Our 'BBB-' issuer rating on LSTH Svenska Handelsfastigheter AB (publ) (Svenska Handelsfastigheter) is unchanged following the publication of its second-quarter results.
Operating efficiency slightly impaired, but likely to recover
The results were broadly in line with our expectations. Earnings from the recent debt-financed acquisition of Tre Kronor Property Investment AB (3Kr), which entered the portfolio in June, supported a revenue increase of 22% from the second quarter of 2020. Operating efficiency, as measured by the NCR-adjusted EBITDA margin, was somewhat weaker year on year, at 66.5% for the 12 months ended 30 Jun. 2021. However, we expect the ratio to remain above 65% and return towards 68% in 2022. The 3Kr acquisition increased Svenska Handelsfastigheter's geographic diversity and the overall value of the property portfolio to SEK 14.3bn as of end-June compared with SEK 10.5bn as of end-2020. The occupancy ratio remained strong, at 97.6% as of mid-year.
3Kr acquisition increases leverage
The 3Kr acquisition has significantly increased Svenska Handelsfastigheter's leverage ratio, as we expected. The NCR-adjusted net loan-to-value (LTV) ratio was 59.5% as of 30 Jun. 2021, up from 48.7% as of 31 Dec. 2020. We still expect the company to restore its net LTV to below 55% on a sustained basis, and make no adjustments to our estimates at this point.
Figure 1. Svenska Handelsfastigheter key credit metrics, 2017–H1 2021
| SEKm | 2017 | 2018 | 2019 | 2020 | LTM to 30 Jun. 2021 |
|---|---|---|---|---|---|
| Total revenue | 298 | 477 | 584 | 670 | 731 |
| NCR-adj. EBITDA | 203 | 323 | 394 | 353 | 486 |
| NCR-adj. EBITDA-margin | 68.0% | 67.7% | 67.5% | 67.6% | 66.5% |
| NCR-adj. investment properties | 4,683 | 6,918 | 8,597 | 10,565 | 14,340 |
| NCR-adj. net debt | 3,662 | 5,654 | 6,919 | 5,140 | 8,528 |
| Total assets | 4,809 | 7,032 | 8,747 | 10,867 | 14,878 |
| NCR-adj. net debt/EBITDA | 18.1x | 17.5x | 17.6x | 11.3x | 17.5x |
| NCR-adj. EBITDA/net interest | 1.8x | 1.4x | 1.7x | 2.4x | 4.2x |
| NCR-adj. net LTV | 78.2% | 81.7% | 80.5% | 48.7% | 59.5% |
This commentary does not constitute a rating action.
If you have any questions, please contact:
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Marcus Gustavsson, credit rating analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com