As a result of our revised valuation on Tigné Mall plc (“TML” or “group”) following the issuance of the interim results for FY 2019, we maintain our “buy” recommendation on TML with a one-year price target of €1.17, implying a capital upside of 28.6% to the current price of €0.91 as at the date of this writing.

The marginal improvement registered by the group during H1 2019 is attributable to an increase in rental revenue and contribution from the operation of the car park.

The group’s results for H1 2019 were impacted by an increase in finance costs, as a consequence of the additional bank financing during the latter part of FY 2018 to purchase the additional 132 car parking spaces (355 spaces in total).

TML has a strong track record of full occupancy within the mall, and as such we have assumed that due its strategic location, the mall will continue to be fully occupied going forward.

The 2019 LTM revenue figures demonstrate an increase in revenue of 3.4% to €6.7 million. This has been primarily initiated through an increase in the overall footfall within the mall and a consequent upsurge in tenant sales experienced throughout H1 2019. Revenue was also positively impacted as a result of the contribution brought about by the additional 132 parking spaces acquired at the latter part of FY 2019.

As per 2019 LTM results, TML incurred an increase in administrative expenses (9.5%) and in cost of sales excluding depreciation (34.1%). In such regard, these led to a fall in EBIT margin from 63.5% in 2018 to 62.3% as at 2019 LTM. We expect EBIT margin to remain constant at 62% during 2019 and improve thereafter in line with the increase in revenue expected to be generated by TML moving forward.

In terms of profitability, during H1 2019 TML registered an increase in net profit of 5.5% in comparison to the corresponding period, translating into an EPS of €0.021. Given TML’s year-on-year improvement in turnover and profitability, we expect net profit to improve in the foreseeable future.

TML is currently trading on 21.1x FY2019F earnings, which is below its five-year historical average of 23.7x. We deem such P/E offering as attractive and expect the share price to reflect such reality moving forward.

Furthermore, TML has a positive track record of constant dividend distributions paid over recent years. TML is currently offering a reasonably attractive net dividend yield of 2.8% (based on LTM). During the first six months of 2019, TML paid an interim dividend of €0.7 million or €0.01,31 per share.

Given TML’s positive outlook and consistent improvement in revenue and profitability potential, coupled with TML’s attractive dividend yield offering, we are of the view that the main reason to buy the stock primarily relates to TML’s constant dividend distribution and its potential to increase this further in the near term.

Disclaimer: This article was issued by Andrew Fenech, Research Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Analyst views to BUY, SELL or HOLD on particular stocks or instruments are related to the stock/instrument being reviewed and are not to be treated as personal recommendations to investors, which are only issued following suitability assessment.