Heimstaden Bostad - comment

The call at 1 pm may be more interesting as investors will seek further details on potential large-scale asset disposal, but the quarterly release is very operational in detail.  Rental growth continues to show improvement and with Net Operating Margin improving 300 bps on both a quarterly and LTM basis, cash flow continues to improve.  The Privatisation Program reached SEK 2.4bn in the quarter, continuing to achieve a premium (24%) to book value.  Heimstaden Bostad continues demonstrating its access to the financial markets (mainly secured) via its €725m sustainability-linked secured credit facility in the Netherlands and two SEK bonds totalling SKE 2,300m issued in the quarter.  

The S&P-defined LTV is 57.7% with an ICR of 1.6x.  Despite the improving operational data, the ICR continues to fall, and our model shows that they will be unable to maintain their credit rating without strategic large-scale asset disposal. Expect the investor call to focus on this.