Commercial property company Hibernia Reit has announced a €25 million share buyback in order to reduce its share capital.
In a note to Euronext Dublin on Friday, chief executive Kevin Nowlan said the company was in a strong position despite current economic uncertainty.
“Despite the uncertain economic outlook our business is in a strong position,” he said. “Our rent collection statistics are good and our balance sheet is extremely robust, with a last reported loan-to-value [LTV] ratio of 16.5 per cent.
“This €25 million share buyback is expected to be accretive to net asset value [NAV] per share and earnings per share and will also complete the return to shareholders of the proceeds from the sale of 77 Sir John Rogerson’s Quay started with the €25 million share buyback undertaken last year.”
The programme will begin on Friday and may continue until the end of February.
The maximum number of ordinary shares to be repurchased under the buyback programme is 68,478,208 and these may be repurchased on either Euronext Dublin or the London Stock Exchange.
The company said the purpose of the programme is to reduce its share capital. It is intended that the shares repurchased will be cancelled.
An analyst with Davy said the buyback at the current share price equates to about 23 million shares, which is 3 per cent of the total outstanding shares. “We expect this buyback to take around four or five months so should complete this year,” he said.
“The company did a €25 million buyback previously and that took seven months to complete with an average daily volume of around 100,000 shares. We expect this buyback to be over 200,000 shares per day.”
The analyst said Hibernia’s LTV ratio “has plenty of scope for a buyback following disposal proceeds last year at 77 Sir John Rogerson’s Quay”.
“Total buyback capacity from existing reserves is €50-60 million,” he said. “By doing a €25 million buyback, the company retains firepower and ensures that available liquidity remains around €100 million between cash and undrawn facilities.”
At the current share price, Davy expects the buyback to be about 1 per cent NAV accretive or to add 1.5 cent to its full-year forecasts in March 2022 onwards. It is likely to add around 2.5 per cent to earnings and dividend forecasts.
“The stock trades at a 32 per cent discount to our NAV forecasts, so this buyback will partially address that gap,” the analyst said.
“With an implied cap rate of over 6 per cent, the buyback is a far more attractive investment than buying assets in the direct market where prime yields are 4 per cent.”