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Ladies and gentlemen, hello, and welcome to the Catena Q1 Report for 2020. [Operator Instructions] I'd like to advise all participants that this conference is being recorded. Today, I'm pleased to present CEO, Benny Thögersen. Please go ahead with your meeting.
Thank you, and welcome to today's presentation. I would like to present the one, around the table in -- at our headquarter in Helsingborg. We have Peter Andersson, the acting CFO. And we have David, who is taking care of our support and helping out. And last but not least, our -- I would like to introduce Sofie Bennsten. Sofie is the successor of Peter, as CFO, and she will start with her new role on Monday, and welcome.
Thank you, and hello, everyone.
And as already been a communicator early on, Peter will continue as the Head of Treasury. So then you know who is in this room, welcome. I would like to move forward to the slide content. So we're there now, yes. And I will walk your way through the presentation, and we could then go to the next slide. Slide 3, please, highlights. In the viewpoint, the markets, the first quarter is divided in before and after the pandemic outbreak of COVID-19. As we focus on public health needs during this outbreak, it's important that we address a long-term societal and economic implication of the global pandemic. Catena, we came out strong in the first quarter with limited impact from the ongoing virus pandemic, with key numbers, overall, satisfying, and with projects running according to plan. During the second part of the first quarter, evidence of caution was all around spotted. Financial markets as well as other market participants became selective, overnight. Still discussions and negotiations are underway, but it's a little bit of a wait-and-see mode. This translates into the fact that there is kept awaiting for the right moment.Next slide, please. A little bit about COVID-19. No one is to blame for this global ongoing crisis, created by the COVID-19 virus, and it's everybody's responsibility to react and limit damage, the best we possibly can. Catena has set up a program to cope with the situation to safeguard our employees and to provide efforts to help communities and customers that might experience difficulties amid virus outbreak. We are continuing to explore ways to address the challenge faced by our communities, and we keep you updated with new developments.Still for the first quarter, the COVID-19 has a limited impact on Catena, regarding numbers and revenue. In the first quarter, SEK 5 million was reserved as revenue loss, impacting the rest of the year. Given the uncertain situation is, by this time, difficult to estimate. We entered the COVID-19 crisis in a position of financial strength, and we feel comfortable about the overall financial position. We have, among things, mitigated the risk of refinancing with the expansion of an existing backup facility to cover for outstanding capital market raised funds, and raise funds, should that deem necessary. Next slide, please. Results and balance overview, and Peter will step in on Slide 6.
Thank you, Benny. I think this is my 58th report on a real estate company on that stock market. So I have done a very lot of this one. If we go to the income statement, I have some comments, and we have some onetime effects on the income statement. On the rental income, there is a positive one-off effect of approximate SEK 40 million, and it's related to rental compensation for early redemption of rental contract in Jönköping. And second is that we have a reservation that have been made on the rental receivables of about SEK 5 million. And I will comment also -- the third one is repair and maintenance cost is very low on the quarter. And we have approximately something -- we're around SEK 8 million to SEK 10 million lower in the ideal quarter. And it's dependent on the mild winter we have in Sweden, but it's also that we have not been able to carry out maintenance measures due to the corona pressure. We are not coming into the real estate in the same time as well.Under other operation expenses, we also have a very small one-off effect of minus SEK 1.5 million, which is related to a write-down of inventory, that has been rented out before. Income from property management, approximately SEK 177 million, it's increased by 14% from last year, first quarter, as well. And the change in value, regarding property are included with about SEK 11 million and from the derivatives of about minus SEK 6 million.Slide 7. The balance is about SEK 18.4 billion, it's up approximately SEK 1.8 billion since last year, regarding the property value. No further comment on that side.Back to Benny on Slide 9, I think.
Yes. I will move forward to Slide 9. Rental growth like for like. Rental income amounted to SEK 350 million and that we have seen in the first quarter. The total growth in rental income was 7%, year-over-year. Project developments contributed 2.2%, and like-for-like growth contributed 1.7%.Net transactions had 0 effect in the quarter. There were also one-off effects related to prepayment of an early lease expiry as well as reserved creditors, and that amounted to 3.2% in the period. The facility related to the early lease expiry has already found a new customer. Slide 10. Cash flow maintained at a stable level. Our strong first quarter or operating performance is a result of our long-term focus. While the current environment is challenging, we are happy to deliver a sound first quarter. We have confidence in our team, our strategy and in the strength of our portfolio. And in the first quarter, we obtained 56% of all income in the company, before value changes and including one-off effects.Slide 11, Peter, put further color...
Yes. I'll not further comment on that, there. We are organized in 5 regions. And this slide show you -- if you find the detailed figures for that regions. So this is for you to study on your own. Slide 12. Some key figures on the properties portfolio. Over 40% of our customers are related to third-party logistics providers, where PostNord and DHL are considerably critical to society, as service providers. Over 21% is related to grocers, perishables and home retail, all of whom experienced accelerating growth at the moment. Slide 13. We have an average net initial yield of 5.9% in the property portfolio, and the yield on valuation has remained unchanged since the year-end of 2019. Back to Benny and Slide 14.
Rental market. We continue our focus on raising the quality in our portfolio and translating in the growth of rental value per square meter. We are underway, with several energy efficiency projects, including 7 auto solar panels installations. They will, in turn, and along with other projects serve as a push towards cleaner energy and provide for long-term cost efficiency. The rent on our market is currently in a stable mode. And as the world is coming to terms with the coronavirus, focus will once again be ground to fundamental factors driving the market. The scarcity of land in popular regions and continued structural demand for more logistics space. With the overall letting ratio, over 95%, we feel we're currently in a comfortable position. Slide 15. Leasing activity and contract maturity. The quarter provides a SEK 22 million worth of new leases and net SEK 0 million. The extension project at [ tower ] in Jönköping became final at year-end, and our customer, [ Procurator ], was moving in this January. The maturity of our contracts remains well distributed, over time, averaging approximately 5 years. Almost all of this year's contracts have now been extended and renegotiated. We move forward to capitalization and to Slide 17, Peter.
Yes. We have an average LTV level of 54.6%, down from last year's first quarter of 56.1%. And all our finance is still secured through mortgage. And we are moving on to Slide 18. We have now a debt maturity of 2.3 years on the balance sheet date, which is up from the year-end of 2019 from SEK 1.3 billion. And it's up above the target of 2 years. We have done some renegotiation and signed a new few agreements of approximate SEK 3.1 billion of the loan portfolio and during the first quarter. And this was set before the corona crisis was -- yes, ongoing. The bonds amounted to approximately SEK 840 million, that we set in February. We had also signed a new swap agreements for about SEK 1.2 billion to year 2027 and 2028, on a very low level. And we had also renegotiated SEK 1.1 billion swap contract, which has been extended to 2029 and 2030. The average level of the swap portfolio is now 1.7% from the previous 2.3%. And the interest maturity is now 3.7 years, up from 2.3 years, at the year-end of 2019. And we have also lowered the average interest rate, it's now 2.5%, it's coming down from 2.6%. Discussion with the banks are going well. And hopefully, the capital market will return to more normal condition, during 2020 and forward. Back to Benny and Slide 19.
And from capital deployment, slide 19, we move forward to Slide 20, capital deployment year-to-date. During the first quarter, we have invested a total of almost SEK 560 million, 3 properties were acquired, totaling SEK 307 million and adding almost 30,000 square meters and SEK 20 million in the rental value. Development capital expenditures amount to over SEK 250 million.Next slide, please. Development projects in progress. On balance date, we have 5 largest -- larger projects on the constructions -- construction and all of the projects will move forward, as planned. Overall, there is SEK 540 million left to invest under the existing development pipeline, which when finalized, will add another 102,000 square meter to our portfolio.Slide 22, please, market and outlook. And from there, we go to Slide 23. Some voices from the market. PostNord have published the first quarter numbers and confirmed an acceleration in parcel home deliveries, offsetting a slower pace in servicing traditional retail. Catena and PostNord have had a long relationship. And with PostNord and several other third-party logistics providers, being customers to Catena, their businesses provides for mission-critical service to the society. Several have taken notice of the fact that e-commerce is accelerating, providing tailwind for logistics properties ahead.ICA Sweden's largest grocer and one of our largest customers have experienced a huge upturn in March sales figures. Due to the coronavirus, customers' behavior has changed. Part of the explanation comes from the tentative hoarding and switch to home cooking, but also because of an increase in online orders. While we may never return to a pre-COVID normality, the new normal will certainly offer an interesting alternative scenario, coupled with the new opportunities and a catalyst for new our dimension.Slide 24, the Logistics segment on a growth path. For the last 6 years, industrial and particularly, logistics properties have witnessed a step-up in the business transaction volumes related to it, and assets have become an integral part of the entire stock of real estate. What the pandemic will, beyond future transaction is obviously difficult to assess, but logistics, as the property segment have certainly earned a spot in terms of the new important role in the society.Slide 25, Case Tostarp. Even if the business confidence in the overall economy is taking huge dip, due to the coronavirus, it feels important to notice that our ongoing projects currently are running according to plan. Our logistics position, Tostarp in Helsinborg, the new postal terminal as well as the new expansion made to no waste is underway.Some acquisition land, on Slide 26. In November 2019, we announced the acquisition of a large piece of land, south of Stockholm. The land is positioned about 50 kilometers southwest of Stockholm and comprises 1 million square meters. The object is to turn this area into perfectly fit logistics hub servicing, the Stockholm area. During this quarter, we also acquired a property, strategically located within the area, comprising 21,000 square meters of the lettable area. Above all this, this enables us to utilize the existing railway crossing the territory and presumably extending tracks. Slide 27. A little bit about Denmark. With 3 new facilities at the 3 different locations in Denmark, facilitating the distribution of goods to populated areas. I'm particularly glad to acknowledge the acquisition, we announced in January. Through this very important transaction, we confirm our vision to interlink Scandinavian cargo flows. The 3 properties comprises a total of 12,700 square meters of lettable area. And they are all fully let to PostNord. And I'm happy that we can continue to contribute to their business, even outside of Sweden. One of the properties is under construction and in the total transaction, also including billing rise of almost 20,000 square meters for future development.Slide 28. Potential future development projects. We are working hard to get a hold of strategic land, serving our mission and on balance date, we would -- we hold a potential of almost 5 million square meters of land. The land bank includes joint venture agreements and various conditional options and contracts. About 500,000 square meters are related to land allocation contracts made with municipalities, where one piece is located in Landvetter Gothenburg Airport, not far from Gothenburg. The selling plan is ongoing and expected to become final in Q1 2021.If we go to next page, I will talk a little bit about another interesting piece of land. Slide 29. And this piece of land is in a connection to Malmö at the harbor, where we own a piece that comprises 400,000 square meter with a potential lettable area of 25,000 square meter. Selling plan is activated and recently, we received from local authorities approval for starting demolition on site. This forms an excellent location in the vicinity to harbor and Malmö Central Station. We keep dialogue with a couple of potential customers. And this was all for...
This picture we see in Slide 29 is an animation. So that this -- the building is not on place today. It's only land.
Peter, thank you for the clarity. Thank you for clarification. And that was all for the presentation, and we move forward to the question-and-answer session.
[Operator Instructions] The first question we have is from the line of Niklas Wetterling from DNB.
Niklas Wetterling, DNB. I got a few questions for you. If we start off with the Q2 rents. And how much of the Q2 rents has been received? And how much discounts has been given?
There's been given only SEK 1.2 million in discounts. However, we have given possibilities to move forward the payment, during the quarter for approximately SEK 42 million. And of those, about 1/3 has already been paid, right now.
We have a little trouble hearing you. But do you say 1/3 of the rent has not been received?
Yes. Of the -- we've given our customers the possibility to move forward the payments of the quarter 2 rent, which SEK 42 million. And of those, approximately 1/3 has been paid by now.
Okay, yes. Great. And if we move over to -- you got one tenant in reconstruction, I read Intersport. How big a day of your total incomes? And do you have more tenants in company reconstruction, right now in your portfolio?
We have 2 tenants, right now, under reconstruction. The one is Intersport, that you mentioned, and it's also Caliroots...
Caliroots.
Caliroots.
Yes.
Quite small one, up in Stockholm. And that's what we got for the time being.
And if you're looking at rental income total, it's somewhere around SEK 2.5 million for quarter, but it's not all of the quarter. The reconsideration is -- yes, they are paying when they're doing the reconsideration. They are paying us after the decision. So it's not going to be all of the quarter. That's -- we're not going to receive as rental income.
I would say, it's a very manageable levels, all in all.
Okay. And what's your policy, regarding reservation for expected credit losses, is this ongoing company reconsideration included in the SEK 5 million, you reserved this quarter?
Yes. We will have same principle, regarding the reservation, as we always do. So it's the same principle. So we have to take in considerate (sic) [ consideration ] what happened, within the quarter. And before we put this report out into the market. So we have taken all of our valuation in consideration.
So the ongoing reconsideration is included in the SEK 5 million?
You can say we have taken it into account so much that we know -- those we know by the 31st of March. This is taking into the account. And if I -- we can't go into the details with the -- basically tenants and as...
There are some uncertainty in this progress, of course.
Okay. Yes. And if we move ahead. I saw your in annual report and that your book value is 3%, 4% below your external valuation. And why is that? And are there any specific variables you are more cautious on?
No. It's depending -- in evaluation when you're doing it in a real estate business, we will evaluate every property and every contract. And sometimes, we have a little bit more information and external valuator. We know when the customer has maybe talked with us and they have lost a customer or they should increase by customers. So that's nothing we can always say to the external valuator. So in that case, we have a little bit different view -- point of view, sometimes. And if 3% is very small. If you look at the valuation from the external part, they have often somewhere around 7% to 10% of an uncertainty in their valuation. So it's...
Within that range.
Yes. Within the range of the uncertain valuations.
Okay. So you're within the range, but you've got more negative information in the external valuators?
Every property should be evaluated at it's very tenant and every thing. And we do a little bit different calculation from our side to the external. It's not very much -- if you're taking -- this is a very low different, if you're looking out of the whole portfolio. Sometimes we know -- yes, sometimes we take a little bit other consideration on the external part as well. And we can have a discussion with an external part -- yes, with price and sales and so on, but we can't inform the external valuator in that specific real estate. We have a little bit different inputs in our calculation. But I think, 3% is a very, very low range, if you're looking at external. If you're talking with our external valuator, they always said 7% to 10% is uncertain range.
And -- yes, fair enough. And then if we move over to your like-for-like rental growth of 1.7%, which is pretty much in line with the indexation. Can you please comment anything on that figure? Is that what can be expected ahead?
Yes, that's expected as well. What we have done, we have increased our rental value when we build new buildings as well. So the whole portfolio is going up, a little bit more. But if you look at the like-for-like, it's -- yes, it's in the [ 6,7 ] for the same portfolio as we had before. So we should...
So no growth besides the indexation?
Yes.
And then we could -- we can...
Yes. Go ahead.
And just lastly, I wanted to ask about the Group negotiation, if you are willing to take that one up again, or how is that one standing right now?
I have to state it, like I did yesterday as well. It's good and old. And the reason for canceling the LOI is that things have changed. They have changed dramatically, the cost of financing. And we are in a very different situation. So right now, it's put on hold. And right now, there is no longer negotiations.
The next question we have is from Markus Henriksson from Pareto Securities.
Markus Henriksson from Pareto, here. Just a follow-up there on the Coop LOI. So it's mainly due to financing. So we could expect if the turmoil stops here in the future, you're going to continue the discussion?
And I must sweeping out or saying, it could be because right now, we are not negotiating, and they are looking on alternatives on their side.
But it's not only the finance. If you have the supplier of the optimization. We don't know if the factory can deliver the optimization as well. So it's not -- you can't blame only the fire.
No, no, no. But there is a lot of -- and we can't talk about that situation.
Fair enough. And then you said SEK 8 million to SEK 10 million lower maintenance cost. Could you specify what winter-related and what's COVID-19-related, here, in the figures?
I should say it's SEK 2 million, SEK 3 million, maybe regarding the -- if I should estimate, anything. So SEK 2 million, SEK 3 million for the mild winter or something like that. But it's always -- it's very difficult to say what's normal in Sweden today. It's -- you get the warmer and warmer winter. So what's the normal. So I should say, if you're looking 10-year back, yes, SEK 2 million, SEK 3 million, something like that. But maybe it's going to be the new normal. We are not going to get as current winters following. So this is maybe normal. But I should say something like in SEK 6 million, SEK 7 million, SEK 8 million is depending on the main payments, that we have [ following ].
Okay. And what can we expect going forward? Will you have other maintenance, of course, in other properties? So should we expect higher maintenance here going forward? Or is it -- yes, it's, of course, problematic now as well in Q2, but what can we expect for maintenance for 2020?
I should say maintenance should be the same level. If you put it out on a 25, 30 years, then we usually get the maintenance around SEK 20, per square meter, that's the normal on a long, long, long term. But if you're going for the Q2, I should say, just at the moment, we are not going -- we can't get in our real estate as well as we want to do. We can't travel, and we are not able -- our customer is not allowed to have a person, that's coming outside their own organization. So I should say, Q2 is -- yes, I think, I should speculate something. You can go and understand what that I'm telling you, that I think, it's a bit lower. The normal as well.
Yes. Yes. I got that. And then lastly, if you look at the project pipeline here, beyond 2020, looks solid now in 2020, with a lot of finalizations. But could you compare your negotiations with possible tenants post COVID-19 compared to pre? And how that is faring?
I could say that it's a little bit slower to sign in the contracts. But our sales funnel looks good. We are having a number of discussions, and we do expect some more to come. But of course, in this turmoil, we have to act in a good and careful way.
Okay. And just one more. Looking at that interesting property in Malmö and compare it to Väsby in Stockholm, for example, what kind of rental levels could you possibly get at that location compared to other parts in Malmö?
It will absolutely be higher what you see out in the Sunnanå area, but I won't indicate any figures. It's an extremely good location. You just fly over the bridge, and then we are at the Central Station in Malmö. So it's a very nice location for most Malmö city logistics.
The next question we have, I believe, from the line of [ Brandon ] from [ Atkins Capital ].
Yes. It's [ Ryan Grimmett ]. Just one quick question with regards to the debt maturity this year. Outstanding loans, whatever it may be, is around SEK 3.4 billion. So I just want an idea of what that relates to, whether it's bank financing or some bonds or including commercial paper? And with that being said, are they expecting -- are you guys expecting the same rate as before, i.e., 1.6% with the margin? Or higher or lower? And how long would that be the start -- or what kind of terms are they looking -- are you looking at for those loans 3 years, 4 years, 5 years?
Yes. Well, those, we have done a bond. We did during the quarter, of SEK 840 million. That was 2, 3 and 4 years. And that was on a very low level, I should say, something around [ 0, 8, 5 ] or something like that, all of the 3 ones. And that was before corona. We had the certificates was level around something 0.4, something like that. The certificate market is now, not function as normal. So we're putting the certificate, within our backup facilities, and that's going to increase the rent level. The discussion with the banks is going very well. I should say, on a margin from the bank side, somewhere around 0.3 or something like that, above. But we are not going for long term. We have some discussion ongoing. We are not going for 3, 4, 5 years, but we are going for 1, 2 years or something like that for a moment. So we have a very good discussion, and we have no financing problem with the banks whatsoever. And we have shown a very good timing of our backup and our swap contracts have been spot on, I should say. We have a very good timing on all of those contracts that we have done before, in January and February.
Okay. Just so I can put an exact figure on it, is that SEK 3.4 billion, I'd say, due 0 to 1 years, I mean how much of that is with the banks?
The SEK 3.1 billion that we have discussed, you said, SEK 840 million is bonds and rest is banks.
[Operator Instructions] At this time, we have no further questions in the queue. I'd like to hand back to the presenters for any closing comments today.
There's one question here, we received through email. It's regarding our projects. And the question is, whether we should expect any delays in terms of equipment, in any of our projects? Will there be any delays in terms of equipment?
There is no delays from Catena side. But what we do see and Peter you were touching that topic, early on, is where they have automation. We know that, we have late software installation at one of our customer and also discussions with another about the automation part. So -- but from the Catena and the building and to get access to the estate. And we have no delays.
That was all from this investor. Thank you.
Okay. Thank you guys for taking parts. Take care out there. Yes.
Thank you. Bye.
Thank you. Goodbye.
Thank you. Ladies and gentlemen, that concludes your call for today. We thank you very much for joining and ask that you disconnect your lines. Thank you.