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Nasdaq and Helsinki-listed real estate group Citycon is the focus of my attention this week, a Nordic stock that deserves some investor attention. The business has been public since 1988. Citycon is a member of EPRA (European Public Real Estate Association). It maintains investment-grade credit ratings from Moody’s (Baa3), Standard & Poor’s (BBB-) and Fitch (BBB-).

Citycon is a leading owner, manager and developer of mixed-use centres for urban living including retail, office space and housing. Citycon is committed to sustainable property management in the Nordic region with assets that total approximately EUR 4.4 billion.

With net rental income increased to EUR 217.4 million (Q1-Q4/2018: 214.9m), their centres are located in urban hubs with a direct connection to public transport. Placed in the heart of communities, these modern centres are anchored by groceries, healthcare and services to cater for the everyday needs of customers.

Diversified in the Nordic region

Citycon owns 40 such centres and one other retail property. Their centres are located in Finland and Estonia (12, 44% of total value), Norway (17, 30% of total value) and Sweden & Denmark (11, 26% of total value). In addition, Citycon leases and manages 10 centres in Norway on behalf of other owners. Altogether Citycon’s centres attract approximately 170 million visitors annually.

Citycon valuation historically cheap

The stock has seen steady investment lately, but the price peaked in 2007 at 24 euros. In 1990 Nordea owned 40% of the company. In 2004 Tel Aviv public real estate company Gazit-Globe Ltd purchased 39% and has subsequently increased it’s holding to 48.8%. In 2014, another large shareholder entered the scene, CPP Investment Board European Holdings S.à.r.l., which is owned by Canada’s pension fund, purchased a 15% stake. In addition, Ilmarinen  which is Finland’s largest pension fund, owns 7.13%.

Since the share price hit a floor of 5.45 in November 2008, the Citycon stock price has steadily climbed to 14.85 in March 2015.

In the last two years, Citycon had been trading between 8-10 euros prior to the Covid-19 crisis. The current price at close on May 27th was 6.1 euros and the 52 week range was 5.1 to 10.1 . The stock is down almost -35% in the year to date.

A value stock as the economy reopens?

The business has a market cap of 1.086 billion euros, which is less than 25% of the book value and we would expect real estate firms to trade at 80-90% of book value in normal activity. The team  here at The Armchair Trader feels this stock offers good prospects for investors seeking value and expects to see the share price rise when the economy starts to reopen in June.

The Nordic region has escaped the worst of Covid-19 due in most part to the excellent health care system and high living standards. We feel this stock is well positioned to bounce in the near future closer to the eight euro level and beyond. The shopping centres are NOT office spaces; they are modern and highly profitable and all anchored by large food stores, public transport centers and public services like libraries and private health care stations.

Citycon reports additional details on April rent collection

On 12th May, Citycon OYJ released the following update:

In the extraordinary circumstances followed by the outbreak of Covid-19 pandemic Citycon considers it beneficial to provide additional details on the rent collection level in April 2020. As stated in the company’s Q1 interim report published on 23 April 2020, Citycon’s rental income for Q1 remained stable. In April these conditions have subsisted and Citycon has collected and/or accrued as government assistance guarantees approximately 75% of its billed rent for the month.

Citycon CEO, F. Scott Ball noted:

“[The Nordic] countries largely took a holistic approach to dealing with the crisis and never shut down completely, which makes the resumption of business that much easier. I am also pleased to see footfall numbers continuing to improve each week while we have simultaneously upgraded our COVID-19 safety measures. These were already some of the most attractive markets to operate within, and on a relative basis, should outshine their peers around the globe.”

The company expects to publish more detailed information on its trading and results as well as the impact of COVID-19 in its Q2 report in July.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Raine Lahtinen

Raine Lahtinen

Raine Lahtinen has spent over 25 years in wealth management and trading. His active investment days started when he attended University of Miami 1987-1991 majoring in International Finance and Marketing. He has experienced the highs and lows of the stock markets since the 1987 crash, Dot.com bubble 2001-2002, the 2008 financial crisis and the current record breaking rally.

Since 1995, Raine has been based in Brussels, Belgium in Continental Europe as an international financial advisor and director of investments in various UK IFA firms. He has written many popular columns about markets and investments during his professional life. His passion is finding undervalued listed stocks. As a Finnish native he specializes on Nordic and US stocks.

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