Today we bring you the key takeaways from Equinox’s Investor Day Presentation.
Equinox is the first real estate company that was listed on the Ljubljana Stock Exchange. The Company was established in 2021 by a partition of Union Hoteli d.d. into an operating and an asset company. The Company first started trading on the Ljubljana Stock Exchange on 31 January 2022.
As a real estate Company, Equinox owns more than 75k m2 of business space, with 80% of these areas going to hotels, and 20% pertaining to office buildings. Equinox maintains one of the most centralized portfolios in all of the European capitals. In total, they have 4 hotels, including Grand Hotel Union, uHotel, Hotel Lev, and The Fuzzy Log. On the other hand, their office buildings include the Office building Kompas, Office building Delo, Office building Nomago, and Mall Modna hiša.
In terms of the hotels, all 4 of them are located in the center of Ljubljana, with 677 rooms, 21 conference halls, and EUR 6.1m of stabilized revenue per year (for the next 20 years). In terms of the commercial part of the portfolio, all 4 of their office buildings are also located in the center of Ljubljana, with an area of 15.9k m2 and EUR 1.8m of stabilized revenues per year. The estimated fair value of the portfolio on 30 September 2022 amounted to EUR 115m. Equinox also has 2 strategic projects in the works, including Nama Kočevje, a redevelopment of Nama Kočevje into a residential-commercial building, and Delo 2.0 building, a redevelopment of Delo building into a residential commercial building.
In 2022, the Company highlighted that it works with international strategic partners, to whom it has rented all hotels in the portfolio, with at least 20-year agreements, and EUR 122m of minimum guaranteed rent. Equinox is also working on diversification, with 3 projects with which the Company expands its portfolio. They are also focused on organizational, corporate, and financial restructuring, and finally, they aim to provide greater stability and transparency of the business model.
In terms of future growth, the EUR 122m of guaranteed rent will also be increased by indexation and variable rent, meaning that if the inflation remains higher in the period, so will the Company’s revenue. They aim to provide stable and sustainable dividend payments, at least 50-70% of FFO (Funds From Operations, a widely used indicator for real estate companies, it is calculated as the sum of net profit and depreciation and amortization). Furthermore, starting in January 2023, they plan to initiate a share buyback program. Furthermore, in the next 8 years, they plan on investing EUR 18m into new projects. Finally, they plan to reduce the share of hotels in the portfolio to 50% in the next 5 years, with a focus on office, residential, healthcare, and logistic real estate.
In terms of the financials, the Company recorded net revenue of EUR 2.02m in Q3 2022, an EBITDA of EUR 1.45m, and an FFO of EUR 1.36m. This would mean that the EBITDA margin amounted to 71.8%, a decrease of 0.4 p.p. QoQ.
Equinox key financials (Q4 2021 – Q3 2022, EUR ‘000)
Source: Equinox, InterCapital research
In terms of the fair value, according to Company’s estimates, the fair value of the share of EUR 64.3/share, with an increase of 11.4% in the last 4 quarters. Finally, taking a look at the Company’s stock performance, it has been listed on the stock exchange at EUR 37/share, and it currently stands at EUR 50.5/share, implying a YTD increase of 36.5% YTD. As mentioned, the targeted dividend payment will amount to 50-70% of the FFO, with a target dividend yield of 3-5%.
Equinox, SBITOP price performance (YTD, %)
Source: Equinox, InterCapital Research
