- Rental Income: Increased by SEK20 million to SEK454 million.
- Like-for-Like Rental Income: Increased by 7.3%.
- Net Operating Income: Increased to SEK229 million, a 3.4% increase in the like-for-like portfolio.
- Profit from Property Management: Totaled SEK68 million.
- Unrealized Value Changes: Decreased by SEK216 million, a 1.5% decrease during the period.
- Property Portfolio Value: SEK13.7 billion with 8,300 apartments.
- Residential Property Value: Accounts for 94% of the total property value.
- Rental Value Increase: Increased by 5% over the past 12 months.
- Occupancy Rate: Improved by 1.3 percentage points in the last 12 months.
- Investment in Value-Creating Measures: SEK56 million during the first half of the year.
- Divestment: Retail property in Falun sold for SEK75 million, 18% higher than the most recent external valuation.
- Property Costs: Increased by SEK16 million to SEK224 million.
- Central Administration Costs: SEK38 million, with SEK5 million in items affecting comparability.
- Net Financial Items: Improved by SEK5 million due to lower interest rates.
- Net Initial Yield: Increased to 3.8%.
- Average Debt Duration: 2.8 years.
- Average Interest Rate: 3.4%.
- Interest Coverage Ratio (ICR): 1.6 times on a rolling 12-month basis.
- Interest Rate Derivatives: Aggregated nominal value of SEK5.4 billion with maturities between one and seven years.
- Total Shareholder Return: 95% over the last 12 months.
Release Date: July 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rental income increased by 7.3% in the like-for-like portfolio due to rent increases and reduced vacancies.
- Net operating income increased to SEK229 million, reflecting a 3.4% rise in the like-for-like portfolio.
- Successful divestment of a retail property in Falun at a price 18% higher than the most recent external valuation, generating a positive earnings effect of SEK10 million.
- Refinanced and extended bank loans for over SEK1 billion at a lower margin, indicating a strong financial position and improving market sentiment.
- Continued positive development of rental income and a positive outlook for the next year, with higher rents expected to take full effect in the third quarter.
Negative Points
- Unrealized value changes amounted to minus SEK216 million, representing a decrease of 1.5% during the period.
- Profit from property management decreased to SEK68 million due to higher property and financing costs.
- Property costs increased by SEK16 million, driven by higher costs for operations and property administration.
- Central administration costs amounted to SEK38 million, with SEK5 million attributed to items affecting comparability due to preparations for a Nasdaq Stockholm main list switch and reorganization.
- High maintenance costs last year led to a significant decrease in maintenance expenses this year, but property management costs are up by SEK6 million.
Q & A Highlights
Highlights from Neobo Fastigheter AB (OSTO:NEOBO, Financial) Q2 2024 Earnings Call
Q: We saw that the maintenance costs were down from SEK15 million last year to SEK6 million this quarter. What should we expect in the coming quarters given that the costs were way below last year?
A: (Ylva Westman, CEO) We had high maintenance costs last year due to significant maintenance needs. Going forward, yearly maintenance affecting NOI will be at a lower level. The property costs in the earnings capacity are up by SEK6 million from the last quarter, but this is related to high operating costs, not maintenance.
Q: Should we expect a similar run rate for maintenance costs in Q3?
A: (Ylva Westman, CEO) It's better to look at the six-month figure. The full year will likely be double the half-year figure.
Q: Central admin costs are down quite a bit this quarter, but you have the upcoming list change. Excluding list change costs, what are you expecting?
A: (Ylva Westman, CEO) For the full year, we have total central administration costs of SEK60 million, excluding one-offs. During the first half, SEK5 million were one-off costs related to preparations for the main list and a reorganization.
Q: Regarding investments, you mentioned upgrading apartments and investing SEK46 million in H1. What are your plans for H2?
A: (Ylva Westman, CEO) We invested SEK56 million in the spring, renovating approximately 50 apartments and making sustainability investments. We aim to maintain this pace in H2, focusing on value-creating investments.
Q: Can you update us on the progress and timing of the main market listing?
A: (Ylva Westman, CEO) We are making necessary preparations for the list change, which is progressing well. The uplift is planned for the autumn this year.
Q: Given the high LTV, low ICR, and high debt-EBITDA, what are the possibilities for future opportunities?
A: (Ylva Westman, CEO) We have an ICR of 1.9 times in Q2 and 1.6 times on a rolling 12-month basis. We see opportunities for improvement with higher rents and lower financial costs, enabling value-creating investments.
Q: What is the main difference between the initial yield of 3.8% and the valuation yield of 5.0%?
A: (Ylva Westman, CEO) The difference is due to assumptions of future rent increases, reduced vacancy rates, and lower costs. Our target is to increase the return from the portfolio to meet the exit yield in valuations.
Q: Your average interest rate was 3.4%. What average rate do you expect for H2?
A: (Ylva Westman, CEO) With a hedge ratio of 75%, only 25% of the total debt will be affected by lower interest rates. The hedge ratio will remain the same in H2, and the average rate will depend on future interest rate changes by the Riksbank.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
