Nadav Berkowitz, Real Estate Analyst, IBI Investment House
Following the improvement of the forward forecast and the update of the value of the Landmark project, we are updating the target price to NIS 297 per share and recommending a market return.
Melisron yesterday published its reports for the third quarter of 2021. The reports continue the trend from the second quarter with a continued improvement in operating data and a decrease in leverage. The company also recorded an improvement in leased redemptions of 6% compared to the same period in 2019 and a real increase of 5% on average in the renewal of new contracts while in the renewal of contracts in the quarter there was an impressive improvement of 9%.
In addition, Melisron repeats the update regarding the Landmark project in which the NOI is expected to grow to NIS 290 million assuming full occupancy. In light of the improvement in the project forecast (not including some of the apartments that will likely sell high prices), and in light of the new contracts that have already begun to be signed, we are updating Landmark’s value in the model even though the project is expected to be completed only in 2023.
The FFO in the second quarter amounted to NIS 201 m, which reflects an annual rate of NIS 804 m and a multiplier of 14. If we look a year ahead from today and also include the completion of the projects in the initiation and debt cycles, the company is expected to present a close FFO rate of 900 m. ‘Chess reflecting multiplier 12.
Following the improvement of the forward forecast and the update of the value of the Landmark project, we are updating the target price to NIS 297 per share and recommending a market return.
Revaluations Positive valuation of NIS 250 million per quarter. And the asset capitalization rate remains at 6.8%
Redemptions – 6% improvement in redemptions in the company’s malls compared to the same period in 2019. The company also reports that in October there was an improvement of about 10% compared to October 2019.
New contracts – Since the beginning of the year, Melisron has signed 594 new contracts with a real increase of 5%. In the trading sector, the increase was 9% in the exchange of tenants and a 4% increase in the exercise of options. In offices the increase was 5% and 4% respectively.
In addition, the company signed 79 new contracts that were not previously inhabited in an area of 7 square meters with an income of NIS 11 million in commerce and areas of 15 square meters in offices with an income of NIS 10 million.
Active results
As in the previous quarter, the comparison to the corresponding quarter is less relevant due to the closures in the corresponding period.
The owner’s NOI share increased by 23% to NIS 281m, compared with NIS 230m in the corresponding quarter and NIS 279m in the second quarter.
NOI from identical assets increased by 23%.
The quarterly FFO increased by 22% to NIS 281m, compared with NIS 141m in the corresponding period and NIS 198m in the second quarter.
The company’s leverage dropped to 45.7%.
Deployment and debt cycles
As of September 30, 2001, the Company has cash and an asset portfolio that can be realized in the amount of NIS 2.7 billion, including NIS 1.1 billion deposited in a trust to secure Series H bonds that are finally repaid on January 1, 2022. 600 m.
Future initiation
In the coming year, three projects are expected to be completed, which will add NIS 33 million to NOI. This is the Carmel Gate, the C + D building in Petah Tikva and the addition of trading in Kryon. Melisron estimates a total NOI of NIS 1,392m in 205 after the completion of Landmark and an FFO of NIS 1,185m.
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It is clarified and emphasized that what is stated in this review does not constitute a substitute for advice that takes into account the data and the special needs of each person. In publishing the information in this review, there is no recommendation or opinion regarding the execution of any transaction or investment in securities, including the purchase and / or sale of securities. It should be emphasized that for any information of any kind that appears in the review – each person must perform additional testing and verification, taking into account his data and special needs. It should be noted that the information may contain errors and that market changes and / or other changes may apply to it, and that significant deviations may also be discovered between the forecasts and analyzes that appear in the actual situation. Therefore, making any decision based on a fact, opinion, opinion, forecast or analysis that appears in the review – is the sole responsibility of the reader.