Wexboy
09 May 2016
TGISVP - Hibernia REIT 2016 – The Great Irish Share Valuation Project (Part I):Company: Hibernia REIT (HBRN:ID)Last TGISVP Post: HereMarket Cap: EUR 870 MPrice: EUR 1.277Hibernia’s NAV has appreciated nicely in the last couple of years, and it managed to pull off a substantial €300 million follow-on placing. Highlights in the past year include significant pre-lets to Twitter at €50 psf & HubSpot at €45 psf, the fit-out & rental of 213 residential units in Wyckham Point, Dundrum (for €3.7 million pa rent), EPRA Index inclusion, and internalisation of the investment manager. And with €63 million of cash & zero leverage outstanding at year-end 2015, the company has plenty of reserve firepower.The in-place office portfolio now enjoys an average rent of €32 psf, with an ERV of €40 psf (though long-term leases mean this will only be realised over time). But Hibernia has obviously enjoyed windfall gains to date from purchasing NAMA & bank distressed assets/loans, and it sports a passing rent yield of 4.4%, so 1.0 P/B is a fair multiple – we’ll use the latest pro-forma EPRA NAV (to reflect the recent internalisation):EUR 1.224 Adj EPRA NAV * 1.0 Price/Book = EUR 1.224Hibernia’s fairly valued. In fact, Irish property stocks have taken a breather for the past year or so, but accelerating (& now sustainable) Irish economic momentum would suggest further NAV appreciation ahead. Noting Hibernia’s mixed investment mandate, I suspect we’ll see a larger residential allocation in due course…considering the overwhelming supply/demand imbalance that’s now emerged (inexplicably) from the vast post-crisis surplus of residential stock we were wringing our hands over not so long ago. Looking ahead, sector performance will increasingly depend now on property management & development skills, and on raising dividends towards average global REIT yields.Price Target: EUR 1.224Upside/(Downside): (4)%For related links/graphs/files, and more TGISVP analyses/price targets: Google the Wexboy investment blog.
