SYN prop e tech SA

BOVESPA:SYNE3

Earnings Call Transcript 2024-Q3

[Operator]

[Interpreted] Good morning, ladies and gentlemen. Welcome to SYN conference to discuss the results for the third quarter of 2024. This video conference is being recorded, and the replay can be accessed on the company's website, ri.syn.com.br. The presentation will be also available for download. [Operator Instructions]

These statements may involve risks and uncertainties as they relate to the future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should be aware of events related to the macroeconomic environment, the industry and other factors that could result to differ materially from those expressed in the respective forward-looking statements.

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

Now I'd like to give the floor to Mr. Thiago Muramatsu, who will start the presentation. Please, Thiago, you can proceed.

[Thiago Muramatsu, executive]

[Interpreted] Good morning, everybody. Thank you so much for participating of this teleconference. And to start, we would like to see the third quarter '24 achievements, less activity in the business, but some activities internally that is very important to share with you.

Starting with the prepayment of 13th debenture, something that we mentioned that we would do, reduce the leverage with the cash received from the transaction of the shopping malls, partial sale. We paid the second series, BRL 160.7 million. And in September, we distributed BRL 440 million in dividends, considering already the profit of the operation of the partial sale of the mall. After the closing of this third quarter, we approved the capital reduction, BRL 560 million in a total of dividends and capital reduction returning to the shareholders BRL 1 billion. In addition to that, we announced in the end of October, the signature of Brasilio Machado. We announced this in the second quarter, and we conclude the signature in this transaction is BRL 32 million, and then we are selling -- building our participation in Class B that was almost 100% vacancy.

And here, just showing the flow of the transaction that we concluded in June, receiving up to the close BRL 941 million. Part of this BRL 300 million was cash and then the end of the closing of the payment, taxes and expenses of transaction, we spent BRL 70 million. And then we have 2 more parts to receive BRL 359 million paid in December '24 and 1 more installment December 2025, BRL 550 million. Both installments are CDI oriented.

And that, as I mentioned before, the distribution of values to shareholders, we distributed already BRL 440 million dividends on September 2. And we have a capital reduction that we are still in the term of the creditors finalizing December, 2 or 3 weeks from today with the payment date up to the end of this year, showing also the work we had ROE, return on equity, in the last 12 months, the return is almost 30%. And this is one of the best returns that we have in the stock market in the last 12 months with 2 distribution with the yields over 50%.

In the operational, starting with the malls, we finalized the quarter with occupancy of 93.4% a big impact of vacancy in Grand Plaza, really relevant, but we are already in discussion on the minute for next quarter, probably this number is going to be closer to what it was in the third quarter '23. Financial occupancy as the area that is vacant is big and with the rental per square meter lower to a store, a satellite store, we finalized with financial occupancy of 95% and then the expectation is signing this contract that we can overpass 95% of occupancy in our malls.

And talking about sales, the composition of sales, we finished the quarter with a total of BRL 724 million sales. The growth compared to third quarter 23.4% and half was replacing malls, stores, what we have been doing, working on qualifying our mix in general and BRL 20 million growth of same-store sales this quarter is 3.2%.

In comparison, same-store rental from 0 from the second quarter '24 going to 2.7% increase in the third quarter '24. Buildings, this considering Brasilio Machado transaction, we finalized this semester, but now we concluded the sale. We finalized 93.2%. The vacancy was really representative, almost 100% vacant considering this asset in our portfolio, 83%. When we remove this effect of our portfolio is 93.2%. And financial occupancy, a little bit higher, 84%. And to finalize here operational aspect, we have our CLD warehouse partially concluded with the first phase delivered. This first phase, we have the physical occupancy of 72%. As the quarter finalized, we have 3 [indiscernible] ongoing enough to finalize the year with 100% occupancy in this asset.

I pass the floor to Hector, so he can talk about financial performance.

[Hector Bruno de Carvalho Leitao, executive]

[Interpreted] Good morning, everybody. Thank you so much for your attendance in our call. I'd like to start talking about NOI of the same properties as we had an important divestment in last quarter. I would like to bring the performance of the same properties adjusting the share in the last quarter, we can see growth of almost 2.5% in total of NOI, reaching BRL 22 million in the third quarter.

And in the accrual of the year, the growth is 9.7% with BRL 65 million compared 59.3% on the 9 months previous year. Opening up the business unit, shopping malls, the growth is 4% and 10.6% accrual in the year. Offices, there is a penalty NOI growth. It was not -- this is a punctual result of the quarter. We are growing almost 7% a year. And in the quarter, the drop of 3%. That was some accounting effects on grace period that we accrue in this quarter because of occupancy in our development. But the trend here, we are going to continue to grow above the inflation in offices as well.

Observing the results, there is no adjust on participation, EBITDA adjusted on the quarter. It's important to highlight that there was adjust because of the sale on the previous quarter, especially in 2 lines, financial results. We removed all the positive effect of the monetary adjustment of the installments, December '24 and '25, a penalty in the adjusted to keep our criteria of removing the sales effect.

And also, above the financial result in revenue and other revenues and operational expenses, we have a positive adjust now because of AVP present value installments. So on the net value, we have an important adjustment in our net profit because of the sale. Seeing the numbers, we closed the quarter in BRL 18 million in EBITDA adjusted with a drop of 58%. It is expected this plunge as we commented last quarter, our EBITDA recurring is around BRL 20 million.

And here, there was a penalty, a higher penalty in this quarter on PDD, the last quarters. We presented a positive number. And this PDD would revert next quarter because we received highest part of the PDD was attendant and we received in October. So we are going to revert PDD next quarter. In the accrual of the year, we closed [ 95, 96.6, 29 ] drop in the same reasons that I explained before in the participation.

Profit, the growth is 10% compared to the previous quarter, closing with BRL 6 million. And here, although the adjusted financial result was superior than last year because of the positive net cash all over the quarter and dividend distribution, the net debt is BRL 300 million, inferior to what we presented in the previous year. In the year accrual, we have BRL 16 million adjusted net profit, BRL 700 million loss last year, FFO.

In the quarter, there is a drop of 40%, BRL 9 million FFO and the accrual of the year, BRL 35 million growing on BRL 30 million. So basically, the drop in the plunge that we see is portfolio adjustment. On the other hand, the financial result is better. We leveraged the balance in a better net profit. And underneath of the graph, we have EBITDA net profit without the sales, without this effect, we would like to highlight the accrual EBITDA we reached BRL 650 million in the accrual of the year and BRL 486 million net profit.

Leveraging the quarter, we closed with BRL 880 million of debt and BRL 300 million on net debt, representing twice our EBITDA in the last 12 months. So we presented before the transaction, a leverage close to 5x. We have net cash in the second quarter because we received the transaction after distribution, we are back to a net debt almost 2x. And observing after the transaction, after the installments and payment of capital reduction in December '25, we see a net debt close to 0. So we had already a comfortable cash situation with a debt profile that was comfortable as well. Now even more, we have a great option either on distributing more dividends or having some reinvestment with this cash that we have in our hands.

And finally, we see the amortization schedule well equated, considering the towers BRL 120 million for next year, BRL 130 million for '26 and '27. And in '28, we have the amortization that is more expressive, BRL 400 million, giving us time to re-leverage and equate this amortization. So we are comfortable here in this situation, considering cash management and debt management. Index, we have half and half IPCA, CDI. This cost is very interesting, the spread of 1.3% CDI and 6.5% in IPCA.

On my side, I'd like to conclude. Let's open up the floor for Q&A.

[Operator]

[Interpreted] [Operator Instructions] Our next question comes from Mr. Elvis Credendio, BTG Pactual.

[Elvis Credendio, analyst]

[Interpreted] I have a question about capital allocation. There is a big movement on capital director and the leverage of the company is low even after capital distribution, selling assets. On the other hand, the news, Brookfield, [indiscernible], Brasilio Machado selling. I'd like to understand your reasoning midterm to allocate the capital of the company if we expect a leverage that is higher investments and more return to the shareholder.

[Thiago Muramatsu, executive]

[Interpreted] We have, in fact, the level of leverage that is low. That is our objective here. We have the development of CLD. It is still on the second phase out of 4. So we have a cash exposure to happen in the next 1.5 years. So part of the cash is going to be used for debt. And we have a term, a deadline Hector showed us in '28. But in addition to that, we would like to leave room for opportunity investments. So when we -- lately, we see opportunities. So we observe some things and we would like to make room for these things for the next 12 months up to the end of next year to understand if we can find something that is timely.

The moment is also interesting next month because real estate fund will have a higher restriction for capture. So we have a position of capital structure that is balanced with credit. So maybe we can see opportunities in the future in the next 12 months. So the idea is that in 12 months from now, we can discuss more if there is more room for returning dividends to the shareholders.

[Operator]

[Interpreted] [Operator Instructions] Our next question is from Mr. [indiscernible]. One, if you invest in SYN's current price after sales of properties in 2024, what's the thesis of value generation for 2025 and long term?

[Thiago Muramatsu, executive]

[Interpreted] There are 2 questions. Let me start with the first one. I think that every investor has their thesis on investment. What can I say on SYN, it doesn't matter the moment that you get into after distribution in capital reduction, you still see a cap rate that is very appealing calculated by investors and banks, almost 15% expectation for 2025. We do not have any guidance on this sense.

And the idea is that you have a company that is low even after the dividends, and we see operational performance that is not reflected in this quarter. But the perspective of growth is very interesting next year. With this transaction, we have a higher part of our result in service provision, improving the return on invested capital. So some of these components, I believe, help in the value generation. I believe the main is a calculation of cap rate, the way of the investor sees their strategy of investment.

[Operator]

[Interpreted] And next question, also [indiscernible], the second part. He says about the minority share in balance, the accounting value of investment property of BRL 1.7 billion. What is the partner shareholders compare minority and the installments to be received of the shopping. What is the percentage of the shareholders here and the minorities?

[Hector Bruno de Carvalho Leitao, executive]

[Interpreted] Marcos, this is Hector. About the accounting value in the release, you can see BRL 800 million. We opened the balance pro forma. And about this installment values BRL 36 million and BRL 550 million, this is our share already. So do not consider partners here. So these values are totally received by SYN.

[Operator]

[Interpreted] [Operator Instructions] Our next question is Ms. [indiscernible]. She asks, with the high interest rate scenario and economic instability, how do you adjust your acquisition strategy and asset selling? Is that any profile of asset that you consider more appealing or the opposite that you are preventing? And about the period of opposition of creditors, is there a term for a deadline?

[Thiago Muramatsu, executive]

[Interpreted] Let's start with the second question that is more direct. Yes, there is a deadline. I believe it's December 2, finalizing it. And then we received the cash on the second installment XP. So it would be something that timely as soon as the term is ending, our RE will communicate the cutoff date and the instructions for capital reduction. And about the first question, I believe I have already answered this to Elvis before we see a scenario in the next 12 months with a reduction of acquisition activity on real estate development because of a more challenging capture scenario.

And this is a little bit of the difference when you see company of profits and real estate investment, they have different objectives considering dividends and growth on capital. We can position ourselves as buyers in a moment that we have capture difficulty on real estate funds. Maybe there is opportunity in this point, there is no specific asset that we are searching for or preventing. Maybe that's our work is to have an assessment of opportunities to understand potential upsides for each one of asset classes that we work. So we observe and search opportunities of investments where there is a possibility of gain of our shareholders.

And talking about divestments, something that we did a lot in the last years, well executed, well performed, well successful, reaching a value close to what we believe. And eventually, we can have another movement of divestment, nothing so relevant, but it's always searching opportunities to see something that makes sense to our shareholders for you in general.

[Operator]

[Interpreted] Our next question comes from Mr. [ Reinaldo Francisco ]. Congratulations on the results. Can you update the situation of the work in Cidade Sao Paulo shopping mall? And this question also [ answered ] Mr. Eduardo.

[Thiago Muramatsu, executive]

[Interpreted] [ Reinaldo and Eduardo ] an update of this construction work we have not started yet. This construction work is an area of the mall together with another building. So we are working the bureaucratic aspect to advance with this construction work. But for now, we do not have a term date to start this construction work, this expansion work. There is one more question about I will answer you directly.

[Operator]

[Operator Instructions] Our next question is Mr. Eduardo Grangeiro.

[Unknown Analyst]

[Interpreted] Congratulations on the results. I'd like to have a follow-up question about capital allocation, asking if you have any opportunity of M&A already in your radar? And the second topic, a little bit different. I'd like to understand better why do you outsource the management of parking spaces, parking lots? What is the strategy behind it?

[Thiago Muramatsu, executive]

[Interpreted] We have a good relationship with great part of banks, real estate funds and property owners. So we have a big funnel of opportunities coming up to us. So constantly, we are analyzing. This is an investment, and we have it as our daily activities. So that is always something under analysis. But I believe short term, in the next 2 months, there is nothing that we see already ongoing to be concluded. So we have analysis, discussions, nothing advanced, just things on daily activities. And about your second question, the company that manages the parking lot is [ Upper Place ], and it's 100% owned by us. They do not have our name, but it's ours managing parking lots.

[Operator]

[Interpreted] [Operator Instructions] No more questions, 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]

[Interpreted] I believe that we talked a lot about things on the third quarter and also mentioning things on perspective that we have on the operational point of view, capital allocation and M&A. I believe we conveyed a very good message to you all. And remember that if you have questions, further questions, our team of RE are here for you. Thank you so much. Good day.

[Operator]

[Interpreted] This SYN video conference is now closed. We appreciate your participation, and have a good afternoon.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]