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04 October 2021, Luuk van Beek
Digimij acquisition contributes to growth strategy
  • Ctac acquires Digimij, a company with EUR 2m in revenues and a strong offering for SME’s in the south of the Netherlands
  • This diversifies Ctac’s offering, making it less dependent on large projects and retail
  • We will slightly raise our estimates to reflect this acquisition and expect more takeovers in the coming year
Ctac: Digimij acquisition contributes to growth strategy
(full report) 8 pages
31 August 2021, Joren Van Aken
Portfolio is shining in 2021
  • Strong H1 with listed portfolio adding another EUR 2.5 p/s post-close
    Luxempart’s NAV amounted to EUR 1.9bn or EUR 95 p/s at June 30, up 12% YoY. Luxempart sold its stakes in TCM, SES, Kaufmann & Broad and RTL proving their goal to go for a more listed portfolio. Post-close, there was an offer on Schaltbau by Carlyle and a tender offer on Zooplus by Hellman & Friedman. We estimate these two to bring in an additional gain of ~EUR 2.5 p/s. At August 31, we estimate NAV to be EUR 2bn or EUR 99 p/s, implying a discount of 31%.
  • Rotation in private at attractive multiples
    In the private portfolio, Luxempart sold its stakes in NMC and Baobab realising IRR’s of 15% and >50% respectively. ESG distributed EUR 14m to Luxempart as a result of the sale of its mobility division which represents a major part of their original investment. Post-close, LXMP sold their stake in Stoll for EUR 18m at a money multiple of above 5x. Also Investment Funds performed very well at EUR 376.7m, up 34% over the first half.
  • Impressive performance in August but technical upside remains
    We initiated coverage on August 2 outlining why we believe the mismatch between a strong performance and the high discount of Luxempart is based on technical factors rather than fundamental ones. Since then, the share price has rallied ~20% proving one of the technical factors we listed: the lack of visibility.
    As a reminder we listed the following measures to reduce the discount to NAV:
    • Provide more granularity on the most important private assets
    • Increase its visibility on the market through coverage, corporate access, …
    • Improve liquidity on the stock market by going for a secondary listing (Brussels)
    • Bring dividend growth back to the historical average of 8‐10%
    • Increase liquidity on the market
Additionally in this report, we prove once again the illiquid nature of the LuxSE as most brokers in the Benelux do not even offer its (retail) clients access to the LuxSE. We therefore strongly believe a secondary listing would bring added value. As a result of the strong H1, we raise our target valuation to EUR 73-89.
Luxempart: Portfolio is shining in 2021
(full report) 7 pages
19 August 2021, Inna Maslova
1H results
  • Net rental income down 3.3% YoY on the back of disposals and restrictions. Distributable earnings were down 9% YoY, impacted by higher finance costs.
  • Quality of the portfolio is highlighted by positive revaluation +0.4% vs. December end). Occupancy stable at 95.6% thanks to a strong lettings activity and no sizeable bankruptcies taking place.
  • Cash distribution of EUR 0.1764 per share (100% of distributable earnings).
NEPI Rockcastle: 1H results
(full report) 8 pages
NEPI rockcastle
17 August 2021, Inna Maslova
Not Everything Priced In
  • Quality retail with a unique exposure to CEE cities
    NEPI Rockcastle offers a unique retail exposure to fast-growing regional cities in Central and Eastern Europe. Thanks to a proactive asset rotation since the merger in 2017, the company has grown its direct portfolio exposure by almost 50% to EUR 5.8bn. The portfolio is well-positioned to capture the above-EU-average GDP growth while benefitting from lower retail density and favourable consumer behaviour (low e-commerce penetration, social importance of physical shopping, cash payment preferences). Besides acquisitions, the company develops own projects which allow for a significant value creation on the back of development yields being 100-150bps above market yields. The company is also actively looking at mixed-use developments which could become an attractive value creation tool.

  • Firepower to finance growth
    NEPI has a sizeable controlled development pipeline which we expect to be gradually committed from 2022 onwards. Taking into account active asset rotation and conservative portfolio valuation, we expect LTV to go slightly above 35% by 2026 end, NEPI’s internal LTV limit. Considering that earlier growth was financed primarily by the disposal of listed stakes, we believe that a revision of the LTV limit to 40% could be an interesting option to consider in the longer term. NEPI currently has one of the lowest LTVs in the industry and boasts a sizeable EUR 1.15bn liquidity position (EUR 575m of which is cash). Before income from large developments anticipated in 2024, we expect rental income to grow at 6.9% CAGR (2020-2023) on the back of Covid recovery.

  • Valuation reflects current Covid context but not high potential of CEE markets
    NEPI’s valuation today reflects Covid challenges, which impacted the portfolio at the beginning of this year and in 2020 but does not take into account strong rental growth prospects driven by above EU-average growth rates and undeniably differing consumer market dynamics in CEE. Using three different valuation methods (DCF, DDM, EVA), we arrive at a target range of EUR 6.57 – EUR 7.30, corresponding to an upside of 10%-22% to the bid-ask midpoint on Euronext (2%-13% to the latest share price), and 16%-29% for share price on Johannesburg Stock Exchange (JSE).
NEPI Rockcastle: Not Everything Priced In
(full report) 46 pages
NEPI rockcastle
02 August 2021, Joren Van Aken
Discount season is almost over
  • Impressive track record with 10-year CAGR > 12%...: Over the past 10 years, Luxempart realised a 12.2%, CAGR, making it the 4th best performer in our coverage. The only investment companies preceding are Sofina and Brederode, which have a similar hybrid portfolio, and Tubize, a mono-holding.
  • …but with a clear ‘return and discount’ mismatch: Over the last 3 years, Luxempart has clearly outperformed its benchmark. NAV/share increased at a CAGR of 8.1% since 2018 whereas its TSR only rose by 2.4%. Hence, its discount increased, whereas it should have decreased, to a ~37% record level. Normally, players having a similar portfolio all trade at or above NAV as discounts declined at such well-performing investment companies.
  • Road towards lower discount is clear and achievable: In our view, this mismatch is unjustified and has nothing to do with its portfolio. We believe factors like transparancy, visibility and liquidity are hurting today’s discount. Therefore, we suggest 5 specific measures, Luxempart can take to reduce this discount and unlock additional shareholder value:
    • Provide more granularity on the most important private assets
    • Increase its visibility on the market through coverage, corporate access, …
    • Improve liquidity on the stock market by going for a secondary listing (Brussels)
    • Bring dividend growth back to the historical average of 8-10%
    • Increase liquidity on the market via a rise in free float, capital increase and commence optional dividends
  • Valuation based on technicalities not fundamentals creating interesting buying opportunity: In our view, Luxempart’s valuation today is driven by technical factors rather than fundamental portfolio inputs. Using our target discount methodology, we arrive at a target discount of 15%. This is still conservative when looking at peers. Applying our two discount scenarios, we arrive at a target range of EUR 69 – EUR 84. That corresponds with a 20%-46% upside.
Luxempart: Discount season is almost over
(full report) 20 pages
30 July 2021, Luuk van Beek
Organic growth accelerated in Q2
  • Further acceleration in organic growth to 18% in Q2, beating our expectation.
  • Guides for further growth in H2, bringing EUR 100m in FY revenues and 6% EBIT-margin within reach.
  • We expect the positive trend to continue despite a potential disruption in Q3-21 as employees may catch up on postponed holidays.
Ctac: Organic growth accelerated in Q2
(full report) 9 pages
18 June 2021, Luuk van Beek
Gearing up for higher revenue growth
  • Ctac’s Capital Markets Day provided more detail on how the company intends to capitalize on the growth opportunities offered by the market in the coming years.
  • The company set an ambitious target of achieving high single-digit organic revenue growth, which exceeds our estimates. In combination with acquisitions this should allow it to reach EUR 150m in revenues by 2023.
  • Since staff scarcity is likely to be the most important challenge in reaching the revenue target, management launches several initiatives to retain and attract more employees.
  • The margin guidance was below our estimates due to growth investments, mainly in the recruitment and training of new employees. Furthermore, amortization of acquisition intangibles has a negative impact on the EBIT-margin. Finally, management may be cautious due to the inherent volatility of project results.
  • On balance, we cut our 2021 EPS estimate by 18%, our 2022 estimate by 10% and our 2023 estimate by 2%. We keep our target valuation range unchanged at EUR 5.00-6.80, indicating 7-46% upside.
Ctac: Gearing up for higher revenue growth
(full report) 10 pages
28 May 2021, Luuk van Beek
Multiple growth drivers kicking in
Ctac has a strong position as a business integrator, helping Dutch and Belgian companies to create the IT systems that are needed to support their business needs. We have set a target valuation range of EUR 5.00-6.80 for the shares and see the following catalysts that can drive the share price to a level within the target range:
  • Continuation of the promising organic recovery that started in Q4-20. We believe this will convince investors that the company’s growth profile has structurally improved after a period a period of portfolio streamlining.
  • Strategic targets confirming further mid-term potential. New strategic targets at the June 11 Capital Markets Day can increase visibility on further upside. We expect that ongoing operational improvements, in combination with a higher share of revenues from mature SaaS products, can lead to further increases in profitability in the coming years.
  • Growth acceleration through acquisitions. The use of Ctac’s solid balance sheet for acquisitions can accelerate the realization of its ambitions. These takeovers can add complementary skills and customers, creating room for cross-selling.
Ctac: multiple growth drivers kicking in
(full report) 24 pages
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