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
In 9M 2022, TNG recorded an increase in sales of 112.6%, an EBITDA increase of 4.2x, and a net profit of HRK 65.8m (compared to a net loss of 20.2m HRK in 9M 2021).
In 9M 2022, TNG recorded an increase in sales of 112.6% (or HRK 197.2m) and amounted to HRK 372.3m. This increase can be attributed to higher exposure to the spot market. At the same time, commissions and voyage-related costs amounted to HRK 49.9m, compared to HRK 36.5m last year because the ship owner covers the voyage-related expenses, like bunkers, port expenses, agency fees. This increase is also attributed to the much higher exposure to the spot market in Q3 2022 especially, compared to Q3 2021. One of the most significant factors contributing to voyage cost increase is the drastic rise in the cost of fuel. In total, operating expenses amounted to HRK 252.2m, an increase of 43.2% YoY, mostly driven by the aforementioned increases in commission and voyage-related costs.
The Company also notes that during the year, the average TCE (Time Charter Equivalent) net daily rate amounted to USD 21,361, an increase of 84.8% YoY. At the same time, the daily vessel operating expenses equaled USD 7,077. Meanwhile, in 9M 2022 fleet utilization increased as well, growing by 3.8 p.p. YoY to a high 99.8%.
The EBITDA increased by as much as 4.2x YoY (+124.6m YoY) and amounted to HRK 163m. This increase can mainly be attributed to the higher sales due to the aforementioned utilization rate and Time Charter Equivalent rates. EBITDA margin in 9M 2022 amounted to 43.8%, an increase of 21.8 p.p. YoY.
Net interest expenses amounted to HRK 16.3m, noting an increase of HRK 3.2m in the same period in 2021. Meanwhile, net FX losses amounted to HRK 15.5m, recording an increase of almost 20% compared to 9M 2021, partially offsetting higher profitability compared to 9M 2021.
The Company recorded a net profit of HRK 65.8m, compared to the net loss of 20.2m the year before (9M 2021). This result can be attributed to several factors: higher exposure to the spot market, higher average TCE (Time Charter Equivalent) and an increase in fleet utilization.
TNG Financials (9M 2022 vs. 9M 2021, HRKm)
Source: InterCapital research