Our 'BBB+' issuer and issue ratings for Vacse AB (publ) are unchanged following the publication of its Q2 2019 results. Rental income, EBITDA and property valuation were all slightly higher than our expectations, while credit metrics remain fully commensurate with our 'BBB+' rating.
Portfolio and rental income growth slightly higher than our expectations
Rental income of SEK 89.6m (compared to SEK 81.2m in Q2/2018) and EBITDA of SEK 69.4m (62.6) in the second quarter of 2019 were both slightly higher than our expectations. As of June 30, 2019, the property portfolio was valued at SEK 6.4bn (5.6bn), also somewhat higher than our expectations. The average property valuation yield was 5.5% (5.7%) by the end of the period. In June, the rescue station in Tierp was inaugurated. Tenants are the municipalities of Uppsala and Tierp under a 25-year rental contract. By the end of Q2 2019, the average contract lease length was about 11 years. Occupancy rate, 100%.
Financial position remains strong, credit metrics fully commensurate with our 'BBB+' rating
Vacse's reported loan to value (LTV) of 42.9% (41.0%), EBITDA/interest coverage ratio of 4.6x (4.2) and net debt to EBITDA of 10x (9.2) are all fully commensurate with our requirements for a 'BBB+' rating. We expect LTV to increase somewhat in the coming two years due to investments in the project portfolio, but that it will remain below 50% in the longer term. The average debt maturity increased to 2.9 years (2.0), as well as an improved liquidity position, which is positive from a credit perspective in our view. In June 2019, Vacse entered into an agreement with the Nordic Investment Bank (NIB) about a secured loan that will be put in place in January 2020. This will lengthen the average debt maturity to more than 4 years. At the end of the second quarter 2019, the share of secured debt to total assets was 15.5% (12.3%). This commentary does not reflect a rating action.
For more information, please contact:
Michael Andersson, Chief Rating Officer, +46 732 32 43 22, michael.andersson@nordiccreditrating.com
Mille O. Fjeldstad, analyst, +47 99 03 89 16, mille.fjeldstad@nordiccreditrating.com