Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Catena AB (FRA:T9R, Financial) reported a 17% increase in rental income, reaching SEK1,566 million, driven by acquisitions and CPI-linked contracts.
- The company has a solid balance sheet with a loan-to-value (LTV) ratio of 37.6%, providing headroom for future investments.
- Catena AB received an upgraded credit rating from Fitch, reflecting strong performance and strategy.
- The acquisition of DSV HS in Denmark, the largest logistics center in Denmark, is expected to significantly boost earnings capacity.
- The company's net leasing was positive, with a letting ratio of almost 97% and a weighted average lease expiry (WALE) of 6.7 years.
Negative Points
- Profit from property management per share decreased to SEK16.78, attributed to temporary factors.
- There was a SEK28 million write-down in joint venture companies, although partially offset by a SEK37 million value uplift.
- The transaction market is becoming more competitive, potentially impacting Catena AB's ability to secure favorable deals.
- Development projects are facing delays due to challenges with natural values and administrative approvals.
- The macroeconomic environment remains uncertain, with potential impacts from political challenges and central bank policies in Europe.
Q & A Highlights
Q: You mentioned more bidders and aggressive bids in the transaction market. Does this imply we are past an inflection point on yields, and how does this impact your capital allocation decisions?
A: Yes, we have observed more players with sharper bids, suggesting potential valuation uplifts in the portfolio. However, it may take about six months for external evaluators to confirm lower yields. This competitive market could make it tougher for us in some transactions, but we have historically found successful projects and acquisitions.
Q: Are you more comfortable starting new projects given the increased activity in development discussions?
A: Definitely. There are more discussions this quarter, indicating stronger demand in the future. This is partly due to anticipated central bank rate cuts, making the outlook more positive.
Q: How do you view the opportunities with DSV, given they now account for 20% of your portfolio?
A: We see it as a secured cash flow for many years and have a good dialogue with DSV. While it's too early to speculate on future opportunities, we are well-positioned for potential discussions.
Q: What yield on cost do you expect from your project pipeline, given the increased activity?
A: We aim for around 7% yield on cost, depending on land acquisition prices and market rents. We are confident in maintaining this target, though it may vary slightly.
Q: Regarding the latest acquisition from DSV, does the contract stipulate any rental income discounts?
A: The contract commenced on October 1st, and the earnings capacity reflects the full contribution from the DSV acquisition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
