KLPEF - Klepierre: Assessing The Impact Of ECB Rate Cuts

2024-02-12 17:37:08 ET

Summary

• Klepierre did an excellent job hedging its interest expenses, with half of all bonds maturing in the early 2030s.
• The company will only slowly refinance its bonds at a higher level, with a cumulative negative impact on net current cash flow of about 0.42 EUR/share.
• The majority of the refinancing impact will come in the 2030s, allowing the company to benefit from rent indexation in the process.
• The market-implied cap rate rose about 1.36% in 2020-2021 as a result of COVID-19, but only 0.12% following ECB rate hikes in 2022-2023.
• The current market-implied cap rate for Klepierre is around 6.4%, and my target price under different ECB rate scenarios ranges from 25 to 30 EUR/share.

Introduction

I previously covered Klepierre ( KLPEF ) all the way back in October 2021 where the focus of the article was on operations recovering post-COVID-19. You can tell how much things have changed since then, as the 10-year German government bonds were trading at a negative yield of -0.11%, well below the 2.37% as of the time of writing this article....

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