One United Properties successfully completed their IPO on Friday, during which they sold130,007,085 shares, which account for 10% of all shares. The final offer price amounted to RON 2 per share which gives a market cap of RON 2.8bn. Therefore, to get you a bit more familiar with the BVB’s latest addition, today we bring you an overview of One United Properties.

In the new listing on the Bucharest Stock Exchange, we saw the Romanian developer One United Properties embark on a 10% IPO between June 22 and July 2. The company planned to sell 130,007,085 shares, which account for 10% of all shares at a price ranging between RON 1.93 and RON 2.12 per share. Note that 60% of the public offer was addressed to a tranche of institutional investors, and the remaining 40% to retail investors.

According to a statement released on the BVB on Friday, the final offer price was set at RON 2 per share, while the company’s expected capitalization is RON 2.86bn (EUR 580m). Meanwhile, according to the prospectus trading will start either on or around July 15^th.

What is it all about?

Founded in 2006, One United Properties (ONE) is one of the most important players on the Romanian real estate market and the leading developer of luxury residential real estate. The Company’s activity is organized into four business lines: developing and selling residential properties, developing office properties, renting Group owned properties and investing. The main line is the residential activity, covering Bucharest and Constanta (including Mamaia).

Financial overview

The main product of the Group are the housing units (mainly apartments) in the categories “medium”, “medium-high”, “high” and “very high” prices, located in exclusive/high interest areas for residential spaces in Bucharest and Constanța (including Mamaia), the targeted customers being mainly those who purchase housing units respectively for their own use, to a significantly more reduced extent being those who purchase these units for rent or buy them as an investment. The segment posted volatile sales results in the observed years with sales ranging between RON 147m and 437m. However, there is an explanation to that. The segment’s 32.9% YoY drop in 2019 can be attributed to lower amounts recognized as income in that year, as the apartments sold were in a relatively less advanced stage of completion. Meanwhile the segment surged 196.8% in 2020, amounting to RON 437.5m, with the bulk of sales coming from three projects (One Mircea Eliade, One Herastrau Towers, Neo Mamaia) Overall, One United Propertieshave a portfolio of completed residential projects with a gross development value (GDV) of over EUR 222.6m and other projects under development/planning of EUR 939.4m. As of the date of this Prospectus, the Issuer has completed residential projects that include 687 housing units, with another 4,000 units under development, of which over 900 are under construction.

Regarding the rental & services income, rental income has been diminishing during all three observed years with 2020 posting the strongest decrease of -89% YoY to just RON 1.3m. The reason behind this is the expiration, of the main lease of One North Gate, which was the only rent-generating project at that time. Furthermore, rental income was also affected by the pandemic and switches to a work from home set up. Meanwhile revenues from services to tenants have been observing a similar trend. However, the Company intends to rely more intensely on the office rental activity from 2022, with the help of two new projects, namely One Tower and One Cotroceni Park.

Turning our attention to gains from investment property, one can notice that they have been quite volatile during the observed period. Note that this was primarily due to gains related to office buildings under development. Just like what happened to the company’s rental income, the outbreak of the COVID-19 pandemic affected the valuation of office buildings which now became more conservative.

One United Properties Operating Income (RON)

When observing the company’s expenses, administrative expenses stand out as they have soared from RON 8.8m in 2018 to RON 29.9m in 2020, mostly backed by the general increase in the company’s activity. Meanwhile commissions for brokerage real estate have been sliced in half, from RON 2.6m in 2018 to RON 1.1m in 2020. This decrease is due to the fact that these expenses through sales are recognized in the result when the apartment is completed and delivered to the final customer. Thus, the evolution of these costs is directly related to the completion of projects.

As one could have noticed by now, One United Properties have quite a volatile business and the same goes for their operating result. Namely, EBIT ranged between RON 137.9m and 217.3m in the observed period.

As a result of the above-mentioned, net profit was volatile just as the rest of the P&L.

Balance Sheet

On the balance sheet, the company operates with a very low level of indebtedness with the net debt/EBITDA ratio amounting to 0.98x. This is also visible when comparing the company’s interest-bearing debt to assets which has only increased slightly, from 19.3% in 2018 to 22.6% in 2020.

One United Properties Capital structure in %

Dividend Policy

In their prospectus, the company also announced a dividend policy that envisages a payout ratio of 35% of the company’s distributable net profit.

Peer Analysis

When compared to some peer companies, One United Properties seems somewhat overvalued. However, this could partially be explained by the high profitability of the company, coupled by the optimistic outlook of the local market.