NSI TRADING UPDATE q1 2018

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Algemeen advies 19/04/2018 08:29
. Successful start of 2018, with debt refinancing extending maturities at a lower cost
. EPRA NAV €37.23 per share (up 2% vs YE 2017)
. EPRA EPS of €0.58 per share (up 2% on Q1 2017)
. Vacancy rate 18.8% (up 0.4% vs YE 2017)
. Leasing momentum points to like-for-like vacancy improvement for 2018

NSI HIGHLIGHTS
Key financials metrics1
YTD Q1 2018 YTD Q1 2017 Change %
Revenues and Earnings (€ '000)
Gross rental income 21,148 23,451 -9.8%
Net rental income 15,091 16,104 -6.3%
Direct investment result 10,578 10,152 4.2%
Indirect investment result -181 2,227
Total investment result 10,397 12,379 -16.0%
Earnings per share (€) 0.57 0.69 -18.1%
EPRA earnings per share (€) 0.58 0.57 1.6%
EPRA cost ratio A (incl. direct vacancy costs) 26.0% 29.0% -3.0pp
EPRA cost ratio B (excl. direct vacancy costs) 23.2% 25.8% -2.6pp
31 Mar 2018 31 Dec 2017 Change %
Balance Sheet (€ '000)
Real estate investments 1,112,368 1,072,180 3.7%
Assets held for sale 24,029 28,791 -16.5%
Net debt -425,807 -408,453 4.2%
Equity 683,085 672,688 1.5%
IFRS equity per share (€) 37.19 36.63 1.5%
EPRA NAV per share (€) 37.23 36.66 1.5%
EPRA NNNAV per share (€) 36.77 36.13 1.8%
Net LTV 37.2% 36.9% 0.3pp
Number of ordinary shares outstanding 18,364,998 18,364,998
Weighted average number of ordinary shares outstanding 18,364,998 18,133,178 1.3%
Key portfolio metrics
Mar 18 Dec 17
Offices HNK Other,2 Total Total
Number of properties 91 14 18 123 126
Market value (€ m)3 772 185 186 1,144 1,108
Contracted rent (€ m)4 58 15 16 89 87
ERV (€ m) 69 21 16 107 105
Lettable area (‘000 sqm) 443 127 107 678 676
EPRA vacancy rate 16.4% 31.1% 12.7% 18.8% 18.4%
WAULT (years) 4.8 3.1 5.1 4.6 4.7
Average rent/sqm (€ p.a.) 170 178 178 173 169
EPRA net initial yield 5.7% 3.7% 6.2% 5.4% 5.5%

1 Based on unaudited results
2 Keizerslanden in Deventer was sold in April 2017 and is included as Assets held for sale in “Other”, with the delivery and transfer set for H1 2018
3 At market value. Reported in balance sheet at book value excluding lease incentives and part of NSI HQ related to own use
4 Before rent free and other lease incentives

CEO COMMENTS
In April 2018 we completed the refinancing of most of our debt,
having been able to secure a longer average debt maturity at a
lower margin. This leaves a further reduction in the vacancy rate
and continued asset rotation as the two main points of focus for
now. We are confident that we will deliver on both in 2018.
Positive leasing momentum
The EPRA vacancy rate has increased by 0.4% to 18.8% in Q1
2018. This includes a 0.6% like-for-like increase and is negatively
impacted by several large asset management initiatives at HNK.
Based on our current leasing momentum, with several new leases
already agreed with a future start date, we expect a fall in the
vacancy rate on a like-for-like basis for the whole of 2018.
The EPRA vacancy rate has fallen from 24.3% (end 2015) to
21.4% (end 2016) and 18.4% (end 2017) and, notwithstanding the
increase in Q1, we are adamant that we will continue to progress
to a below market vacancy rate in due course, as we further
improve the quality and focus of the portfolio.
Asset rotation
In Q1 we sold three small office assets in Leusden, Apeldoorn and
Amersfoort and one small industrial asset in Diemen, for a total of
€10.7m. We expect to transfer the nearly completed Keizerslanden
shopping centre in Deventer and a small office asset in Tilburg in
June 2018, for a total of circa €26.6m.
The above disposals fund the recent acquisition in March of the
12,700m2 Q-Port building in Amsterdam Sloterdijk for €36.8m5.
The net effect on EPRA EPS of the above disposals and
acquisition will be positive once we lease up the remaining
vacancy in Q-Port. We expect to be able to achieve this before the
end of 2018.
Improved terms in debt refinancing
In Q1 2018 we completed an 8-year €40m private placement with
Pricoa, on terms that reflected an investment grade credit rating.
Earlier this April we refinanced our term loan and revolving credit
facilities with our syndicate of banks.
Following these transactions we have an average debt maturity of
5.5 years (was 3.1 years) at an average interest rate of 1.9% (was
2.3%). In combination with a strong LTV of 37.2% we have the
financial stability to pursue our development program.

Dividend outlook for 2018 and beyond
The ongoing transition to a better quality, more focused, portfolio,
supported by a structurally lower LTV and longer debt maturities
signals that we are willing to sacrifice short term EPS in the belief
that long term risk-adjusted total returns will be better.
So far the EPS rebase is caused solely by the move to a lower
LTV, not because of the asset rotation to a better quality portfolio.
As we are still in the middle of a sizeable asset rotation program
and have a significant development pipeline to consider it will take
some time before we have more clarity on the longer term incomegenerating
capacity of the business.
It is exactly this longer term income-generating capacity of the
business, net of capex requirements, that will help us determine
what is an appropriate - sustainable - level of dividend.
Our current best estimate, based on analysing multiple scenarios,
is that we expect to be able to maintain a dividend distribution of
€2.16 per share going forward.

Outlook for 2018
It is too early in the year to revise our previous EPS guidance of
€2.35-2.45 for 2018. The timing and the size of potential disposals
and/or acquisitions can still have a significant influence on the outlook.
We are off to a good start with a Q1 2018 EPRA EPS of €0.58, or
€0,67 adjusted for straight-lining effects and one-offs. With the
operational business improving and costs firmly under control we
are positive about the outlook, even though the run-rate EPS for
Q2 will be lower, mostly due to an increase in maintenance
expenditures and the dilution from stock dividend.
It is exactly 20 years ago this month that NSI became a stock
exchange listed company (on 3 April 1998). Much has happened
since. We are proud to be a listed company and with a new team
and new strategy in place, we are looking forward with confidence
and renewed energy to the opportunities ahead.
Bernd Stahli

5 Acquisition price excluding transfer costs

See & read more on
https://nsi.nl/wp-content/uploads/2018/04/NSI-trading-update-Q1-2018.pdf

tijd 09.11
De Smallcap 1.084,61 -0,28 -0,03% NSI EUR 36,65 -35ct vol. 8.491



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