Triple Point Social Housing REIT — Strong rent growth and improving rent collection

Triple Point Social Housing REIT (LSE: SOHO)

Last close As at 18/06/2024

GBP0.57

0.00 (0.00%)

Market capitalisation

GBP225m

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Research: Real Estate

Triple Point Social Housing REIT — Strong rent growth and improving rent collection

Triple Point Social Housing REIT’s (SOHO’s) Q124 update confirms a continuing improvement in rent collection. The newly set FY24 DPS target is unchanged compared to FY23 at 5.46p as the board considers the impact of asset sales and transfers. This represents a yield of 9.0%. Strong indexed rental income continues to support income and capital values.

Martyn King

Written by

Martyn King

Director, Financials

Real Estate

Triple Point Social Housing REIT

Strong rent growth and improving rent collection

Q124 NAV and DPS target

Real estate

21 May 2024

Price

61p

Market cap

£240m

Net debt at 31 December 2023

£234.5m

Gross LTV at 31 December 2023 (gross debt/gross assets)

37.0%

Shares in issue

393.5m

Free float

99%

Code

SOHO

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.2

8.0

12.6

Rel (local)

(6.3)

(1.1)

3.7

52-week high/low

65p

48p

Business description

Triple Point Social Housing REIT invests primarily in newly built and newly renovated social housing assets in the UK, with a particular focus on supported housing. The company aims to provide a stable, long-term, inflation-linked income with the potential for capital growth.

Next events

H124 results

Expected September 2024

Analyst

Martyn King

+44 (0)20 3077 5700

Triple Point Social Housing REIT is a research client of Edison Investment Research Limited

Triple Point Social Housing REIT’s (SOHO’s) Q124 update confirms a continuing improvement in rent collection. The newly set FY24 DPS target is unchanged compared to FY23 at 5.46p as the board considers the impact of asset sales and transfers. This represents a yield of 9.0%. Strong indexed rental income continues to support income and capital values.

Year end

Total income (£m)

Adjusted earnings* (£m)

Adjusted EPS* (p)

NAV**/
share (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

12/22

37.4

19.6

4.87

109.1

5.46

0.56

9.0

12/23

39.8

18.3

4.61

113.8

5.46

0.54

9.0

12/24e

41.4

22.4

5.69

117.0

5.46

0.52

9.0

12/25e

42.7

24.6

6.26

120.7

5.75

0.51

9.4

Note: *Excludes revaluation movements and non-recurring items and adds back non-cash loan fee amortisation. **Throughout this report, NAV is EPRA net tangible assets per share.

Q124 NAV, including DPS paid, 1.5%

SOHO’s Q124 NAV per share was 114.15p, up 0.39p or 0.3% in the period. The portfolio value increased by £1.3m, adding 0.31p per share to NAV, with a 19bp increase in the blended portfolio net initial yield more than offset by annual rent increases, mostly linked to the September 2023 Consumer Price Index (CPI) figure of 6.7%. During Q124, rent collection increased relative to 2023, when it was 90% covered by adjusted ‘cash’ earnings (and fully covered on a run-rate basis by early FY24). Retained earnings added 0.08p to Q1 NAV per share, implying that the DPS paid was fully covered (c 1.06x) by EPRA earnings. Compared with EPRA earnings, SOHO’s adjusted ‘cash’ earnings measure deducts movements in the lease incentive debtor, which are difficult to predict. For FY23, EPRA EPS was 4.92p and adjusted EPS 4.61p and we anticipate a further impact this year, including from the transfer of assets from Parasol to Westmoreland.

Asset sales and share repurchases

SOHO previously announced it was looking to transfer all of its 38 homes leased to Parasol, one of its two struggling tenants, to Westmoreland, following several months of due diligence. The company continues to make progress with My Space, where it is supporting the management team in delivery of its turnaround plan and rent payments are increasing. Also, SOHO intends to make further portfolio sales this year and is currently in the process of agreeing heads of terms in relation to the sale of a portfolio. The proceeds will support further share repurchases, while also maintaining a suitable level of leverage. We have reduced our DPS forecasts for FY24 and FY25 but our earnings forecasts are unchanged, notwithstanding the uncertainties about the impact of asset sales, the property transfer, and the expected creditor agreement with My Space. At the current price, share repurchases are accretive to both NAV and earnings.

Valuation: Uncertainty masking recovery potential

The targeted DPS represents a yield of 9% and, despite a share price recovery from a low point of c 42p in April 2023, the shares continue to trade at an almost 50% discount to NAV.

Additional details and recent developments

Strong tailwind from rent reviews

Rent reviews continue to be strong. All rents are annually indexed to the lower of inflation2 or, under the terms of the new lease clause, government housing benefit policy. For FY24, 65% of lease uplifts are linked to the September 2023 CPI annual rate of increase of 6.7%, mostly taking effect in the first half of the year. The balance of reviews, spread across the year, will reflect the prevailing level of inflation.

  1 100% of contracted rental income is indexed either to CPI (92.5%) or RPI (7.5%). An index premium applies to 7.5% of leases, which increases the standard annual indexed rental uplift by 1%, and the uplifts on 4.9% of rental income are capped and collared.

DPS guidance increases our forecast DPS cover

We had previously forecast a c 4% increase in FY24 DPS to 5.70p, 100% covered by adjusted earnings and 109% covered by EPRA earnings. We now forecast FY24 DPS in line with SOHO’s unchanged target of 5.46p, with a slower progression in FY25. Without changing our earnings forecasts this increases DPS cover to 1.04x in FY24 and 1.09x in FY25 on an adjusted earnings basis.

Exhibit 1: Changes to DPS assumptions

FY23

FY24e

FY25e

EPRA earnings (£m)

19.5

24.4

25.6

Amortisation of loan arrangement fees (£m)

(0.3)

(0.3)

(0.3)

Movement in lease incentive debtor (£m)

(1.5)

(2.3)

(1.3)

Adjusted earnings (£m)

17.7

21.8

24.0

Revised DPS forecast (p)

5.5

5.5

5.8

EPRA earnings DPS cover (x)

0.90

1.14

1.13

Adjusted earnings DPS cover (x)

0.85

1.04

1.09

Previous forecast

DPS (p)

5.7

5.9

EPRA earnings DPS cover (x)

1.09

1.00

Adjusted earnings DPS cover (x)

1.00

1.06

Source: <Insert Source or Notes>

Our forecasting assumptions regarding Parasol and My Space

At end-FY23, 38 of SOHO’s almost 500 homes were leased to Parasol, representing 9.7% of the total rent roll. A further 34 properties, representing 8.1% of rent roll, were leased to My Space. With the FY23 results the company made clear that, while it was working with the new Parasol leadership team towards agreeing an equitable long-term agreement, if this was not possible, it had already agreed terms with an alternative provider.

Our last published forecasts included assumptions, in respect of rent collection and rent levels, about the outcome of the creditor agreement and ongoing discussions with Parasol, and about the creditor agreement being negotiated with My Space. With few details of the creditor agreements available, we said that our assumptions should be seen as illustrative, and this remains the case following the transfer of properties to Westmoreland. Our best guess is that some combination of rent adjustment and additional lease incentive remains valid. For now, we make no change to this element of our forecasts, while retaining the existing caveats.

The impact of disposals and share repurchases

Following the August 2023 sale of a small portfolio of assets for £7.6m at close to book value, SOHO swiftly concluded a £5m share repurchased programme, acquiring and cancelling c 9.3m shares (c 2% of the total) at an average c 53p, at a highly accretive discount of c 53% to prevailing NAV.

The company has provided no indication as to the likely scale of further asset sales and share repurchases but given the persistent discount, we expect it will be on a larger scale than previously. However, this is not reflected in our forecasts. While we expect an asset sale and share repurchase programme to be accretive to EPS and NAV per share on a full-year basis, the need to sell assets ahead of completing repurchases is likely to dull the nearer-term impact. This is a factor that the board has considered in setting the FY24 DPS target.

The illustration below, indicates how asset sales, combined with debt reduction and share repurchases, are likely to be accretive on a full-year basis. It is based on our existing FY25 forecasts and reflects a full annualised impact, of a £25m disposal at a yield of 6%. The proceeds are deployed in debt reduction (maintaining an unchanged net loan-to-value ratio) and share repurchases at the current share price. The number of shares outstanding is reduced by 7% to 365 million. Adjusted EPS would be enhanced by 3% and NAV per share by 4%.

Exhibit 2: Asset sale and share repurchase illustration

£m unless stated otherwise

FY25e

Rent

Interest

Management fee

Equity

Debt

Pro forma

Change

Income statement

Adjusted earnings

24.6

(1.5)

0.2

0.2

23.5

-5%

Adjusted EPS (p)

6.3

6.4

3%

Net assets

NAV

474.8

(16.9)

457.8

-4%

NAV per share (p)

120.7

125.3

4%

Cash flow and debt

Net debt

221.7

(8.1)

213.7

Net LTV

32.3%

32.3%

Gross LTV

38.4%

38.6%

Source: Edison Investment Research

Exhibit 3: Financial summary

Period ending 31 December (£m)

2021

2022

2023

2024e

2025e

INCOME STATEMENT

Total income

33.1

37.4

39.8

41.4

42.7

Expected credit loss

0.0

(2.1)

(4.6)

(1.0)

0.0

Investment management fees

(4.6)

(4.7)

(4.7)

(4.8)

(5.0)

Other expenses

(2.4)

(3.2)

(3.6)

(3.6)

(4.4)

Operating profit/(loss) before revaluation of properties

26.2

27.5

27.0

32.0

33.2

Change in fair value of investment properties

9.0

8.3

15.5

10.0

(0.1)

Operating profit/(loss)

35.2

35.7

42.5

42.0

33.2

Net finance income/(expense)

(6.8)

(10.8)

(7.5)

(7.6)

(7.6)

PBT

28.4

24.9

35.0

34.4

25.6

Tax

0.0

0.0

0.0

0.0

0.0

Net profit

28.4

24.9

35.0

34.4

25.6

Adjusted for:

Change in fair value of investment properties

(9.0)

(8.3)

(15.5)

(10.0)

0.1

Loan arrangement fees written off

0.0

2.6

0.0

0.0

0.0

EPRA earnings

19.4

19.3

19.5

24.4

25.6

Interest capitalised on forward funded developments

0.0

0.0

0.0

0.0

0.0

Amortisation of loan arrangement fees

1.3

1.0

0.3

0.3

0.3

Change in lease incentive debtor

0.0

(0.6)

(1.5)

(2.3)

(1.3)

Company adjusted earnings

20.7

19.6

18.3

22.4

24.6

Basic & diluted average number of shares (m)

402.8

402.8

397.0

393.5

393.5

Basic & diluted IFRS EPS (p)

7.05

6.18

8.81

8.74

6.50

EPRA EPS (p)

4.82

4.78

4.92

6.20

6.51

Company adjusted EPS (p)

5.14

4.87

4.61

5.69

6.26

DPS declared (p)

5.20

5.46

5.46

5.46

5.75

EPRA EPS/DPS (x)

0.93

0.88

0.90

1.14

1.13

Company adj. EPS/DPS (x)

0.99

0.89

0.85

1.04

1.09

EPRA cost ratio

20.9%

21.1%

20.6%

20.4%

22.2%

EPRA NTA total return

6.6%

5.7%

9.3%

7.7%

7.9%

BALANCE SHEET

Investment properties

641.3

667.7

675.5

686.1

686.6

Other receivables

2.3

2.9

4.2

6.6

7.9

Total non-current assets

643.6

670.6

679.7

692.6

694.5

Cash & equivalents

52.5

30.1

29.5

29.5

42.2

Other current assets

3.9

4.3

3.9

4.2

4.3

Total current assets

56.4

34.4

33.3

33.7

46.5

Trade & other payables

(3.7)

(3.1)

(2.7)

(2.8)

(2.9)

Other current liabilities

0.0

0.0

0.0

0.0

0.0

Total current liabilities

(3.7)

(3.1)

(2.7)

(2.8)

(2.9)

Bank loan & borrowings

(258.7)

(261.1)

(261.2)

(261.5)

(261.8)

Other non-current liabilities

(1.5)

(1.5)

(1.5)

(1.5)

(1.5)

Total non-current liabilities

(260.2)

(262.6)

(262.7)

(263.0)

(263.3)

Net assets

436.1

439.3

447.6

460.5

474.8

EPRA net assets

436.1

439.3

447.6

460.5

474.8

Period-end basic & diluted number of shares (m)

402.8

402.8

393.5

393.5

393.5

EPRA NTA/ IFRS NAV per share (p)

108.3

109.1

113.8

117.0

120.7

CASH FLOW

Net cash flow from operating activity

24.7

25.7

25.9

29.4

31.9

Cash flow from investing activity

(61.4)

(18.3)

7.6

(0.6)

(0.6)

Net proceeds from equity issuance

(0.0)

0.0

0.0

0.0

0.0

Loan interest paid

(5.6)

(7.2)

(7.2)

(7.3)

(7.3)

Bank borrowings drawn/(repaid)

65.0

0.0

0.0

0.0

0.0

Share repurchase

0.0

0.0

(5.0)

0.0

0.0

Dividends paid

(20.9)

(21.7)

(21.6)

(21.5)

(11.3)

Other cash flow from financing activity

(2.7)

(0.6)

(0.2)

(0.0)

(0.0)

Cash flow from financing activity

35.7

(29.6)

(34.1)

(28.8)

(18.6)

Change in cash

(1.0)

(22.2)

(0.7)

0.0

12.7

Opening cash

52.9

51.9

29.7

29.0

29.0

Closing cash (excluding restricted cash)

51.9

29.7

29.0

29.0

41.8

Restricted cash

0.6

0.4

0.4

0.4

0.4

Cash as per balance sheet

52.5

30.1

29.5

29.5

42.2

Debt as per balance sheet

(258.7)

(261.1)

(261.2)

(261.5)

(261.8)

Unamortised loan arrangement costs

(4.8)

(2.4)

(2.3)

(2.0)

(1.7)

Total debt

(263.5)

(263.5)

(263.5)

(263.5)

(263.5)

Net (debt)/cash excluding restricted cash

(211.6)

(233.8)

(234.5)

(234.5)

(221.7)

Net LTV (net debt/investment property)

33.0%

35.0%

34.7%

34.2%

32.3%

Company gearing (gross debt/gross asset value)

37.6%

37.4%

37.0%

36.3%

35.6%

Source: Triple Point Social Housing historical data, Edison Investment Research forecasts

General disclaimer and copyright

This report has been commissioned by Triple Point Social Housing REIT and prepared and issued by Edison, in consideration of a fee payable by Triple Point Social Housing REIT. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Triple Point Social Housing REIT and prepared and issued by Edison, in consideration of a fee payable by Triple Point Social Housing REIT. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Research: Financials

ProCredit Holding — A solid start to 2024

ProCredit Holding (PCB) has delivered another strong set of results, posting Q124 net income of €33.5m (up 14% y-o-y), which translates into an annualised ROE of 13.4%. Earnings were supported by a sustained solid net interest margin (NIM; at 3.7% annualised vs 3.4% in Q123) and low cost of risk (2bp). Meanwhile, PCB reported a higher cost-income ratio (CIR, 61.7% in Q124 vs 59.7% in Q123) as it ramps up its new strategic agenda. In line with PCB’s dividend policy, the management board will propose at the AGM (on 4 June 2024) the payout of one-third of PCB’s FY23 profits, translating into a dividend per share of €0.64, which implies a healthy 6.4% dividend yield.

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