Intermoney | Moody’s has improved its rating on Merlin Properties (MRL) (Buy, Target Price 13 euros/share) from stable to positive, also confirming its long-term rating of Baa2.
Moody’s flags that, with the recent sale of BBVA branches, “the capital structure will remain solid. In addition, the loan to value (the relationship between the debt and the value of the assets) will be below 36%, in line with Merlin’s strictest financial targets”. The ratings agency adds that over the next two years the Socimi will continue to show positive operating results and stable cash flow generation.
Valuation:
After the sale of the BBVA branches, as well as its CMD (Capital Markets Day) we are hiking our target price for Merlin to 13 euros/share from 12. Our estimates point to Merlin increasing its proforma EBITDA by close to 18% in 2022e. This will be fuelled almost equally by; 1) the inflation effect; 2) a lack of Covid 19-derived costs; and 3) new assets will be put into service, mainly logistics, as well as a decrease in the vacation of offices.
The Socimi gave some guidance at the CMD of 0,80 euros/share in FFO for 2025e versus 0,58 euros in 2021 (here still including the BBVA branches). This is a reasonable estimate if the investments in data centres are included. For the sake of prudence, we have not taken these into account until Merlin puts part of them into service.
