(News Bulletin 247) – The real estate developer announced Thursday evening that it had entered into exclusive negotiations with Bridgepoint to sell its property administration activities to it. Good news for Oddo BHF, which believes that this operation constitutes an opportunity to reduce Nexity’s debt.

Nexity is the star of the market on this Friday’s session, the last before a long weekend, the Paris Stock Exchange being closed for four days for the Christmas festivities. The title of the real estate developer jumped 10.6% to 17.18 euros at the end of the morning this Friday. The stock had not seen such a price level for three months, given the lack of visibility induced by the rise in interest rates on its activity.

This time, Nexity benefits from a buyer flow fueled by an asset sales operation. The promoter announced Thursday evening, after the closing, that it had entered into negotiations with the British management company Bridgepoint for the sale of its “personal services” activity. This division concerns the group’s property administration professions (trustee, management, rental and transaction).

This transaction, the final implementation of which could take place in the first half of 2024, according to the timetable announced by Nexity, would be carried out on the basis of an enterprise value of 440 million euros.

“This operation is not a surprise,” notes Oddo BHF in its note dedicated to Nexity. The design office recalls that the promoter indicated in October that it had initiated “a process of searching for strategic and financial partners in the management and distribution professions”.

In the absence of details, Christophe Chaput, the analyst in charge of the file, also recalls that in 2022, management activities (administration of goods for individuals and businesses) had generated 382 million euros in turnover. business in 2022, and a current operating profit of 29 million euros, which reveals an operating margin of 7.6%.

“Obviously this operation is a good opportunity to reduce the group’s debt with a sale price which seems to us to correctly value the Personal Services activities”, appreciates Oddo BHF.

“An opportunity to reduce debt”

This operation will, as Oddo BHF reminds us, allow Nexity to be more financially comfortable. In its press release, the promoter argues that this sale will contribute to the debt reduction desired by the company.

Nexity’s debt is a point of vigilance for the market, in a high interest rate environment. At the end of last June, Nexity had a net debt of 1.012 billion euros, compared to 820 million euros at the end of December, due to a sharp drop in results between January and the end of June.

“It is currently more difficult to maintain margins and therefore we have deteriorating operating results,” explained Jean-Claude Bassien, general manager of Nexity, on BFM Business at the end of July.

Therefore, the group remains attentive to the direction of its debt. For example, Nexity sold its activities in Portugal at the beginning of September, an operation which was added to the sale this summer of its Polish activities for 100 million euros.

Furthermore, the promoter indicated that the capital gains generated by the sale of its property administration activity would also make it possible to accelerate the adaptation of Nexity “to new market conditions” and to partly compensate for the downturn in the cycle. expected in 2024. In other words, Nexity is counting on this additional nest egg to negotiate a year 2024 which will follow a 2023 financial year marked by the intense real estate crisis that all stakeholders in the sector are going through.

In this respect, Oddo BHF recalls that management “has not given objectives” for 2024 given this exceptional context for the stone professions. The financial intermediary thus says it understands that the operational margin for residential real estate “should reach a low point” which it estimates at 6%, a decline compared to the 8.4% achieved in 2022.

On the profitability front which will be “strongly affected by the economic situation”, Oddo BHF expects a net result down by 40% on average for 2023 and 2024.

At the end of July, the company spoke of a “rarely intense crisis” in the real estate sector linked to the “sudden rise in interest rates” and which has the consequence of excluding households from potential access to bank credit .

In this context, the group was forced to revise downwards its 2023 objectives. Turnover is now expected at 4.3 billion euros (excluding international), with an operating profit of 250 million euros.

However, Oddo BHF wants to be relatively optimistic, seeing that Nexity “demonstrates relative resistance in its reservations”, with a drop of 20% in volume, outperforming a market at -29%. But above all, the analyst foresees “the prospect of a stabilization of the various economic parameters of the operations (construction costs; evolution of interest rates). quite simply at half mast with the increase in credit conditions for individuals, continues Oddo BHF.

After an underperformance of 42% on the stock market compared to the CAC Mid 60 (the SBF 120 reduced by the 40 stocks of the CAC 40 and the 20 stocks of the CAC Next 20) since the start of the year, the valuation multiples are now considered relatively modest by the design office. This even though it already includes a “sharp drop in results”. The financial intermediary therefore adjusts its 2024 profit per share forecast, by 9.5%, to take into account financial costs which will be higher than initially expected and “not at today’s announcement”.

In summary, based on a stabilization of reservations in 2024 and a significant reduction in debt. Oddo now takes a less negative opinion on the matter. The financial intermediary raises its recommendation to place the cursor at “neutral” against “underperformance”, with a price target maintained at 17.1 euros. A target which has now been reached with the daily increase in Nexity shares on the Paris Stock Exchange.