SYN prop e tech SA

BOVESPA:SYNE3

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to SYN video conference to discuss the results for the third quarter of 2022. This video conference is being recorded, and the replay can be accessed on the company's website. ri.syn.com.br. The presentation will also be available for download. [Operator Instructions]

For those who are watching, the statements are based on the beliefs and assumptions of SYN management and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts, journalists should be aware of events related to the macroeconomic environment, the industry and other factors that could cause results to differ materially from those expressed in their respective forward-looking statements.

Presenting this conference is Mr. Thiago Muramatsu, CEO of SYN; and Mr. Hector Leitao, CFO and IRO of the company.

Now I would like to give the floor to Mr. Thiago Muramatsu, who will start the presentation. Please, Thiago, you may proceed.

[Thiago Muramatsu, executive]

Good morning, everybody here present in this result statement conference. Thank you so much for your time. We are going to start our call talking about the third quarter. The first one was we sell an asset that was interesting in Suarez Trade. The asset was a long time in a region, but in our geography that we do not have further activity. Strategically speaking, this selling was interesting. The transaction that is not relevant, though, to the result of the company, BRL 14.1 million and we have 2/3 of this asset. So this value is 100% of our marketplace, BRL 10 million.

This quarter, one more time, I believe it's the 4th year in a row that we were acknowledging the top ranking of open corps connected to innovation. This year, we had the third rank on Real Estate Services. And this is the reflection on how we incorporate new technologies to improve our process to improve productivity. So it's really nice to see for years in a row, participating actively of innovation, technology, incorporating them in our daily activities, and we are acknowledged for that.

Advancing now, let's talk about the performance of our portfolio. We start with [indiscernible] on occupancy, physical occupancy, we see on the left-hand side, when we see the occupancy, total occupancy shopping malls and office, 91.6% from 91.3% in the third quarter '22 to 92.6% in this current quarter, 3% increase led by the occupancy of the shopping mall. And financial occupancy, we capped the grow compared to 2022, growing [indiscernible] I believe that it's led by the shopping malls, and we are going to see individually the both categories.

First, going to the corporate buildings, we kept the physical occupancy since the third quarter '22 and '23 is flat. And the meaningful change was the financial occupancy leaving 92% to 87%, but there is a difference in the physical occupancy and financial occupancy. Third quarter '21, we did not have the transaction of the assets in Faria Lima Avenue. So the renting value was higher, leading to higher financial occupancy. When we see physical occupancy is in the same level, is flat. Financial occupancy did not decrease. We just removed the assets from Faria Lima with a higher renting value. That's the difference.

But the portfolio that we have currently compared to the same portfolio in the past, we have basically the performance aligned advancing to shopping malls occupancy, we have broken our barrier in physical occupation from 95%. And of course, the more occupied, we higher our margins. This advancement is very important in the shopping malls occupancy physically and financially. Physically, we have broken this barrier of 95% occupancy. Financially, we are in a trend of breaking this barrier as well. I believe that we have assets that are well positioned and currently, they have big representativeness in this company. It's very important to keep on advancing here in this indicator of occupancy.

Talking about the operational performance of sales in our shopping malls, the growth on sales was very interesting on the third quarter '22 and '23, almost 10% growth, 9.6% in the scenario where the inflation was beyond that, this is very important. And within this growth of 9.6%, we have almost 6% of same-store sales showing that the stores have good performance 6% one quarter after the other. Occupancy and replacement of stores help a lot. So we are growing 22 million replacing stores. So we have more than 4% of growth, replacing stores finalized with kiosks and events total sales of BRL 738 million.

Now to talk about financial performance for this quarter. I pass the floor to Hector.

[Hector Bruno de Carvalho Leitao, executive]

Good morning, everybody. Thank you so much for your attendance in this call. I will start explaining our portfolio of assets, shopping malls and offices during this quarter and 9 months accrual of the year starting with NOI total, malls plus offices, the growth was robust in the quarter, 14.7%, BRL 50 million NOI. When we see the accrual of the year, the growth was BRL 145.9 million compared to BRL 133.6 million in '22. Breaking down the business units, malls, highlights with [impressive] growth of 16.4%, BRL 40 million NOI during the quarter and 13% of growth during 9 months, reaching BRL 118.7 million. Highlighting the revenue on rents growing a lot, although the negative IGP and the avenue for growth is discount reduction that we granted during the pandemic, we are reducing this discount throughout time. And this is directly connected to the increase of sales that Thiago has just mentioned.

Offices, the growth was 11.4%. [indiscernible] Birmann 10, the relevant that we occupied last year 100% and started to see the [indiscernible] accrual of 9 months of 1.3%. Last year, there was an effect of Birmann 10 on discounts, but [indiscernible] excluding this accounting effect, so [indiscernible] the offices and office [indiscernible] it was expected that the offices behaved in a linear way.

Next slide, we see [indiscernible] following up the growth of portfolio, we see 16% [indiscernible] [ BRL 924 million ] 5% growth [indiscernible] last 2 quarters that there was [indiscernible] accounting that [indiscernible] that were revised last year and the [ realization ] that I told you about the Birmann. This effect the growth 13% during 9 months.

On the right-hand side, financial results [indiscernible] 9 months with drop of 19% of financial expenses and [indiscernible] compared to 94.7% last year. And here, there is an effect -- the main effect here were the amortization that we had for payment [indiscernible] last year expect the [indiscernible] and now we see the effect of that going down and the [indiscernible].

Our strategy here is fruitful and finally, observing FFO and profit this quarter was -- [ adjusted ] the profit compared to BRL 1.1 million and the accrual during 9 months a loss of BRL 700,000 compared to BRL 9 million loss last year. So we had a trend of improved quarter after quarter compared to profit and FFO that is [indiscernible] depreciation different from most of the companies [indiscernible] market we account [indiscernible] in our properties. We have this [indiscernible] of depreciation. That's the interesting comparatives of net profit, FFO is BRL 15 million, [indiscernible] growth of 56.8% compared to last year, and during 9 months accrual BRL 26.9 million, BRL 6.7 million last year, this growth [indiscernible] yes, its performing very well. The financial expense with less gross debt. And with the trend of SELIC dropping, there was an important cut in the last quarter. We are going to follow this improvement as well.

Next slide, we see [indiscernible] [ 1.084 ] EBITDA in the last 12 months [indiscernible] so net debt EBITDA [indiscernible] quarter after quarter [indiscernible] increased EBITDA and this happens in the [indiscernible]. The criteria its very interesting and corporate net [indiscernible] always 1.5x, so we have both covenants sorted at [indiscernible] we see the evolution of the [indiscernible] and then we are going to see this drop because of [indiscernible] we spent time lot of time [indiscernible] we have a lower SELIC now.

And that's the point that is all [indiscernible] trend of flattening, so we are going [indiscernible] financial expenses, net expenses improving quarter after quarter. And finally the amortization scheduled in [indiscernible] we still have [indiscernible] non-amortization just BRL 5.4 million. We have an amortization of [indiscernible] see that how [indiscernible] lower cost for money. On the right hand side [indiscernible] 36%IPCA and 63% CDI and average spread IPCA, 6.5 close to what would be NTB long, interesting debt that we have.

And here, I conclude the financial session. We can open up the floor for questions.

[Operator]

We would start now the Q&A session. [Operator Instructions] Our first question comes from Mr. [indiscernible].

[Unknown Analyst]

Mr. [indiscernible] congrats on the results as an investor in my first quarter with profit. I'd like to hear from you if the net profit line is recurrent and it was affected by the SYN sale. And if the cost of ITM are damaging the values of SYN?

[Hector Bruno de Carvalho Leitao, executive]

[indiscernible] Hector here talking to you. The first question on profit, there was no nonrecurring effect, and this is already an effect of the operations and the rents, all the work we have been doing, managing the debt. And about the ITM, yes. It is an asset that is open and the impact of 9 months is BRL 2.5 million. It is in our profit already. So yes, there is an impact. I believe that's it, I have answered your question.

[Unknown Analyst]

Just I forgot one piece about the sales, the impact of selling [indiscernible] will start -- will be present next quarter. It's not here considered in this current quarter?

[Operator]

[Operator Instructions] We are collecting more questions. Please hold.

The Q&A session is closed. We would like to give the floor to Mr. Thiago Muramatsu to make the company's final remarks.

[Thiago Muramatsu, executive]

I believe that -- then again, I'd like to thank you so much for the attendance. This third quarter was a quarter really nice for the company, we [ could do ] some businesses, reverting a trajectory of losses that we had in the last years. The performance of our assets behaved on the fourth quarter also promising, especially in the beginning of November, we have our Christmas campaigns and being welcomed by the retailers and also the customers, the consumers at the mall. I believe that we can expect and looking forward to November and December, successful keeping this growth trajectory in sales and rents. And of course, a great part of our result is affected by interest rates. This interest rate reduction giving us relief, helping us in our results. So we have our perspective on the next quarters of having good operational results as well and some other things that we have been working hard to bring a positive impact and the results of the company.

I thank you so much for your attention, for your time, and we are available and at your service if you have further questions. Thank you so much.

[Operator]

This video conference of SYN is now closed. Thanking you so much for your attendance. Have you all a great afternoon.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]