Wednesday, September 16, 2020

Vastned retail real estate price and stock value

Vastned has been hit by the coronacrisis and has stopped paying a dividend. In February 2021 they are discussing their strategy going forward. Like Wereldhave and Unibail Rodamco, the price seems cheap at the moment.

SECTOR: [PASS] Vastned is a store real estate company. 

SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Vastned's income of €63 million, based on 2019 sales, fails this test.

CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Wereldhave's current ratio €19m/€92m of 0,1 fails this test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for Vastned is €612 million, while the net current assets are  -€80 million. Vastned fails this test.

LONG-TERM EPS GROWTH: [PASS] [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. I don't have enough earnings history for Vastned's to measure this factor. 

Earnings Yield: [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. Vastned's E/P of 7% (using this year's estimated normalized Earnings averaged with the past 2 years) passes this test.

Graham Number value: 
[PASS] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Vastned has a Graham number of (15 x €1,6 EPS x 1,0 x €40 Book Value) = €31  (Note for real estate I use a factor of 1x book value instead of 1,5x book).  

Dividend (if restarted): €2,05/€24 = 8% 

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