BREF Q4 2022 – Would BREF be the golden egg for value investors?

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 12.77% 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)

Full report can be viewed here.