Original review: IRSA - cheap Argentine property
Tag for finding my other articles on this stock: IRSA
Key takeaways
Record rental ebitda and ongoing swaps at Ramblas del Plata, which begins monetising in earnest in 2028/9. Stock remains at a 40-50% discount to an NAV which I think is understated.
Thesis and valuation update
No change to thesis. Still priced to compound at +/- 20% in a bull case. I plan to lay this out in more detail in a note soon.
Notes
Data are for FY26 rather than just the quarter. IRSA reported strong profits for the year The key components were:
$199m in rental ebitda, a record ($176m malls, rest office and hotels). This is largely cash.
A revaluation of investment properties under IFRS due to a c.70bps reduction in the discount rate to c.10% as the country risk premium falls. This is not cash but supports my belief that the NAV is understated.
Malls
Dollar ebitda was up 3.8% to $176m, a new record.
Acquired 2 new malls and started development of a third. They will reach 432k square metres of gross leasable area in 2027, a 28% increase on 2024.
As a reminder IRSA is the dominant mall operator in Argentina and has 70% market share in Buenos Aires, which has 15m people and is 10x the size of the next biggest city. Mall penetration in Argentina remains very low “because nobody invested in Argentina during the last, I would say, 30 years or 20 years”.
Tenant sales were down 8.5%. Traffic and tickets are flat, but apparel pricing is lagging inflation as imports get easier and competitors enter the market. In other words, affordability is rising but tenant margins are falling.
The same liberalisation is attracting global retailers, so IRSA has rented space to Decathlon, Victoria’s Secret, Mango, D&G, and “many others” in FY26. “We do not have space for [such] high demand.”
I like this dynamic; in the short term IRSA is protected by strong tenant demand and inflation-linked rents, and in the longer term economic acceleration should feed into consumption.
Ramblas del Plata
Closed 5 barter deals for a total of 20 to date with a value of $130m. As a reminder RdP is the development of a vast riverside plot in prime Buenos Aires and IRSA is selling plots to developers for a small up-front payment and 25-30% of final proceeds. So these deals lock in high margin cash flows in 2028 and 2029.
6 plots remain in Phase 1, which is about 23% of the project.
“Strategic international partners [are] starting to get interested in the development.”
Phases 2 and 3 may include more developments on IRSA’s own balance sheet - more capital intensive but IRSA keeps more of the profit.
Other assets
Barter deals are planned for other assets in IRSA’s extensive land bank - will drive future cash flow.
Launched an office expansion project which is largely leased to Mercadolibre.
2 of IRSA’s hotels may be up for sale in the “near future”.
Banco Hipotecario had a tough year with margins and NPLs but still distributed dividends. The bank is shifting its retail clients to a digital-only model. IRSA owns 29%, accounting for approximately 7.5% of IRSA’s market cap. Hipotecario is well placed to benefit from a growing mortgage market as the economy normalises.
Raised $230m in debt. IRSA is underlevered at 1.4x debt/ebitda and 11% LTV, and is borrowing to grow. The growth plan is now fully funded with cash on hand - a smart move with a presidential election on the horizon. 70% of gross debt is due 2033 or later.
Given the share price, they are considering another buyback.
Thanks for reading - if you enjoyed reading this please like and restack, and do get in touch if you have questions.
Pete
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