Our 'BB-' long-term issuer rating on Stendörren Fastigheter AB (publ) (Stendörren) is unchanged following the publication of its third-quarter results.
Improved cash flow and margin
Stendörren's rental income for the third quarter was in line with our expectations, at SEK 158m and some 4% higher than for the same period last year. The bankruptcy of the tenant Exploria AB has impacted net rentals by around SEK 17m so far this year. However, we expect Stendörren to succeed in renting out the property in question, which we believe should improve rental revenues and increase the occupancy rate by some 3 percentage points from 88% in the third quarter. Stendörren's net operating margin and EBITDA margin for the period were better than we expected, due to the company focusing more on renegotiations and operating efficiency.
Increase in value improves metrics
Since our initial rating report on Stendörren, the value of the company's property has increased by SEK 865m as a result of lease renegotiations, project development and yield compression, with SEK 240m of the increase occurring in the third quarter of 2021. This has improved the NCR-adjusted net loan-to-value (LTV) ratio, which strengthened in the third quarter to 55% from 59.8% 12 months earlier. However, we expect this metric to weaken as result of more project development and acquisitions. Improved operating efficiency and a reduction in the average interest rate, to 2.1% from 2.2%, has bolstered NCR-adj. EBITDA to net interest. On 4 Nov. 2021 the company announced its intention to issue a SEK 600m unsecured bond, which we believe will underpin the continued growth and development that we expect. We are not adjusting our estimates at this point.
Figure 1. Stendörren key credit metrics, 2017–Q3 2021
| SEKm | 2017 | 2018 | 2019 | 2020 | LTM to 30 Sep. 2021 |
|---|---|---|---|---|---|
| Total revenue | 453 | 537 | 592 | 651 | 656 |
| NCR-adj. EBITDA | 265 | 304 | 309 | 374 | 411 |
| NCR-adj. EBITDA margin | 58.5% | 56.6% | 52.2% | 57.5% | 62.7% |
| NCR-adj. investment properties | 6,494 | 8,486 | 9,372 | 9,758 | 11,028 |
| NCR-adj. net debt | 3,684 | 5,166 | 5,703 | 5,763 | 6,077 |
| Total assets | 6,624 | 8,735 | 9,608 | 10,233 | 11,236 |
| NCR-adj. net debt/EBITDA | 13.9x | 17.0x | 18.5x | 15.4x | 14.8x |
| NCR-adj. EBITDA/net interest | 2.5x | 2.3x | 1.7x | 1.9x | 2.0x |
| NCR-adj. net LTV | 56.7% | 60.9% | 60.9% | 59.1% | 55.1% |
This commentary does not constitute a rating action.
Contacts:
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Marcus Gustavsson, analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com