ambitions intact despite the crisis

This residential promoter and regional developer has just successfully completed a capital increase intended to support its growth projects. Despite a good history of achievements, the company of Yoan Chouin-Joubert and Christophe de Brébisson is trading at a significant discount on its peers.

by Aymeric Val

Will the health and economic crisis spell the end of the model of this troublemaker of real estate development? Nothing is less sure. At a time when visibility is lacking among many of its colleagues, Réalités allows itself on the contrary to play its card on the table. In early July, this actor from Nantes and largely shining on the Atlantic coast specified his objectives for 2020, after having been forced to suspend his initial projections due to the epidemic. The turnover for the year is expected to rise to a minimum of 190 million euros, representing an increase of 15% at least. This contrasts with the stoppage recorded globally by the profession, while confinement has been synonymous with work stoppages. Of course, Réalités was not spared by these operational difficulties – the group estimates the cumulative delays in terms of expected delivery times for operations at two -, but its underlying growth dynamic is such that it manages to absorb the shock serenely, while waiting to resume with more brilliant performances. The leaders are also busy preparing for further development. This will involve the continued diversification of income outside of promotion, through residences for seniors and students, sports complexes, health centers as well as the management of a portfolio of goods. Convinced of the relevance of its model firmly anchored in the territories, Réalités even allowed itself to carry out a capital increase of 15 million euros (17 million with the extension clause) this summer, subscribed by the founders. Enough to reduce the financial leverage, the Achilles heel of the group in recent times. At the end of 2019, let us remember, net debt reached 58 million, or 3 times the gross operating surplus.

Indigent valuation multiples

While liquidity is not the strong point of the Realities file, the recent fundraising should help to fill this gap somewhat. The transaction was carried out at a low discount, which is quite positive for the shareholders, who are less diluted. To secure their development plan, leaders have also taken other initiatives since the start of the health crisis, including taking out a state-guaranteed loan of $ 21.5 million. In the meantime, commercial efforts have continued, with great success recently obtained from CDC Habitat, the general interest real estate subsidiary of Caisse des Dépôts. The agreement covers the sale of 238 homes, for a total amount of 43 million euros excluding tax. This contract, described as “voluntarily modest” with the first lessor in France, calls for others, allowing Réalités to strengthen its order book. Realities is gradually gaining in importance, without this being reflected in the stock market course, which has been rather disappointing in recent times. Around 20 euros, the developer-developer capitalizes less than 8 times the net profit made in 2019 and only 6 times our anticipation for 2021, a year which will better reflect the profitability of the company than 2020, a transitional exercise. We should also highlight the discount on equity, which exceeds 30% (before dilution linked to the capital increase). Last but not least, the founding leaders have so far shown their involvement in the project, not hesitating to give up and take risks. An alignment of interest with shareholders that bodes well for the future.

Our advice: despite the difficult context in real estate, this Nantes player is doing well. Buy Réalités at 19.50 euros to aim for a first target of 23 euros. Isin code: FR0011858190.


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