Dip or downturn, EPS falls either way
JM’s Q3 sales fell as we expected (-29% YOY) and the Stockholm segment reported its lowest sales since Q4 2008. With starts well above sales, production is maintained, but we believe the market downturn will eventually lead to lower starts. The lack of residential price growth should also lower plot gains contribution to EBIT margins, as the company burns through its landbank. We reiterate our SELL recommendation and SEK200 target price.JM is a developer of housing and residential areas in the Nordic region. Co. focuses its operations on new production of homes, with the main focus on metropolitan areas and university towns in Sweden, Norway, Denmark, Finland and Belgium. Co. is also involved in project development of commercial premises and contract work, primarily in the Greater Stockholm area. Co. is divided into five business units: JM Residential Stockholm, JM Residential Sweden, JM International, JM Property Development and JM Production.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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