The Q2 report showcased improved occupancy (95% vs 91% a year ago), renegotiated leases led to a rental increase of ~39% on average (up from 17% in Q1'23), and the net leasing was positive for the eighth consecutive quarter, at SEK 8m (17m). The results of the management team's key focus of improving operational performance in recent years is impressive, in our view; the NOI margin adjusted for ~SEK 10m in electricity support in Q2'23 has increased from ~66% in 2019 to ~76% LTM (up 9.6pp). We only make small cuts to rental income and NOI estimates, while the recent increase in interest rate expectations affects CEPS for 2024e. There has been extreme volatility recently, e.g., the 5y SWAP has in the last month moved from ~3.20% to ~3.60% last week, and then back to ~3.25%.
Solid progress in the project portfolio
Stendörren has ongoing projects with an investment volume of SEK 944m (~8% of the property portfolio), and ongoing and recently completed projects that have not yet contributed to earnings amounts to SEK 80m in NOI, or ~15% of 2022 NOI. One of the most recently signed leases was 11,300 sqm in its new construction project in Almnäs (Södertälje), and it also started a new logistics project that is set for completion in Q4'24 (investment volume of SEK 175m).
Relatively smooth refinancing ahead
Stendörren has its next unsecured bond maturity in April 2024 (SEK 700m) and investors generally dislike bond exposure, as recent dilutive rights issues in the sector (e.g. Castellum, Cibus, Nivika) have been done partly to handle such refinancing. In Stendörren, we think the cash earnings, no dividends, project completions and existing credit facilities (SEK 560m) should allow for a smooth refinancing. The share is trading ~10% below its NAV, whereas peers NP3 and SLP are ~36% and ~18% above their NAVS.
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