Would BREF be the golden egg for value investors?

Q4 2022 results

06 February 2023

  • BREF continues to be one of the most stable performers in Q4. The company’s stock appreciated by 7.07% YTD due to strong fundamentals in its portfolio that generate steady returns despite the geopolitical hurdles.
  • The company reported a revaluation gain of BGN 7.0 mln (BGN 574 k a year ago), which brought total revenue to BGN 8.9 mln from BGN 2.6 mln in Q4’21.
  • In Q4 EBIT and EBITDA show an increase of almost 280% and 320% YoY respectively. The primary reason are the revenues coming from sale of properties together with new leases. Operating expenses have grown up by around 50%.
  • BREF reported decrease in Q4’22 rental income to BGN 1.8m (-4.8% YoY), due to the Mr Bricolage property in Varna being sold in Q2‘22.
  • Overall rental revenues increased 77% YoY to BGN 7.1 mln compared to last year’s Q4 of BGN 6.3 mln. 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.
  • During the quarter, BREF received operation permit for the remaining portion of the office space in Synergy Tower as well as the conference room. The remaining portions of the property that are yet to receive an operation permit are the restaurant as well as retail space on the ground floor.
  • BREF signed a new 5-year lease agreement with INSAIT at Sofia University St. Kliment Ohridski in its Synergy Tour office building in Sofia Tech Park and the total leased area is about 662 sq.m. Now the occupancy rate of the building reaches 29.39%
  • The Company sold 2 of its apartments in Borovets (Sequoia 2) as well as a garage, which have a total area of ​​192.76 sq.m.
  • Management has provisioned BGN 3.931 mln for dividends for 2022 (90% payout ratio of adj. profit), which corresponds to BGN 0.1134 per share, implying 5.35% dividend yield (last closing price of BGN 2.12)

Petya Segova
Equity Analyst
Tel.: +359 2 937 9862
e-mail: info@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

Disclaimers and Required Disclosures

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.

Analyst Certification
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Financial Interest
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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
The report is prepared solely for informational purposes and is not to be construed as a solicitation, recommendation, investment advice or an offer to buy or sell any securities or related financial instruments. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. The document is based on information obtained from sources believed to be reliable but Sofia International Securities do not warrant its accuracy, nor that it is a complete summary of the securities, markets or developments referred to in the report. This report does not intend to provide assurance on the value of the company’s shares or on the achievability of the projections, statements and assumptions used by us. Actual results achieved in future periods might differ substantially from the projected ones because events and circumstances frequently do not occur as expected. Sofia International Securities accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. Additional information will be made available upon request.