Our 'A-' issuer and issue ratings on Heba Fastighets AB (publ) (Heba) are unchanged following the publication of its fourth-quarter results.
Record-low interest margins and high energy efficiency
Heba ended 2021 on a strong note, with EBITDA margins continuing to climb slowly, up by 50bps on year-end 2020 at 61.3%. Quarterly rental revenue rose by 18% year on year, with maintained cost efficiency. The interest coverage ratio rose to 6x for the last 12 months to the fourth quarter, due to a record-low net interest rate for Heba of 0.93%, as well as interest income from joint ventures.
In the fourth quarter, the company achieved its target of reducing energy use to below 100kWh/sqm. We not only view this as an indication of Heba's environmental commitment, but note that improving energy efficiency could also have a financial benefit, as we expect energy prices to remain above historical levels.
Portfolio valuation results in stable loan to value
At year-end 2021, the property portfolio (NCR-adjusted) was valued at SEK 14.8bn, an increase of 21.4% year on year. During this period, net debt rose by slightly less, 20.8%, resulting in an NCR-adjusted net loan-to-value ratio (LTV) of 40.6%, virtually unchanged since year-end 2020. We had expected debt-financed projects in 2021 to lead to net LTV of around 45%, an increase which did not materialise, mainly because of increases in unrealised property values.
Figure 1. Heba key credit metrics, 2017–2021
| SEKm | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Total revenue | 335 | 380 | 388 | 394 | 450 |
| NCR-adj. EBITDA | 187 | 221 | 232 | 240 | 276 |
| NCR-adj. EBITDA-margin | 55.8% | 58.0% | 59.7% | 60.9% | 61.3% |
| NCR-adj. investment properties | 8,771 | 9,656 | 10,293 | 12,213 | 14,831 |
| NCR-adj. net debt | 3,221 | 3,532 | 3,492 | 4,985 | 6,024 |
| Total assets | 8,804 | 9,724 | 10,399 | 12,776 | 15,516 |
| NCR-adj. net debt/EBITDA | 17.2x | 16.0x | 15.1x | 20.8x | 21.8x |
| NCR-adj. EBITDA/net interest | 3.7x | 4.1x | 4.4x | 4.6x | 6.0x |
| NCR-adj. net LTV | 36.7% | 36.6% | 33.9% | 40.8% | 40.6% |
This commentary does not constitute a rating action.
Contacts:
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com