpected expenditures that may arise or secure future dividend payouts.
- Rental revenues increased 6.5% YoY to BGN 3,703 thousand compared to last year’s H1 of BGN 3,477 thousand. BREF management has been very active to find replacements to the main tenants, which they lost in Q4 2021. Because of the outflow, the occupancy rate at their Kambanite site dropped to 33% by year end. However, the signings with TEU Bulgaria (shipping and forwarding) and Neterra (internet service provider, networking and cloud services) increased the occupancy rate to 55% via 5 year rental agreements.
- The Synergy Tower operational schedule is on track and no delays are reported. Once lent at 95%, total rental revenue to the fund will more than double. Currently, negotiations are underway for a large portion of the GLA with a government backed institution. The process is in the final stages, but it is likely that the process is delayed because of the political insecurity stemming from recent government changes and upcoming elections.
- With a current market price of BGN 2.46 we see the stock as greatly undervalued with 31% potential from the NAV of BGN 3.23 (derived from BGN 111,966,000 equity and 34,641,925 outstanding shares). We believe investors abstain from purchases due to the geopolitical uncertainty, but that does not seem to affect their business so far. Stock price has increased 20.9% YTD.
Ivaylo Valchev
Equity Analyst
Tel.: +359 2 937 9862
e-mail: valchev@sis.bg
Svetozar Abrashev
Senior Managing Partner
Tel.: +359 2 937 9869
e-mail: abrashev@sis.bg
Sofia International Securities
Sofia 1000,
140 G. S. Rakovski Str.
Tel.: + 359 2 937 98 65
e-mail: info@sis.bg
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Sofia International Securities AD is a member of Bulgarian Stock Exchange (BSE) and the Central Depository of Bulgaria. The company provides brokerage, investment banking, equity research, portfolio management and other services. Sofia International Securities AD is regulated by the Financial Supervision Commission of Bulgaria.
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Equity Valuation and Risks
The value estimate(s) stated in this report is (are) valid only in light of the valuation methods used to derive this estimation. The use of other or more comprehensive approaches could result in other estimates of value that could diverge substantially from the results presented herein. With regard to the above, when making our conclusions about the intrinsic value of the Company’s share capital, we have not considered or evaluated any possible tax, legal or other effects that might arise from engaging in transaction(s) with the shares of the company. The document should not be regarded by recipients as a substitute for the exercise of their own independent judgment and they should seek and obtain independent investment advice is necessary. Any facts and/or information stated in this document are subject to change without notice and Sofia International Securities is not under any obligation to update or keep current the information contained herein. Any opinions expressed herein are only correct as of the stated date. Past performance is not indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security.
General
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