Cibus has had a tough start to 2025, just like other real estate companies. A lot has also happened with the property portfolio in line with their global expansion.
Since February this year, the share has fallen by about 15% . This is actually more than many other real estate companies, such as Castellum, which has fallen by 8% . You might think this is strange considering Cibus’s stable customers in the grocery trade, but it actually makes sense if we look at the situation.
There is currently great concern about future interest rates, for example, it has been warned that upcoming gigantic investments in defense, security, infrastructure and climate action will lead to a debt spiral, which could push up interest rates.
Cibus is expanding
If we go back to how Cibus was actually founded, it was through an acquisition in Finland of grocery properties. This was back in 2018. In that portfolio we saw the popular grocery giants in Finland, namely Kesko and Tokmanni.
In 2020, Cibus entered Sweden, where it acquired properties that are rented to Coop for 1.9 billion. It then took until 2022 before it entered Norway and Denmark.
To finance the acquisition spree, Cibus has printed new shares, which then dilutes existing shareholders. The advantage is that it raises more money and does not have to increase its leverage. This is a very common phenomenon for real estate companies, and especially REITs in the US.
The journey seems far from over and in recent months a couple of important acquisitions have been made. First, they have continued their expansion in Denmark for 1.3 billion, and second, a larger acquisition in Benelux for 5.6 billion.
This will therefore be a major entry for Cibus into the Benelux market. What was acquired there was Forum Estates with the absolute majority of grocery properties. Approximately 75% of these are in Belgium and the rest in the Netherlands and Luxembourg.
The benefits right now
One advantage is that the new Benelux market is quite similar to the market we have in the Nordics. Here too, it is a fairly well-established market and this in turn limits the ability of new players to enter and compete.
Cibus made the acquisition a yield of 6.5%, which is in line with the company’s average before the acquisition. When it comes to yield for properties, it is calculated by net operating income in relation to the value of the property. If the properties have high rental income and the properties were purchased at a low value, you get a really nice yield.
The company has a high level of debt today, but at the same time the result covers the interest costs 2.2 times. That is quite positive, but if the interest rate situation changes again, that figure will look more disappointing. In the coming years, Cibus is expected to pay just over 4% in interest on its loans on average.
A couple of disadvantages
First of all, we see that Cibus currently has a premium of 14%. But it still tells us how the share is valued in relation to the estimated value of the properties.
Cibus’ new acquisitions will entail some debt. Even though rental income for Cibus will grow by almost 30%, bottom line earnings per share will only increase by a few percent. In addition, we, as shareholders, were diluted by 21% in connection with the acquisition that Cibus made.
The biggest disadvantage I have mentioned before, namely that Cibus has a loan-to-value ratio of 59%. Castellum, by comparison, has a ratio well below 40%. At the same time, this is within Cibus’ own goals where the net loan-to-value ratio should be kept between 55-65%.
Summation
In a situation like this, Cibus is too attractive a dividend stock to pass up with their 6.66% annual dividend divided monthly. It is true that the company may be honoring dividends a little too much and that it is biting their own tail.
Busy And Useful 