Logistea AB (publ) (LOGIA) Earnings Call Transcript & Summary

Welcome to Logistea Q3 Earnings Call for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Niklas Zuckerman; and CFO, Philip Lofgren. Please go ahead.

Good morning, everyone, and welcome to the presentation of Logistea's Q3 report. As always, myself, Niklas Zuckerman; and next to me, Philip Lofgren, we will present. And we will be happy to take any questions after the presentation. Even though we've had a fairly quiet quarter when it comes to new acquisitions, we have during the year been active and we have expanded the portfolio to SEK 15.6 billion, as always, and since we started the company a couple of years ago, full focus on logistics, warehouse and light industrial properties. We favor long leases, triple net leases, and the occupancy currently stands at 97% and the WAULT at 9.4 years. Growth during the year has been in the Nordics, and currently 91% of the properties when it comes to value are located in the Nordics. We're once again reporting record high income, net operating income and profit from property management. The profit from property management is up by 139% in real terms and 48% when it comes to comparing the property from property management per share compared to the same period of last year. As I said, we have continued to grow, and we have so far this year acquired properties worth SEK 2 billion. Also worth mentioning is that the cash flow from operation is up by 65% and that we are reporting an operating margin of 92%. A few words on the market, where you can see that Sweden is the only Nordic market where transaction volumes are up thus this year. The other markets have been fairly quiet, but we foresee a pickup in all of the Nordic markets for the remaining of this year. This is mainly driven by lower cost of financing, lately driven by lower margins especially, and an overall appetite for stable and long cash flow with a clear yield gap. And talking about yield gap, we have during the year acquired properties at an average yield of 8.3%, and this should be compared to our average cost of debt of 4.6% and the cost for new financing in Sweden and Finland at 4% or lower. The transactions undertaken have contributed SEK 0.22 per share, which is equal to roughly 22%. We are under no pressure to buy, but we have a very good pipeline presently and we still see good opportunities in the Nordic market. As communicated before, we look to grow the portfolio from acquisitions, obviously, CapEx investments in our own portfolio and new developments. And our project for Intersport in Nässjö is progressing as planned and it's expected to be finalized in December of this year. So hopefully, we can show you more or pictures of our outstanding assets when we're reporting the full year number. The run rate also continues to improve by the quarter. The NOI is up by 17% in 1 year, and the profit from property management is up by 33% for the same period. And the change per share is up 23% compared to a year ago. Notable is that the net financial cost is down in 1 year, even though the debt portfolio is much larger compared to a year ago. More on the run rate per share. The improvement has been stable in 2024 and 2025, following a decrease in '23 when we did the rights issue. And the growth is obviously driven by acquisitions, improved financing terms and finalized property projects. No major changes in the leasing portfolio over this quarter. The BEWI share has decreased to 25% and, as we have said in the past, we'll continue to decrease even further if and when we do new acquisitions with properties leased to other parties. Otherwise, still on long leases and, as we've said in the past, even longer leases when it comes to most of the non-Nordic markets. Very happy to present the net letting that is positive for the quarter, SEK 1 million, mainly driven by a new lease signed in a property that became partly vacated following a bankruptcy in Q3 of last year. We have had two smaller terminations during the quarter where tenants will leave in 2026 and 2028. But as I said, a positive number when it comes to net letting for the quarter. And finally from my end, we have said that one of the benefits of being a larger company and one of the reasons why we did the merger with KMC was to improve liquidity in the share. Now a bit more than a year post the merger, you can see that the liquidity has improved dramatically. So we're now seeing a turnover per day of, call it, SEK 10 million to SEK 30 million, and that was to be compared with numbers at maybe SEK 1 million or SEK 2 million for the merger and even higher, obviously, in some periods when we have seen larger block trades. And with that, I'll hand over to Philip.

Thank you, Niklas. I will now move over and talk about the strong earnings and the finances for the period. Logistea's revenue for the quarter increased to SEK 288 million compared to the previous quarter of SEK 263 million. The increase is linked to the finalized acquisitions during the period and a smaller increase of the revenues in the like-for-like portfolio. The net operating income came in at SEK 269 million, an increase from last quarter of SEK 242 million, which is linked to both the acquisitions, but also a warm quarter, which kept the heating and electricity costs down. The operating margin increased to around 91% and adjusted operating margin where we exclude the rent supplements from the revenues came in at 97%, an increase from 93% at the beginning of the year. And triple net leases and active asset management are two main drivers for these strong key ratios. Over to the profit from property management. In the quarter, we have reserved a cost of SEK 10 million as a central administration cost following an agreement that was signed in connection to the recruitment of Anders and Niklas, our CEO and Deputy CEO. More about this can be found in our report. But if we exclude this onetime cost from the profit from property management, the result came in at SEK 140 million, which is aligned with the estimates. The main driver for the increase was the much stronger net operating income for the period. If we look at the profit from property management per share, one of our financial targets, it increased by 54% on a last 12-month basis, which is an increase of 52% period-on-period. Over to the key metrics. The loan-to-value ratio decreased a bit following the increased value of our property portfolio. As I've told you before, we have a lot of headroom increasing the loan-to-value up to our financial limitation of 60%. So together with the current cash balance of almost SEK 0.5 billion, we have a lot of firepower when it comes to acquisitions and yielding investments in our own portfolio. A quick comment on the discussions we've seen in the Swedish newspaper, Dagens industri, regarding CapEx investments in the property portfolio. So year-to-date, we have had SEK 201 million in investments. More than 80% of that number is linked to the ongoing project we have in Nässjö for Intersport and almost all of the rest is linked to yield in tenant renovations. The interest cover ratio increased to 2.4x on a rolling 12-month basis. This is an increase from 2.0x a year ago, following a greater property portfolio, together with improved financing portfolio. So here, you can see an overview of our loan portfolio divided into currencies. Our basic funding strategy is to have loans in the same currency that we have rent in and in the currency that we can trade the assets. So this gives us a limited currency risk in the group. The hedging ratio of the group was around 73% in the end of the third quarter. The absolute majority of the SEK loans are hedged, while the hedging ratio for our NOK loans is around 40%, which opens up for lower interest rates following the recent cut in Nibor. On new loans, for all markets except Denmark, we're securing a margin of around 140 to 160 bps depending on the region that property is located in, which is lower than the average margin in all of those markets. Over time, this will affect the average interest rate, which per the end of the period amounted to 4.6%. And just for comparison, as we see on the diagram to the right, NOK loans are pushing the interest rates up. And if we exclude the NOK loans from our portfolio, the average interest rate would be around 400 bps. Continuing on our debt portfolio. During the quarter, we have renegotiated a bank loan in Norway of SEK 328 million, where the new margin decreased by 25 bps. We've continued to improve our loan portfolio, and we can see that over the year we've decreased the average loan margin from -- or the average interest rate from 5.0% to 4.6%. We also have in the end of the quarter unencumbered assets in Germany, Poland and Netherlands of around SEK 940 million, and we are in long-term discussions regarding financing in one of those countries. Wrapping this up, we must look at our financial targets. Annual growth in profit from property management per share adjusted for onetime effects came in at 54%, well north of our target of 15%. One should not expect to see this kind of increases going forward. But looking at the growth rate in our earnings capacity, together with the transaction capacity, we expect to deliver on this target. The NRV per share increased 10% from a year ago and the LTV is in the welcome -- is in conservative zone, and the interest cover ratio is continuing to increase. So the key takeaways from the finance side are that we have a good position to continue to grow the business using the cash balance but also increasing the loan portfolio. We have a strong underlying earnings capacity, and we've also improved the operating margins on annual basis. Back to you, Niklas.

Thank you. And a few words to summarize and where we see the rest of the year. So as you have seen, we're reporting improved numbers basically throughout. We have managed to grow the portfolio by approximately SEK 2 billion so far this year, adding 22% on our profit from property management per share. We still believe there are good deals to be done. We have good firepower and we should be able to act if we find value-creating investments. And by that, we say thank you, and we open up for any questions.

[Operator Instructions]

Niklas and Philip, you answered some of the questions already in the presentation. So good job. But I have a few of them left. So first off, you have other income of SEK 8 million during this quarter. What is that relating to? And is that a level we can expect going forward as well?

Yes. So the SEK 8 million is partly due to a previous bankruptcy where we now realize that we will end up getting more income than expected, so a higher income from that, but also some income related to finalized projects for a tenant. So we've renovated some areas and invoiced the tenant directly for that.

Okay. So a little bit higher this quarter then. So it's not a new run rate, so to speak.

No, correct.

Okay. And also very high NOI margin this quarter. Anything in particular boosting this quarter? Or would you say that this is a run rate for Q3, given your current portfolio?

Yes. The third quarter operating margins have historically been very high due to the warm weather in the warmer months. So lower electricity costs and lower heating costs end up -- we will end up with a higher operating margin.

Yes. Yes, that's understandable. So you would say that this is sort of a run rate for Q3 given your current portfolio then considering -- if you weren't to have any unusual weather, so to speak.

Yes. So if you exclude the other income from the operating margin, I would say that this is the number going forward, yes.

Very clear. And you also had some yield compression during this quarter. Is that across the portfolio? Or is it any specific types of assets or geographies that are targeted specifically?

I would say it's across the portfolio but very -- or limited changes. But there is no particular country or type of properties. So it's basically small adjustments in most of the markets.

Can you hear me, Niklas and Philip?

Yes.

Good. This is Erik Granström with DNB Carnegie. I also have a few questions on perhaps your outlook for transactions going forward. You mentioned in the report that you see yield compression in your segment. How is this going to play out for you when you're looking at acquisitions?

As I think I've said before, we have a very strong belief in the colleagues doing transactions at Logistea. So we still believe that we can do good deals going forward. We've been very active basically throughout the year, and there are signs that, call it, especially the most core stuff has become more expensive. But with that said, we still believe that we can do good and value-accretive deals for the remainder, call it, what, 3 to 6 months. So it has become a bit tighter. But with that said, we still believe that we can find good deals, so to say. Then we can't promise if it would be as good as during the spring, but definitely deals that will improve our EPS.

Okay. So basically, we shouldn't expect sort of the north of 8%, but perhaps you can at least get your yield requirement in terms of deals. Is that sort of a good way to look at it?

Let us come back when we have done a couple of deals. Without promising too much, we still believe there are good deals to be done, if that's sort of -- it will definitely be higher than the reported yield of 6%, 7%. But I don't want to give more guidance if it's 7.5% or 8% or somewhere between that. We'll obviously let you know once the deals are done.

That's fair enough. Looking at the project portfolio, you mentioned you had investments of about SEK 200 million for the first 9 months. You also have a large project running now. Could you give us some guidance of what you are looking for towards next year? So for '26, do you think that you would be able to reach sort of the figure for a full year '25? Or do you think that this -- is '25 going to be a bit of an extraordinary situation?

I would say we're hoping for any year to run sort of one or two projects in the size of Intersport or NKT that we did the other year. That's our ambition. And as you know, with projects, it could be that you do two projects 1 year and nothing the year thereafter. But the ambition is definitely to do one or two, in our view, fairly large developments every year in this lot size. Obviously, nothing signed for next year because then it would be communicated. But there are a couple of fairly good discussion when it comes to new developments. Then we also realize that those processes are typically longer and, obviously, there is competition. But the aim is to run one or two projects a year.

Okay. Good. And then perhaps coming back a bit on transactions, but in this case, looking at potential divestments. With yields coming down especially for core assets, as you mentioned, do you see the opportunity to perhaps divest assets that are fairly low yielding and reallocate that capital elsewhere?

Potentially. But it will be driven by sort of, I'll call it, extraordinary situations. We have done a couple of sales where basically we have sold it to the tenant. It could be that we, over time, start to sell and invest it in other locations. So no clear answer. But obviously, as I said, we have a good transaction team and we need to make sure that they are busy and that they create value. And then one way of creating value is always obviously to realize profits and invest it somewhere else. But slightly boring answer is that we will come back to you if that happens.

It's good enough. Boring doesn't necessarily have to be bad either. And then finally, this is perhaps a little bit of a detailed question on net financials. I appreciate the Slide 15 where you show the currencies. But could you just mention the negative sort of headwind you had in terms of FX in Q3? Was that mainly related to NOK? Or is it the euro? Could you just give us some understanding of which FX was actually the main culprit in terms of translation effects?

Both NOK and euros. So year-to-date, SEK 9 million in the NOI and the income and SEK 6 million in the profit from property management. And for the quarter, it was actually positive SEK 1 million in the income and in the net operating income.

Yes. But you mentioned in your net financials that you had a negative effect of SEK 6 million.

Yes, yes. And that is driven by the SEK, NOK currency, yes.

Okay. So that's a translation effect that you report as unrealized. Or is that -- how should we look at that?

Well, if you look at the previous reports, we've had about SEK 3 million positive from FX effects in the net operating income. That should have been in the OCI, so to say, as a translation effect. So we've taken that out. That's why it's a negative effect of SEK 6 million now in the third quarter.

I hope that you can hear me.

Yes.

Yes.

Perfect. So Staffan from Nordea here. I have a couple of questions, starting off with net LTV. It currently stands at 48%. You have a risk limitation of 60%. And I'm just wondering, the limitation of 60%, is that sort of theoretical? And if that's the case, where are you comfortable to be in terms of LTV? I'm just trying to understand the potential acquisition of firepower that you could have.

Yes. So typically when we do new acquisitions, on a property or portfolio level, we tend to end up at a 55% to 60% LTV on that individual transaction. But one should also remember that we are facing amortization every quarter. So the LTV is by nature coming down and now we'll see what happens with property values. But then obviously, we could use the bond market as well in order to sort of increase firepower and get the LTV up. And to answer your questions, 50-plus percent is fine. 60% is a bit high at the moment. But we're not afraid of being north of 50% and then if it's 52% or 54% or 55%, depending on what type of investments we find. But north of 50s is absolutely doable in the sort of mid- to long term.

Okay. That's clear. And just coming back to transactions, the quarter has been somewhat quieter in terms of transaction activity. And it's not only you where we have seen that. Looking at similar listed peers, the activity has been quite low in Q3 and also in the beginning of Q4. Is there anything that has happened in the market? Are there fewer objects? Are there more competitors? Or why are we seeing less transaction activity?

I think it has mainly to do with sort of seasonal effects. Everyone is off during the summer break and then the processes are started in sort of August, September and then you tend to be in October, November before you can sign a deal. So I think it has mostly to do with seasonal effects. We are looking -- we've got a very long pipeline. We're placing bids and we are in good discussions. But with that said, we don't feel any pressure that we need to buy or need spend the money each and every quarter. The most important is that we find good deals. And once we find a good deal, we'll obviously sign and then communicate it. But to answer the question, I don't think there's anything special that has happened during the third quarter, at least not for us. It's more a seasonal effect.

Okay. I understand. And then a question on like-for-like rental income growth. It was relatively low, and I'm just trying to understand how that come. Are there any rent discounts? Or how should we view that it's a relatively low like-for-like number in the quarter?

Yes. That's mainly due to the old bankruptcies we've had from Q3, Q4 of 2024 and still vacant areas that we're trying to lease. So that's the main driver for the slow like-for-like increase there.

Okay. I see. And then one final question from me. The Q3 average interest rate of 4.6%, does that fully reflect the lower Nibor in Q3?

No, it does not. We're rolling the Nibor here in October.

[Operator Instructions] There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comment.

And there are no written questions either. So I think we call it a day. A busy day most, especially the equity analysts. So if there are any follow-up questions, just reach out to Phil and myself. And thanks for your time.

Thank you.