Neobo Fastigheter AB (publ) (NEOBO) Earnings Call Transcript & Summary

Welcome to Neobo Q3 Report 2026. [Operator Instructions] Now I will hand the conference over to CEO, Ylva Sarby Westman. Please go ahead.

Thank you. Good morning, everyone, and welcome to the presentation of Neobo's Interim Report January to September 2026. My name is Ylva Sarby Westman and joining us remotely today is our CFO, Maria Strandberg. Despite a turbulent global environment, Neobo continues to develop positively. We have remained focused on our core business, creating attractive sustainable living environments where people can thrive and feel secure. Rental income in the like-for-like portfolio increased by 3%, supported by completed apartment renovation and lower vacancy rates. Net operating income decreased to SEK 386 million, reflecting the impact of divestments and colder weather in the first quarter. Profit from property management decreased to SEK 156 million, driven by the same factors and share buybacks supported a 2% year-on-year increase in profit from property management per share. In the third quarter, profit from property management per share increased by 22% year-on-year despite the loss of net operating income from divested properties. The increase was mainly driven by higher NOI in the remaining portfolio and lower central administration costs. Over the past 12 months, we have repurchased shares for SEK 142 million equivalent to 5.1% of shares outstanding 1 year ago. The buybacks have strengthened our key metrics per share, while demonstrating our confidence in Neobo's long-term value potential. The value of the property portfolio remained stable at SEK 13.6 billion, and the portfolio comprises approximately 8,100 apartments with residential assets accounting for 94% of the total value. Our rental value exceeds SEK 1 billion, supported by the 3.4% residential rent increase as well as value-enhancing apartment upgrades. Our focused leasing efforts continue to deliver strong results with residential vacancy declining significantly during the quarter to 4.4%, marking the lowest level ever reported by Neobo. Commercial vacancy also improved, mainly driven by the move-in of 2 new tenants representing a combined annual rental value of SEK 1 million. One of them is jewelry designer, Emma Israelsson, whom we are pleased to welcome as a new tenant in one of our properties in Strängnäs. And we are also pleased to welcome S&T Restaurang in Falköping, where we have created an inviting space that strengthens the local offering and creates value for all our tenants in the area. In September, we made an important strategic divestment, selling our entire portfolio in Skara, Skövde and Mariestad to a local investor. This allows us to exit 3 municipalities, close one local office and further concentrate our portfolio, making Neobo more operationally efficient. The transaction was completed at an underlying property value of SEK 480 million, 16% below book value at the end of June. And we are convinced that the transaction will create long-term shareholder value through increased operational efficiency and by enabling us to return capital to shareholders through highly accretive share buybacks and closing of the transaction will take place in November. As part of our ongoing portfolio optimization, we also sold a nonstrategic commercial property with an apartment hotel in Helsingborg for just over SEK 25 million in line with the book value reported at the end of June. In total, we have now divested nonstrategic properties for SEK 640 million during the year, improving operational efficiency and releasing SEK 300 million of valuable liquidity. Transaction market liquidity has improved during the year, with volumes up 40% year-on-year. While a major M&A transaction has driven much of activity in the residential segment, we are also seeing signs of a gradual recovery in the direct market. Creating safe and attractive living environments remains a key priority and an important part of our sustainability work. And one example is the installation of electronic access systems across several of our properties during the year, improving security and tenant satisfaction and contributing to lower tenant turnover and vacancy rates, and these value-creating investments are also delivering an attractive yield on cost. A few additional comments on our interim results. We have continued to drive rental income growth and improving cost efficiency. Despite higher property costs driven by a significantly colder first quarter, our efficiency initiative delivered SEK 3 million in savings within central administration. The value of the property portfolio remains stable, as I said, at SEK 13.6 billion before closing of the transaction and the average weighted yield requirement is unchanged at 5.1%. Unrealized value changes during the quarter are driven by the strategic divestment of the Skara, Skövde and Mariestad portfolio. An overview of Neobo's earnings capacity. Net operating income decreased by SEK 1 million, primarily reflecting the net effect of divestments and improvements from lower vacancy rate. Net financial items were negatively impacted by SEK 27 million, mainly due to matured and restructured interest rate swaps. And this was partly offset by a lower debt level following amortization. Consequently, profit from Property Management decreased by SEK 29 million. Our financial position remains strong with a loan-to-value ratio of 50% and interest coverage ratio of 1.8x and a hedge ratio of 83%. We maintain a solid and resilient capital structure. After the end of the quarter, a loan of SEK 1.1 billion was refinanced on attractive terms. The continued strong access to capital in combination with Neobo's financial position, enabled refinancing at credit margins below the average margin in our loan portfolio. We continue to actively manage interest rate risk through derivatives, supporting more predictable cash flows. And at quarter end, the nominal value of our active interest rate swaps amounted to SEK 5.7 billion. Creating long-term shareholder value remains our top priority. And in the current market environment and given the significant discount to NAV, we believe share buybacks represent a highly attractive use of capital and a powerful driver of shareholder value, together with investments in our existing portfolio. Following the Skaraborg divestment, the Board intends to allocate transaction proceeds to further share repurchases. And upon the completion of the current SEK 50 million program, a new program of up to SEK 100 million is intended to be launched. At the end of September, Neobo had around 69,000 shareholders and we are delighted to have welcomed a new major shareholder during the third quarter, who today holds just under 10% of the outstanding shares in Neobo. Thank you all very much for joining us today, and we are now happy to take your questions.

[Operator Instructions]

Can we then turn to the web and see if we have any questions -- any written questions?

Yes, we have some written questions. The first one, have all property sales being included in NAV or is there some effect from Skaraborg coming in Q4?

The divestment of the Skaraborg portfolio will close in the beginning of November. So we still have the properties in our balance sheet, in the portfolio value and also in the net asset value today. And as I said, closing will take place in the beginning of November.