Welcome to Cibus Nordic Real Estate conference call. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the speaker CEO Sverker Källgården and CFO Pia-Lena Olofsson. Please go ahead.
Thank you very much. Once again, welcome to the Q3 2022 interim report presentation of Cibus Nordic Real Estate. Speakers today, as usual, is myself, Sverker Källgården, the CEO, and with me is Pia-Lena Olofsson, the group CFO. Pia-Lena will take us through all the numbers later on in the presentation. Let's head on to the significant events during the period. On the thirteenth of July, we announced that we had updated our MTN program and published an updated prospectus. In late August, we opened up the high yield bond market by replacing our green SEK bond with a new green bond of SEK 700 million. In September, we acquired four assets in three separate deals in Denmark, Norway, and Sweden. After the period, we have bought another single asset in Denmark.
On the tenth of October, we announced that the nomination committee in preparation for the next annual general meeting had been appointed. On the thirteenth of October, we acquired another single asset in Finland. Cibus Nordic, we are a real estate company focused on daily goods properties. The properties are filled with strong tenants that provide dependable income to our shareholders. Daily goods are a non-cyclical item, and the grocery market have grown in average by 3% annually the last 20 years. 99% of our rents are linked to the CPI development, and over 90% of our leases is either net or triple net, which means that most of the costs are carried by the tenants. We have been listed since March, since March 2018 and moved to the Nasdaq Stockholm main list in June 2021.
Currently, we have a clear Nordic focus as all our properties are in Finland, Sweden, Denmark, and Norway. We are paying monthly dividends to our shareholders, currently EUR 0.99 for the current twelve-month period. Cibus. The story about Cibus is the story about portfolio diversification. Traditionally, daily goods and grocery properties were owned as either single assets or in small portfolios of maybe 2-5 assets, which meant you have a very high-risk concentration. If the tenant left, you lost all your cash flow. That meant you came into a weak negotiation position with the tenants. The banks realized this, so the bankability was low, which meant you had a high risk, but also a high return business. What Cibus realized is that if you own 450 assets, you lower the risk and the concentration.
Only one of our assets stands for more than 1.5% of our combined NOI. When you own a lot of assets with a handful of tenants, you become an active cooperator with the tenants and not just the landlord to negotiate rents. The banks realize this, so the bankability is much higher, which means that you have lower the risk, but you have the same return as for a single asset. Due to the risk factor I talked about earlier, we can buy assets to 50-100 basis points higher than the existing portfolio is trading at, and therefore produce value-created growth for our shareholders. Cibus is sometimes put on the retail shelf. What sets Cibus apart from other retail? Well, apart from having non-cyclical tenants, we see a resilience towards e-commerce in our portfolio.
We have a negligible negative effect from e-commerce. Even during the pandemic, the share of online trade grew to approximately 5%, but is now down to around 4% again. A large share of that volume is click and collect from our stores. If you look worldwide, you see very few operators who make a profit on online food sales due to the low margins and the high cost of distributing the goods to the end consumer. On the other hand, we see a notable positive effect as our existing stores can work as a natural distribution network for other goods purchased online. Sustainability. Cibus have a goal to have zero emissions by 2030.
We are committed to that goal, and we will reach this goal by working together with our tenants, but also to have own projects. We have started our own solar panel project in Charlottenberg, Sweden, which will be ready and start producing electricity in the fourth quarter this year. Growth. We have a growth target to own a portfolio worth EUR 2.5 billion-EUR 3 billion. Our main markets are Finland, Sweden, Denmark, and Norway, but we are also looking and monitoring other European markets to learn more about them. We have a mandate to issue up to 10% new shares, but due to the new market situation, the timing for the achievement of the target is postponed until the market stabilizes.
For this year, we have grown by EUR 323 million. Most of that was in Q1 when we entered the Danish market. Looking at the shareholders list on the last day of September, the largest shareholder was the Fourth Swedish National Pension Fund, who owns close to 8%, followed by AB Sagax, Columbia Threadneedle Investments, The Vanguard Group, and Länsförsäkringar Fonder. In total, the 15 largest shareholders owns close to 46% of the company, and Cibus has 43,000 shareholders. Looking at the share price performance, Cibus have an average daily volume of SEK 48 million, of which SEK 23 million is traded at Nasdaq, with more than 2,200 transactions per day.
The stock market unease and the turbulence experienced since the outbreak of the war in Ukraine, as well as rising inflation and interest rate expectations, have affected the Cibus share price. On the last day of September, the share price was SEK 145. Today, just before the call, we were trading at around SEK 152. Over to Pia-Lena for the financial overview.
Thank you, Sverker. Here are some key figures for the third quarter. Rental income was EUR 27.8 million. Net operating income grew with 36% to EUR 26.2 million. Profit from property management was 14.7 million euros, and earnings after tax, 24.2 million euros, or EUR 0.49 per share. If we go into details, we have some items affecting comparability during the quarter. Net financial items include a cost for early redemption of our green SEK 600 million bond, as well as previous capitalized arrangement fees, at a total of -EUR 1.4 million. We also have a negative exchange rate change of EUR 0.4 million. Profit from property management, excluding non-recurring costs and exchange rates effect, amount to EUR 16.5 million.
We have unrealized changes in property value this quarter of EUR 8.9 million, and it's largely attributed to increase of income, rental income due to indexation, and this primarily in Finland. Our current earnings capacity on a 12-month basis shows a net operating income of EUR 104.3 million. Indexation and acquisitions has increased the rents. The higher reference rates, the IBOR, as well as the new SEK 700 million green bond has increased the financial expenses. The higher Euribor has also increased the cost for the hybrid bond. Profit from property management plus expenses for the hybrid bond was EUR 61.7 million, or EUR 1.27 per share, which is an increase of 8% compared to 12 months ago.
On the graph below, you see the development of the net operating income, profit from property management, and the profit from property management per share after the deduction of the cost of hybrid bond. On the graph on the right is the net operating income for the comparable portfolio that we owned twelve months ago. The comparable net operating income is EUR 78 million compared to EUR 76 million twelve months ago. Looking at our portfolio, we had 450 properties at the end of the third quarter, with a property value of EUR 1,858 million. Properties with grocery and daily goods tenants contribute with 97% of our net operating income. Cibus segments in our countries. Finland is our largest market and contributed with 69% of the net operating income.
Denmark, 14%, Sweden, 13%, and Norway, 4%. Of property value, Finland has 67%, Denmark, 15%, Sweden, 14%, and Norway, 4%. Cibus strategy is to give our shareholders stable and reliable dividend that increase over time. Dividend yield was, with the share price of 145 SEK, at 7.5%, and we continue to pay our dividend monthly. Looking at the balance sheet, property value was EUR 1,858 million. Secured debt was EUR 855 million, giving a loan to value on secure debt of 46%. Our unsecured bonds amounted to EUR 249 million, giving a net loan to value of 58%, which is within our finance policy target of 55%-65% loan to value.
Our net asset value, EPRA NRV, was EUR 738 million or EUR 15.2 per share. Our average remaining lease time was 5.2 years at the end of the third quarter, and it continues to be very stable, around five years, as you can see on the graph below. Of Cibus external funding sources, 75% is bank financing. During the quarter, we have refinanced a EUR 200 million bank loan in Finland at the same margin. The average floating interest margin is the three-month reference rate plus 1.6%. Bonds stand for 22% of the external funding and our hybrid bond, 3%. 71% of our bank loans are hedged with interest rate caps or have fixed interest rates at the end of the third quarter.
Based on the earnings capacity, taking the caps and the fixed rates into account, an increase of the interest rate with 1% would affect profit with close to EUR 7 million on a yearly basis. An increase of 2% would affect with -EUR 13 million on a yearly basis. We have then not taken any tax consideration into account. Over to you, Sverker.
Yes. Thank you, Pia-Lena. What about the future? What are we focusing on at the moment? Well, of course, we look at refinancing the existing bank loan and the euro bond that has not yet been refinanced. We are looking at continuous growth. Even though the market is calm at the moment and we are not doing any larger acquisitions, we are monitoring both the Nordics and the new geographies in Europe. We are also working with ESG matters to fulfill our commitment to have zero emissions by 2030. We are looking at our current portfolio and how to make it more energy efficient and also how to become carbon dioxide neutral by 2030. Last but not least, what are the primary reasons to invest in the Cibus share?
Well, we produce a high and stable yield. We have never lowered our dividend in euros per share from one quarter to the next. There is a potential for favorable value growth. 99% of our rents are CPI linked, which will give noticeable growth in our NOI even without acquisitions. We also have our investment strategy to acquire individual properties or portfolios with a higher yield requirement than the existing portfolio is valued at. We pay out gradually rising monthly dividends and have a dividend policy that says that we should increase them by 5% annually, and we are in a segment with a long-term resilience and stability. The grocery and daily goods sector has experienced stable, non-cyclical growth over time. As I said, approximately 3% annually, even during periods of recession.
It also shows strong resilience to growing e-commerce trend that has made the stores into distribution network for goods purchased online. Thank you very much. Now over to the questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Svante Krokfors from Nordea. Please go ahead.
Good morning, Sverker and Pia-Lena. Thanks for the presentation.
Good morning, Svante.
A couple of questions. You have postponed your growth and investment grade timeframe targets, which is quite understandable. How do you look at, I mean, for your growth to continue, I guess credit market has to work, but also the share price is a factor as you will need to raise equity when you grow to EUR 2.5 billion-EUR 3 billion. How do you look at these two metrics, the importance of those for the growth targets to kind of be chased again?
Of course, the most important thing is that the financial market stabilizes. It's not important what the interest rates are, just as it stabilizes. Because if the interest stabilizes, the yields for the property stabilizes as well. The unease in the market at the moment is really the biggest problem because no one knows where it's going or in which direction it's heading. That's the most important factor, that we have stability in the financial market. Of course our share price, that we can, as we have done for years, issue new shares at premium to NAV, that is very good situation for any company.
That is important as well, but not as important that the market stabilizes.
Okay, thank you. Also thank you for the good disclosure on interest rates gaps and so on. Regarding that, perhaps the question about bond refinancing, especially the EUR 135 million next year, how do you look at the bank's willingness to continue to lend and, I mean, 46% of your LTVs bank loans, how high can you take that?
I mean, we are still having very good discussions with the banks, and they're still very happy to be part of Cibus and to finance us going forward. As you can see also since we refinanced the EUR 200 million euro bank loan this quarter and at the same margin as we had before. Yes, we have different discussions with the banks and looking at different alternatives when it comes to the EUR 135 million euro bond, of course. We'll see what is best for Cibus, how we will refinance that. It matures in September next year, so we do have some time on our hands, but of course that's something that we have on top of our mind and that we're working on.
Regarding the 46% bank loan LTV, what kind of levels do you think are reasonable to maximum level?
Yeah.
reasonable to work with?
I mean, it depends if we would have amortization or not. Without amortization, around 50% then. It might be that we would need to have amortization if we have a higher than 50% secured in that sense.
Okay, thank you. Obviously you would prefer the bond market to start working, given if you increase the bank loans, it probably will postpone perhaps your investment grade readiness.
Absolutely. We'll see. We're looking at different alternatives, of course.
A question about rent increases, which are indexed. I have talked to some retailers in Finland, and it appears that they are perhaps not swallowing the entire increases as such. Do you have any comments on increased negotiations with tenants, or do they just accept the CPI indexation, which is obviously high now?
Yes, we have no signals that they won't accept the index upgrade.
Okay, thanks. That's clear. Perhaps a question about the competitive landscape. Any changes there? Has it eased now, or how should we look at it?
The market is extremely calm. Yes, it has eased, but we're not doing any large transactions either. It's probably more or less the same.
Finally, a question about dividends. I mean, you have probably followed the discussion in Sweden regarding some investors perhaps suggesting that dividends should be postponed until the credit market situation clears up. Is there any kind of indications from banks regarding that, or do you have any comments on that in general?
No, we have heard nothing about it from the banks, and there are no discussions in the board either of changing our dividend policy.
Okay, thank you. That's all from me.
There are no more questions at this time from the teleconference call, so I hand the conference back to the speakers for any questions from the web.
Yes. We have a couple of questions on the web. I think we have answered the one that says if there are any risk of not being able to pay our dividends next year. We answered that on Svante's call. Interest rates are going up. What about retail real estate yields in your market?
The yields in our portfolio are a bit north of 5.5%, which is a sustainable long sustainable level. We haven't seen the yield compressions. As you'll see in the report, the valuations are still going up due to the indexation in this segment. We haven't seen any fluctuations in any direction or major fluctuations in any direction the last years. Then we have a question from Paul Gori. Can you confirm what levels of CPI index is currently assumed in your property valuations? It's a bit different situation in the countries, as in Finland, you have the index upgrade is on the anniversary of the day when the contract was signed.
That's a bit hard to tell. We know in Sweden that the valuators have an index of 7% calculated. We'll see what the actual number it will be. In some way, I read in the papers that they talk about 9% for next year, so not full indexation in the valuations.
Yeah. We have a question regarding bonds and, for now, the bond market on the high yield market is close to closed, so to say. Right now it's very difficult to do a new bond. Cibus has proven over and over again that we can open the high yield market when it comes to bonds, when there is a market there. Of course we are monitoring the market at this point and if we feel that that would be an alternative then we would pursue it. We are also looking at different alternatives for refinancing the EUR 135 million euro bond.
We have a last question from Nicholas. Where do you see the share price in four years? Well, Nicholas, if I knew I would probably get the Nobel Prize in Economics. We cannot comment on the share price in four years. That's totally up to the market to set. Okay. That's all the questions we have online. I guess.
No more questions at this time. I hand over back to the speakers for any closing comments.
Yes. Thank you all again for listening in at Cibus quarterly call and hope you will call in again at the Q4 report. Thank you and bye-bye.