(Boursier.com) — The real estate company Argan rises 1.8% to 82.30 euros, while the group published recurring net profit group share for 2023 up 5%, to 126 ME, representing a high margin of 69% of rental income. Argan recalls that recurring net profit constitutes the best measure of its cash generation and reflects its ability to continue financing its development model despite the increase in financial costs recorded over the year (+43%). Including the mechanical effect of the variation in fair value of assets for -373.2 ME, in a context of decompression of capitalization rates, the group’s share of net income stands at -263.5 ME over 12 months. The NRV (replenishment NAV) stands at 90.6 euros per share as of December 31, 2023 (-14% over one year).
As of December 31, 2023, the built heritage represented 3.58 million square meters. At 3.68 billion euros excluding duties (compared to 3.94 billion euros excluding duties at the end of 2022), Argan explains that the reduction in valuation recorded over the year (-7%) essentially reflects the mechanical effect linked to a decompression of the rate of capitalization, increased from 4.45% excluding duties at the end of 2022 (4.2% including duties) to 5.10% excluding duties at December 31, 2023 (i.e. 4.85% including duties).
The weighted average remaining firm duration of the leases, calculated as of December 31, 2023, increased to 5.7 years (compared to 5.5 years as of December 31, 2022). The occupancy rate of the assets remains at a maximum of 100% and its weighted average age is 11.1 years (compared to 10.4 years as of December 31, 2022).
Solid dynamic
After investing 132 ME for 100,000 square meters of new space in 2023, Argan intends to continue its solid momentum in 2024 by delivering 180 ME of investments for 170,000 square meters of new pre-let warehouses in BEFA. The average yield for 2024 developments is approaching 7%. Half of the 2024 developments are already financed by amortizing mortgage loans, the other half will be financed by proceeds from the sale of warehouses in 2024 and 2025.
Argan anticipates average annual growth of around +5% in its rental income over the period 2024-2026 (net of selective arbitrage which will be carried out over the period). In a context of sharply rising borrowing rates in 2023, the average debt rate as of December 31, 2023 remains low at 2.3%, compared to 1.5% as of December 31, 2022, for a maturity of 5.8 years . The group does not expect a significant increase in the cost of debt, estimating it at around 2.4% for 2024 based on a 3-month Euribor rate projected at 4% for the whole year.
Argan confirms closing the borrowing tap to finance its development (period 2024-2026). As the group’s debt is essentially mortgage-related (74% of the debt as of December 31, 2023), it has the advantage of being amortized by around 100 ME/year. This specificity guarantees Argan a linear and adequate repayment of its debt… Among the latest broker opinions, Barclays overweights Argan and raises its price target from 95 to 100 euros.