Our 'A-' issuer rating on Swedish property company HEBA Fastighets Aktiebolag (HEBA) is unchanged following the publication of its second-quarter results.
Earnings metrics in line with expectations
HEBA's second-quarter report was in line with our expectations. Revenues in the quarter were SEK 98m (compared with SEK 100m in the second quarter of 2019) and EBITDA was SEK 61m (SEK 61m), corresponding to an EBITDA margin of 62% (61%).
The company remains more-or-less unaffected by the ongoing COVID-19 pandemic, with only negligible lost revenues in the commercial segment. The residential property market remains robust with no signs of tenants struggling to pay rent and given ongoing government support for furloughed employees. HEBA's current vacancy rate of 0.23% is indicative of the stable operating environment.
HEBA reported property investments of SEK 228m during the quarter. As of 30 Jun. 2020, the project portfolio included approximately 600 rental apartments under construction, of which we expect about 200 to be finalised during 2020.
Strong financial position
HEBA's interest coverage ratio was 4.6x as of 30 Jun. 2020, unchanged from a year earlier. The average loan maturity and the average interest maturity were 4.4 years (3.9 as of 31 Mar. 2020) and 3.7 years (3.8) respectively. As of 30 Jun. 2020, HEBA's reported loan-to-value ratio was 36.7% while the reported interest-coverage ratio was 4.6x, both supporting our view of the company's low financial risk profile. The NCR-adjusted metrics were in line with our expectations.
HEBA's liquidity profile remains adequate, despite a cash position of only SEK 1.5m, thanks to committed and unutilised revolving credit facilities and overdraft facilities amounting to roughly SEK 1bn, compared with SEK 675m in outstanding commercial paper.
This commentary does not constitute a rating action.
If you have any questions, please contact:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Marcus Gustavsson, credit rating analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com