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Hello, and welcome to the Catena Fastigheter Q4 Report 2020. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Jörgen Eriksson; and CFO, Sofie Bennsten. Please go ahead with your meeting.
Good morning, and welcome to this audio cast. We have on Slide 3, we have the content of today's presentation, and we will end up with some questions and answers. Please go forward to Slide 4. It's been a remarkable year, firstly, because of the ongoing pandemic situation and the torment it's inflicted on the world health and economy; and secondly, because we have been able to deliver stronger results than ever before. Year-to-date, our profit from property management has increased by 15% year-over-year, EPRA NRV has increased by 21% to SEK 245 per share, partly because of revaluation gains of 7% on the back of strong investor demand and well-executed development projects. The Board proposes a dividend of SEK 7.5 per share, which corresponds to 15% increase. Our leasing operations have performed excellent throughout the year, with net SEK 79 million worth of new rent absorbed with our development portfolio being the strongest driver. We are underway with zoning plans, anticipate it to become final in 2021, enabling new potential projects. The Catena platform provides us with the ability to create value for our customers beyond properties and buildings, and the work we have done makes me confident about the future. Please move forward to Page 5. We have been fortunate enough to experience only a limited negative impact on revenues caused by COVID-19 so far. Though the market sentiment throughout the year has recovered, uncertainties about the long-term impact of the pandemic still remains somewhat clouded. However, it's evident the pandemic has pushed global supply chains to their limits and increased the e-commerce adoption and sharing, rebuilding new inventory setups or structural forces, what will take years to adapt. During 2020, we have agreed to shift from quarterly payments to monthly with some customers comprising SEK 88 million of rental value, all of which have been paid according to the plan. Only SEK 2.6 million have been subsided (sic) [ subsidized ] either through rent relief or through the governmental subsidy program. Please move to Slide 6. The hard work Catena has put down to become the leading provider of logistics facilities in Sweden has historically paid off. Profit from property management has paced at 14% compounded annual for the last 5 years, with EPRA NRV that has grown by 16% annually. At the same time, the 5-year average return on equity has been 17%. Please move to Page 7, and then we take Page 8.
Yes. And then some short comments on our income statement. Net operating income was 11% higher than the same period last year, and income from property management was 15% higher. This is SEK 19.6 per share compared to SEK 16.63 a year ago. Net operating income ratio was reported at over 79.4%, in comparison to last year's 76.3%. This is in part due to a mild winter and a lower maintenance cost caused by limited access to the properties during the pandemic. The rental income was affected by a positive one-off in the amount of SEK 14 million during the first quarter, and a negative SEK 5 million was related to reserved credit losses. Changes in property value amounted to SEK 679 million during the fourth quarter and almost SEK 1.2 billion year-to-date, corresponding to a 7% of fair value. Moving over to Slide 9. The balance sheet has grown with 15%, amounting to almost SEK 20.4 billion compared to SEK 17.8 billion last year, which is a difference of SEK 2.6 billion. Changes in value of properties contributed, as I mentioned before, almost with SEK 1.2 billion and investments in standing assets almost SEK 1 billion. Equity ratio went from 35.6% to 37.2% and debt as a percentage of total fair value was 52.3%. Moving forward to the operational review, Page 10, and moving directly over to Page 11.
Rental income amounted to SEK 1,264 billion (sic) [ SEK 1,264 million ] in the period. The total growth in rental income was 7% year-over-year. Project developments contributed 3.5% and net transactions 1.2%. Like-for-like, rent growth contributed with 1.5%, which comprises a combination of lease reviews -- renewals as well as indexation and changes in vacancy. There was also one one-off effect related to a prepayment of an early lease expiry as well as credit losses that's amounting to 0.8%. Moving to Page 12. As indicated by the diagram, our cash flow has been growing consistently since 2015. From the last 12 months, we have performed another strong cash flow where we retain 57% from revenues in property management income. Cash flow is key for stability and enable us to generate investment capacity for continued focus on our profitable development pipeline. Our target is to maintain a level above 50% of rental income. Move to Slide 13.
And some short comments on our portfolio. Catena is organized in 5 regions with the headquarters based in Helsingborg, with regional offices in Malmö, Gothenburg and Stockholm. Our total organization consists of 46 employees. We have a total of 113 logistics properties scattered around Sweden, with 4 of them located in Denmark. The properties are typically located on strategic routes in proximity to rail, ports and highways. During this strange COVID year, we've been able to keep our high economic letting ratio of 96% and also our surplus ratio at 79%. Moving on to Slide 14. We hold a diversified asset portfolio, both in terms of geography, asset size and tenant concentration. About 12% comprise typical cross-dock terminal, 45% consists distribution facilities and the rest of the 43% constitute traditional logistic warehouses. 47% of our contractual income is derived from our 10 biggest tenants, with the majority of them representing critical logistics providers, whom we hold several contracts with attached to a variety of properties. Many of our customers within food distribution and logistics provide a critical service to society. Moving on to Slide 15 and Jörgen.
Yes. This is a slide where we are proud to present a part of our customer portfolio, where many of them are experiencing growth even in this disruptive market. Simply put, our success is mirrored by the success of our customers, and we are proud to acknowledge the long-term relationship with them to keep with all of our customers. Move to Slide 16.
On balance day, our property value was appraised at approximately SEK 18.6 billion, with a reported EPRA net initial yield of 5.5%. During the year, unrealized value changes amounted to almost SEK 1.2 billion, which was due to several projects being finalized, especially during the last quarter and an ongoing market yield compression. Moving over to Slide 17.
The rental market is strong, particularly in the most populated regions of Stockholm, Gothenburg and Malmö, shown on the slide, where it is the shortage of new land. In other parts, where land is not an issue, the market is typically more stable. Move to -- sorry, we also experienced significant occupier demand, specifically from parcel delivery providers, cold storage and e-commerce retailers. Move to Page 18. We have experienced a successful year with positive net leasing throughout the entire year. In the fourth quarter, we added another SEK 49 million worth of new rent, primarily through development, and this was in part offset by rent from space which turned up SEK 16 million. Our [ rent ] management team has successfully contributed to our high utilization of our facilities, leading to continued high occupancy of 96.2%. Our weighted average lease of approximately 5 years has been a stable metric for many years. Move to Slide 19, and then we go to 20.
And some words about our debt and capital structure. Our cost of debt has gone down to 2.3% from last year's 2.6%, mainly due to prolonged swap agreement in the early stage of 2020. LTV was reported at 52.3%, down 170 basis points a year back from now, primarily due to the increase in value of our portfolio. Equity ratio was reported at 37.2%, with sufficient headroom from our minimum target of 30%. Moving on to Slide 21, and some details about our loan portfolio. Access to financing has gradually improved from the early stages of the year, with credit spreads being tightened. During 2020, we have successfully printed SEK 1.4 billion in bond issued with only a small concession in pricing compared with the beginning of the year. The commercial paper market has also picked up pace since the pandemic hit. And on balance day, SEK 600 million was utilized. Funds available on balance day totaled to SEK 1.8 billion, comprising cash of SEK 400 million and SEK 1.4 billion of undrawn committed bank facilities. As before, ongoing discussions with our bank creditors are going well. On balance day, we reported a debt maturity of 2.2 years and an average interest maturity of 3.1 years. Moving on to Slide 22 for capital deployment and over to Jörgen on Slide #23.
Yes. We continue to focus the majority of our investment into development. During 2020, we have net invested around SEK 1.2 billion, where almost SEK 1 billion comes from development. Move to Page 24. Here, you can see it's a slide of our transactions. And as we had shown, the major part has been concentrated in Denmark. We have also made some in Sweden, but that's just been for land, not any facilities yet. Move to 25. At the end of December, 29,000 square meters of space was under construction, of which all was pre-let, equating to a remaining SEK 430 million to invest. Book value of the project in progress was SEK 1.3 billion, of which SEK 1 billion was related to developments close to closing. During the fourth quarter, we have finalized 3 major development projects, adding almost SEK 25 million in NOI to our earnings. During 2020, we have added a total of 105,000 new square meters to our portfolio. Move to 26 and then go to 27. Sofie, over to you.
And some words about our sustainability. During 2020, we're glad to announce the efforts our team has put in to comply with EPRA sustainability standards as well as with the TCFD recommendations. Catena's new goal for GHG emissions, which have been improved by the scientific -- Science Based Target initiative, which is an important signal about our ambitions going forward. Moving over to Slide 28. During the year, important steps have been taken to ensure environmentally responsible and cost-efficient operations. We are devoted to ensure that all new buildings are constructed in agreement with ISO standards and that they attain a level of environmental certification of a least Miljöbyggnad Silver.We now have 7 certified properties during 2020 and have ongoing processes with another 11 properties, which will give a total cover of 17% of our portfolio. We track our energy use and GHG emissions on a regular basis, and we are devoted to make use of new technology to enhance our efficiency. We also added 7 new solar cell installation during this year -- the last year. Moving over to Page 29, market insights, and leaving over to Jörgen at Page 30.
Yes. Here, we have some interesting news from some of our customers. PostNord announced record volumes in terms of parcels for week 1. And now in 2021, DHL reported a huge B2B (sic) [ B2C ] growth in Q4. And Boozt exceeded all expectations during 2020, and they're seeing a huge growth in 2021. So we can see a continued strong demand for new logistics facilities. Moving to Slide 31. We held a piece of promising land south of Stockholm, where we expect to have a final decision on zoning plan within the next 3 to 12 months. It comprises 450,000 square meters of land, enables another approximately around 200,000 square meters of lettable area, which could potentially generate somewhere between SEK 150 million to SEK 200 million in head rent. This is an excellent position for logistic purpose, and our ambition is to have a similar development as the one in Sunnanå outside Malmö. Move to Page 32. In November 2020, we announced the agreement to finance the automated warehouse solution installed in Åre 92, a property we agreed to acquire in September, with the fashion company NELLY.COM as tenant. Although the quality and location of the property portfolio, it's important to our customers, we believe, that the service we provide other than the building is crucial to build up long-standing relationships with top-performing customers. Move to the next page, 33. We are about, right now, start to constructing a logistics facility up in Northern Sweden in Luleå for the customer, Kyl- och Frysexpressen Nord. It's an investment of SEK 70 million, and it will be finalized at the end of 2021. It is a good location up north along the highway, which will supply Northern Sweden with cold goods. Move to 34. The search of new land continues along with ongoing detailed development plans in progress. On balance day, we hold a potential of about 5 million square meters of land, where almost 1 million are consolidated in our balance sheet. Rest of the land bank is conditional on various contractual agreements, such as detailed development plans have been to gain a legal force. Okay. And then we are ready for Q&A.
Yes. Okay. Slide 35.
35.
If there are any questions?
[Operator Instructions] Our first question is from Niklas Wetterling of DNB.
You mentioned that the development CapEx was about SEK 1 billion in 2020. And you have remaining investment volume for your ongoing projects of about SEK 0.5 billion. Is it a fair assumption that the investment volume will go down in 2021?
It depends. Maybe. It could be dependent on when we are having our zoning plans approvals and we can start some new projects. Otherwise to keep up the steam in the growth, we have maybe to look at some acquisitions to keep up the growth and increase our result of property management. But we have not 100% control of it since the zoning plan processes can be delayed in some cases.
So it could be a decline in 2021 and uptick in 2022? Is that...
Yes. It could be a smaller one. And we are -- yes. Sorry.
As you also mentioned that volumes for your tenants is growing. How's the status about a known upcoming termination in portfolio? The vacancy rate is very low. And do you expect it to keep that way coming years?
Yes. As we mentioned, the underlying demand for our facilities are very strong. So we cannot see that -- and we have no signals at all that there would be some contracts terminated. On the contrary, we are having a lot of questions about asking for more services.
Okay. And my last question is about your land bank and divestment pipeline. When do you expect to start to sign leases like in Stockholm Syd?
It's always -- I mean, we have discussions ongoing, but it's very tough to sign contracts when we are not at the stage where we can know exactly when we are allowed to start building. And it's very critical for some of the tenants which date they have to move in. So it's tough to say. But of course, we would have a very high pace of that one as soon as we have the zoning plan approved, and then we can really take the discussions and intention to sign contracts. I hope that we can present some deals this year on Stockholm South.
[Operator Instructions] Our next question is from John Vuong of Kempen.
Maybe a follow-up on the strong underlying demand for your facilities. I was wondering whether you have a bit more color on the reletting spreads you're signing with your tenants?
Okay. We -- spreads of the rent you mean, for upcoming new contracts? Or refinance -- yes?
Yes, exactly. Yes.
[Foreign Language]
Yes. That question is quite common. And we think that if we are renegotiating and we have the locations in Stockholm, in Malmö and Gothenburg, there is good chance to raise the rent level a bit. We are not talking about those rates we can see in the office market, but we feel very confident with the positions we have in Stockholm and Malmö and Gothenburg. When we are talking other locations, we can see that the rent is quite flat in the future when there are land available, so to speak, the other side of the street.
All right. That's very clear. And maybe on your value growth, given where transactions have been even during last month, do you expect to see more yield compression in the medium to short term?
I think there could be some more yield compressions and the signals we have seen from Europe and so on, Southern Europe and Germany and the U.K. We can see that there have been made some deals at very low yields in Sweden as well. So maybe we can see in 3 to 6 months, there will be some more compressions.
[Operator Instructions]
We have one question that came through by mail. It's from Ryan Bouimad in -- on Clearance Capital. And the question is, "Assuming you get zoning for Stockholm South this year, what is the expected completion time?" Jörgen, do you have an answer?
Yes. It varies. But I think this could be reasonable, but whether -- there is a lot of work with the land. But let's say we have approval in the spring and then, let's say, somewhere around 18 months when -- then we can have the tenants moving in, in Stockholm South. And then for -- to complete the whole area, if that's the question is, well, it's very tough to say. But we are -- we can talk about 5 to 7 years to complete the whole area, could be a qualified guess.
We do have one more question on the phone line from Victor KrĂĽeger of ABG.
Just first of all, you talked about north of Sweden and some expansion. And I just wonder if you would like to give a bit more flavor on your ambition with that expansion?
Yes. I mean we see that the Kyl- och Frysexpressen Nord is, so to speak, a good customer and we are very glad to follow customers all over Scandinavia. And we see that we can maybe have some more deals with the customer in the future. And we also see that as long as we follow E4, the highway, through North, we think it's very good. And our vision is to link the Scandinavian goods. So that's the argument why we are investing in up North Sweden.
That's very clear. And just to add something more here on -- you talked about your extra service apart from location that you offer your tenants. What distinguishes you from the competitors? So that is...
We are working very close to our tenants and we have discussions with them quite often. And we are very fast-footed and we are not any kind of invisible capital investing in properties. We are very operated in them, and we can handle different situations. If they need a quick expansion or they need to move out and maybe move to another facility somewhere, we can solve it very pragmatically and very fast. And we have had a lot of credit from our tenants about that. So fast-footed, and we can also discuss some logistic challenges. We are also in discussions with, for example, financing automations and giving them advice in that cases since we have some experts in our organization and our networks about that kind of things. So we are always close to the tenants.
Yes. And that's a fairly new operation, isn't it, the financing of -- yes, automation?
Yes. Yes. We see also that -- I mean, for example, when tenants they want a new facility with freezing or chill, it's very common that the landlord is investing in that kind of machines. We see in the future that a lot of logistics facilities, they have an automation installed and that could be in the future that it will be more common that the landlord will be a part of that discussion.
There are currently no more questions on the audio lines, so I'll hand back over to our speakers.
Okay. And we don't have any more questions during -- through email. So I think we can say thank you to you all for today.
Thank you for listening. Take care.
Nice having you, and we wish you a pleasant weekend.
Thank you all.
Thank you very much.
Goodbye.