Earnings Call: Q2 2021

Aug 18, 2021

Quarterly report

All right. Thank you. And once again, warm welcome to the Sibes Nordic Q2 report presentation. Let's move on to Slide number 3, summary of the period, please. And as usual, Pia Ljena will take us Through the numbers later on in the presentation, and I'll focus on the significant events. After a relatively calm Q1, it really took off during Q2. Acquisitions during the quarter amounted to EUR 130,000,000 and the acquisitions of the portfolio from Sargax of 72 properties worth around EUR 72,000,000 will be partly paid by 2,000,000 new CBIZ shares. The transaction is targeted to close and the share to be issued during the Q4 of 2021. Sibos were also approved for listing on Nasdaq Stockholm, and the 1st day of trading on Nasdaq Stockholm's main list was Tuesday, 1 June 2021. And we also signed a collaboration agreement with Jan Torjeft to jointly develop the part of Sibils Swedish property portfolio that is not used for daily goods retail. Sibils will have no We received parts of the profit when finalized. And the main reason for this is that we have such a smaller organization, totally focused on our core business. Again, Torje have the resources to scan our portfolio for unused land, And our contribution in this is land today valued to 0 in our books. Next slide, please. Significant events after the end of the period. We have continued to grow by acquiring another 3 properties in Sweden with Koop as tenants anchor tenants. Next slide, please. A few slides about Sibils Nordic and what kind of company we are and our business model. We are a real estate company focused on daily goods properties that are filled with strong tenants that provides dependable income to our shareholders. We have been listed since March 2018 and on Nasdaq Stockholm's mid catalyst since June 2021. We have a clear Nordic focus, and we pay out monthly dividend to our shareholders. The Annual General Meeting decided on the dividends for the EUR 0.94 for the coming 12 months. Next slide, please. The story about CBIZ is the story about portfolio diversification. Traditionally, these kind of assets have been owned as single That's for a small portfolio of 2 to 5 assets, which means that the owner had a very high risk concentration. If the tenant left, he lost he or she lost all his cash flow. You came in a weak negotiation position with the tenants. The banks realized this, so the bankability was very low, which meant was a high risk but also high return business. What Sibes realizes that if you own 300 properties, you diversify the risk and lower the concentration. None of our assets stand for more than 2.5% of our NOI. In fact, just one of the assets for more than 2% of the NOI, so the concentration is very low. And when you own quite a few properties with a handful of tenants, you become an active operator with the tenants and not just the landlord. The bankability is much higher, which means that you lower the risk, but you have the same return as for single assets. And due to the risk factor of owning 1 or 2 of these properties, it's a fact that we can buy assets 50 to basis points higher than the existing portfolio is trading at and therefore produce value creative growth for our shareholders. Next slide, please. What about e commerce and the effects on our business? The Swedish Institute of Trade Up produced a report about the effects on Amazon's entry to the Nordic countries. And as you can see, you have a scale going from low to high. And on the far right, you have high effect. You have electronic books and toys. But on the other hand, in the far left corner, you have daily goods with a very low effect. Next slide, please. And we can see that in our own portfolio that there is a resilience towards e commerce. We have seen a negligible negative effect Even during the pandemic, when online trading has accelerated, the share of online trading is around 4%. And a large share of that volume is click and collect from our stores. And if you look worldwide, you can see very few operators that make a profit on online food sales due to the fact that the margins are low and the cost of handling and distributing the food in a safe way out to the end consumers are very high. On the other hand, we see a notable positive effect as our existing stores, they work as a natural distribution network for non daily goods purchased online that can be delivered to supermarkets who act as pickup points for other goods. Next slide, please. Sibos is an active property manager with our own organization, And that sets us apart in our segment that we can actively work with our portfolio and with new acquisitions. You can see it realized that we are buyers of both large portfolios but also single asset units. Next slide, sustainability. Well, we are driven by the conviction that we and our decisions about our real estate portfolio can contribute to responsible for social development. And apart from that, the amount of solar panel plants have grown from 26 to 32. So far 2021, We have signed a collaboration with Jan Torje. And one of the reasons why we chose Jan Torje was their ambitious sustainability goals in their projects. All homes will carry the Nordic Swan Eco label. Next slide, please. What about the corona effect on our business? Well, our business model is noncyclical and works Whatever economical cycle we're in and we have seen a limited negative effect during corona, The grocery sales are on record levels. Our tenants have handled the increased demand professionally and approximately 90% of our income comes from leading through change. More than 98% of our invoice rents have been paid for Q2 2021 and about 99% of our invoice rents have been paid for the first half. And for last year, over 99% of the invoice rents were paid. So The effect is very limited. Next slide, please. What about growth? While we see a market that continues to be strong and unaffected by the corona pandemic, there are prospects for us to look at. And can see that we have acquired already this year for SEK 130,000,000. There are lots of acquisitions that can be made in the market. Finland and Sweden are still our main markets, but the other Nordic markets are being monitored. We have a strong cash position and pipeline is strong regarding possible acquisitions. Normal growth within our growth target, which is around between NOK 50,000,000 to NOK 100,000,000 We'll be financed through cash and bank or bond financing. But if we see opportunities for more rapid growth, that may lead to an equity raise or a hybrid bond to secure the LTV within the company financial target. And as you can see, we have met our growth targets ever since we were listed on the Stock Exchange. 2018 and twenty nineteen and half of twenty twenty, we had a growth target of EUR 50,000,000 and it was revised to EUR 50,000,000 to EUR 100,000,000 in 2020. And so far 2021, we have significantly met that target. Next slide, please. Looking at the shareholders list. As of the last day of June 2021, The 4th APY fund is still the largest shareholder followed by BMO Global Asset Management, Marian Dragacevich and Drag Haft. And in total, the 15 largest shareholders owns approximately 42% of the company. And CBIZ had 38 1,000 shares as of the last day of June. Next slide, please. Looking at the share price performance, There is an average daily volume of around SEK 32,000,000 with more than 2,500 transactions a day. And on June 30, the share price was SEK 204.4 and total share return since 1st January 2020 was 50%. And today, just before we started the presentations, we were trading at around SEK 225 Next slide and over to Pia Lena for the financial overview. Thank you, Sverdje. I will start at Q2 2021 in brief. So here you see some key figures for the Quarter rental income grew with 21 percent to EUR 19,800,000. Net operating income increased with 22% to EUR 18,500,000 Profit from property management was EUR 10,800,000 and earnings after tax, EUR 11,700,000 or EUR 0.29 per share. Next slide please. Looking at the P and L in more detail. As I mentioned, net operating income was EUR 18,500,000. Administration costs Include items affecting comparability of EUR 400,000 mainly due to the cost for the lease change to Nasdaq's main list. Net financial items include a negative exchange loss of EUR 430,000. Unrealized changes in value of investment properties was EUR 2,500,000 this quarter compared to EUR 3,000,000 in Q2 2020. We have a low current tax in the quarter due to the use of loss Going forward and also taxable depreciation on building inventory. Next slide, please. Our current earnings capacity on a 12 month basis shows a net operating income of EUR 76,000,000 with the properties that we have taken possession of at the end of June 2021. So the Portfolio for Sargax, for example, is not included since we have not taken possession of these properties yet. Profit from property management was €47,100,000 or €1.18 Per share, profit per share has increased with 9% from June last year. Next slide, please. We had 307 properties at the end of the second quarter. And the property value was EUR 1,331,000,000 And we have 784,000 square meters. Our anchor tenants, Keesko, Tokmanay, Coop, Eskom and Lidl, dump over 90 Next slide. Looking at our 2 segments, Finland and Sweden. 85% of our net operating income comes from Finland and 15% from Sweden. Of property value, 80 4% is in Finland and 16% in Sweden. Next slide. Sibes' strategy is to give our shareholders stable and reliable dividend that increase over time. Our dividend policy says that we should increase our dividend with 5 The dividend yield was 4.7% for the share price at the end of the second quarter. Next slide. Looking at the balance sheet. We have property value, as I mentioned before, of EUR 1,331,000,000. Senior debt was EUR 645,000,000 giving a loan to value on senior debt of 48.5%. And then we have our unsecured bonds of €194,000,000 giving a net loan to value of 60.1%, which is within our finance policy target of being between 55% 65% OTV. We have issued our first hybrid bond of EUR 30,000,000 and that is part of equity. Our net asset value, Efrenov, was €491,000,000 or €12.3 per share. Next slide please. Our average remaining lease time was 5.2 years at And over the quarter, and it has, as you can see on the graph below, been quite stable around 5 years historically. And this is as we renew our leases on a regular basis and also buy new properties with usually long lease contracts. Next slide. At the end of the quarter, we had 5 bank loans with a total of EUR 6.20 €5,000,000 The average floating margin is 3 months euro or steel, depending on currency, plus 1.7 Sven, our weighted average tenure is 3 years. 60 6 percent of the bank loans are hedged with interest rate derivatives. And all backlogs are long term. The first matures in 2 years. And then we have 2 senior unsecured bonds, 1 green SEK bond of SEK 600,000,000 and 1 euro bond of SEK 135,000,000. We also have our newly issued hybrid bond of EUR 30,000,000. Next slide. Our funding strategy in the long term is still to have 50% or more of our external funding As in bank financing, we do, however, intend to be active on the bond market as well and have during the Q2 established an program that covers both unsecured and also hybrid bonds. Normal growth, as Rakesh said, will be financed with in combination with hybrid bonds or equity to keep LTV within our finance policies thresholds between 55% and 60 by LTV. Next slide. In the long term, however, Our funding strategy is to reach investment grade in credit rating. And then the debt structure will need to change, which is only the reason for us to establish the MTN program. Over to you, Strathje. Thank you. A few words about the future and what we're focusing on At the moment, we are going to focus on the progress there. Now that we have delivered our on our promises to the market regarding building the company organization and moving to the main list of Nasdaq, have a clear focus on growth. We will continue to grow in Finland and in Sweden, but we are also now looking at new geographies in the Nordics. We hope that the countries will open up so that we can travel to both Norway and Denmark will look prospects. We have also hope of being included in the EPRA index fairly shortly. Next slide, please. Last but not least, what about the primary reason to invest in the Sibils share? Well, first, we produced a high and stable yield. From the outset, Seibils has never lowered our dividend in euros per share from 1 quarter to the next. There is a potential for for value growth. And as we have our strategy of acquiring individual properties or portfolios with a higher yield requirement the existing portfolio is trading at, combined with the annual growth target of NOK 50,000,000 to NOK 100,000,000 that generates potential for favorable long term growth in the share value. We have gradually rising monthly dividends, And we aim to gradually increase them by 5% annually. And we are in a segment with a long term resilience and stability as the grocery and daily goods sector has experienced stable multi click growth over time. That's about all for us. So please move on to the Q and A section. The first question comes from Svante Krogfaust from Nordea. Please go ahead. Yes, good morning. Swante from Nordea. I hope you can hear me. Yes, good morning. Loud and clear. Good. So yes, two questions to Sverkaran and one to PLN. If I start with Sverkaran. And Is there any changes in yields in the market? That's the first question. Anything that you observed? You had a SEK 2,400,000 positive change. Yes. Not dramatically, no. We haven't Any dramatic changes in yields in acquisitions, of course, our valuators, they look at all the deals that have been made And but no, not really. No, no dramatic changes in yields, no. And then relating to that, your implied yield has been going quite Significantly down as the share has gone up. Is this something that kind of impacts your negotiations with potential sellers. It can have that impact. As you saw, Sagerf We choose to have part of the payment for the portfolio in new printed CBIZ shares, which is very, very promising for us We can use the share as a payment method and that SAGAX, which is a renewed or which is a high quality company, wants to be part of the CBIZ journey. That's very positive for CBIZ. Okay. Thank you. And any observations about Competitors, institutional competitors that you have, do you meet them in these acquisitions? Or is it more kind of bilateral discussion? Well, yes, there's a competition is more or less the same that it has been. But as you probably have seen, Sandke Handelslappihaert have acquired Tekroner, which makes it one competitor less. But It's more or less the same gang out there. Okay. Thank you, Sverker. And Pielena, could you remind us about or me or us Regarding the FX impact in your or the one off, so to say, in your net financial, how Can you help us how to model that? Yes. I can help you. We do have exposure in Bf. We had FX effect of minus €430,000 in the quarter. Much of this is, of course, unrealized. So it's that we value the CX that we have and And FX effects on that. Okay. Thank you. That's it from me. Thank you. Thank you. The next question comes from Matthias Serola from Intervest. Please go ahead. Hi, Sverker, I'm D Elena. Hope you're doing well. Yes. I have 2 Questions related to your strategy and to Nordic expansion. The first one is that, Is there some reason that after the last year's good deal, large What Polygon transactions have followed so heavily here in Finland? Why have not been seen detailed transactions in Sweden. Well, probably because there are we have a few More competitors in Sweden that own these kind of properties and have fairly similar business strategy than CBIZ. So There haven't been so many large portfolios for sale, but also that the institutional companies that Frant talked about, they are holding on to the as well in Sweden. So there haven't been any larger portfolios out there for sale. And the reason is, I guess, that the owners, they like these kind of properties as much as we do. Yes. But you have ambitions to expand it And concrete typical transactions also in Sweden. Absolutely, absolutely. But the strength about CBIZN having our own organization is that we And grow by buying 3 assets or 1 asset or 4 assets in smaller deals. And many smaller deals put together becomes a large portfolios. So that's one of the strengths about CBIZN that we have Peter in Sweden and Lauri in Finland that can scan the market and make these kind of acquisitions Orkon, and very quickly. Yes. The second question, when we Considering your Nordic expansion, do you have any preferences between Norway and Denmark? Not really. We the preference we have is that we are or we aim to do the best deals we can that we possibly can for our shareholders. If those deals are in Finland or Sweden or in Norway or Denmark, it's not at all critical for us. If we can see that the yields are too low in Denmark or Norway, we will wait a bit and continue to buy in Finland and Sweden, but if we see potential for valuable acquisitions in value accredited acquisitions in Norway and In Norway and Denmark, we will look at them and make bids. So we constantly scan the markets and put the money where it the work best for our shareholders. Yes, okay. I guess that there are no fundamental phases between the year in Norway, Denmark and Sweden and Finland. Not really. There are differences in legislation, Of course, and for example, in Norway, you can charge the tenant with quite a lot of cost, But that all this is calculated when we do the acquisition. So the yields are Taking this into consideration or our proposals or bids are taking this into consideration. So At the end of the day, you have to have an efficient yield that is value accretive. So if you know the market, you can make in all of the markets. Okay. Thank you. Those were all my questions. All right. Thank you. The next question comes from Stefan John from Zett. Please go ahead. Hello. Thank you. A couple of questions. First on the fair value changes, SEK 2,400,000 in the quarter, is there what is where is it derived from? Is there any yield changes in there? And If you could indicate what is your average valuations at the end of the quarter? Yeah. We do have some changes in yield in Sweden especially And also that we have acquired some new properties also that do have Some deferred tax that we revalued the properties with. But otherwise, we usually do not revalue new properties before And the first after the Q1. So it's a little bit yield in Sweden, difference, yield compression and then also We have deferred tax that has an effect on the valuation. And are you willing to indicate what kind of yield you're currently at in average yield? No, we don't disclose that. We have not done that. Okay. And then there's very small changes on the vacancies. The vacancies are going up slightly. Is that due to mix with new products coming in? Or are you seeing a slight movement there the last 2, 3 quarters? No, no. The vacancies are on a normal level because these vacancies we have are not Whole property, it's small areas or Small vacancies in connection with the supermarket or the food store. It might be a vacant office on the 2nd floor or a hairdresser that has moved out and we are leasing it to another company. So it's fairly normal and Now it's not a trend. It is this is the kind of level that Basically, typically are in a large portfolio like CBIZ. So you just someone moved out and you're waiting for someone else to come in More or less, that's interesting. Yes. And it might be a small office on the 2nd floor that is not in focus for us to It's not on our of course, it's on our to do list, but it's not critical for the operations to lease the 50 or 75 square meter office on the 2nd floor. Good. Then you talked a little bit about competition for assets in Sweden. Are you thinking at all and seeing any opportunities in other countries like maybe Norway As a third alternative or do you still see more opportunities in fuel and Sweden? We see opportunities, but as we said the last couple of years is that Very hard to buy properties when you can't travel and look at them. So but we hope that it will open up and we are Everyone in the company has had 2 shots of vaccine. So hopefully, we can travel to Norway and then look at properties now and make this. Okay. Thank you. Thank you. Thank you. The next question comes from Sande Krogofors from Nordea. Please go ahead. Yes. Hi, again. A couple of follow-up questions. Coming back to Norway and Denmark as new markets, could you a bit elaborate on the market Structure, what kind I mean, I don't know the market at all. Could you elaborate a bit on what kind of owners you have there? Are there similar institutional Investors in Sweden especially. Norway is Fairly similar to Sweden and Finland, you have not so much institutional owners, but there are a couple of companies and also the grocery themselves, the stores. But the market is fairly similar to Sweden and Finland. Also the tenant structure, there are the 3 major companies, So, Nordisk Group and Rhema Tilsen and Coop that has the majority of the market in Norway. So the tenant structure is also fairly similar. Denmark, on the other hand, is a bit more fragmented and where you have these kind of pension companies where wealthy Danes can invest in properties, and they own quite a few of these stores. So it's a bit different situation in Denmark, but there are portfolios in Denmark as well. So It is fairly similar to the market, not so much institutional owned properties in Norway and Denmark. Okay. Thanks. That's very helpful. Then follow-up on Stefan's question. On vacancies, do you have any big vacancies? Do you have any properties where the majority is Vacant. Yes, we have one, but it is Fairly small in consideration to the total portfolio is not significant at all, But we're working with it and hopefully, we can lease it this year. And you haven't seen any change in how Keeskoy and S Group Behaves around Finland, I guess they don't want to give up market share in any areas. No, not at all. They are very They're doing extremely well, both of the companies. And they, of course, they like to maintain the market position And they have Liedel in the looking at Liedeler also wants to expand. So it is a healthy competition in Finland, which makes the Keflav and S Group want to stick to their locations. Okay. Thanks. And then on the Jantarjet Corporation, I might have missed what is If you mentioned it, but how is that progressing? And when could we start to see some development on that side? You won't see any development in the last or in the coming year because this is we're starting from 0. And The all the planning commissions for all of our properties in Sweden are for food or retail. So firstly, they have to scan the portfolio to see if there is any unused land. That might be a bit of grass or a small part where there are trees today. And then they have to make the planning change for residential use. So it will take a while, but we thought it was It's both very interesting to when we got this opportunity. And as I said, today, this land is valued to 0 in our books. So There might be a potential, but it's a fairly long time before we can see any effect in our books. Okay. That's very clear. Thanks a lot. Thank you. Thank you. Ladies and gentlemen, there are no further questions at this time. Your speakers, back to you. Yes. We do have one question from the website. And It says, please talk through the warrants for the CEO with regards to the magnitude and also annual recurrence. If you could please explain in context of the overall remuneration structure. Thank you. We have described the programs that we have On Page 10 in the quarterly report. So Sverdkiel here has one Program, OpGen program that runs for 3 years. And of course, all warrants Our BOT at market value when the program starts. And then we have 2 additional programs in place and those are for management, but not for Zverke. Zverke bought One larger warrant for 3 coming years, but then changed the structure. So Now we have one program each year. But since Saker has the first program, he has not been Included in the 2 other programs, it's the other parts of the management team who has those ones. So that's how the structure is made. And overall, the remuneration, of course, the remuneration committee looks up at the market and of course, wants to It gives market value remuneration, and it's both fixed Income and also variable income that is on goals set by the board each year. Yes. Yes. But please read on Page 10. Page 10 in the Okay. No further questions? No, not from the website. All right. Then thank you all for listening and welcome back when we produce or present the Q3 report in November. Okay. Thank you. Bye bye. Thank you,