Growing earnings in 2025

Mixed upside potential, despite market recovery expectations

Pent-up demand and falling interest rates remain the backbone for newbuild recovery expectations. However, as the recovery has not yet started, property developers screen as the most attractive long-term, but visibility remains mixed. Diversified construction companies are more attractive on near-term P/Es, although many seem to be fully valued on solid share-price performance over the past six months. We maintain a neutral sector view; NCC and Skanska are our top picks.

Skanska (Buy, TP: SEK270.00) - Q1e risk, but SOTP upside potential

With only a minor SEK110m divestment in ‘Central’ in the quarter, we see downside risk to consensus for Q1. However, supported by a solid balance sheet and investments in Commercial Development (CD), Investment Properties (IP) and Residential Development (RD), we see solid upside potential from an SOTP perspective, and believe capital releases remain Skanska’s main potential share price catalyst. Due to FX, we have lowered our 2025–2027e EPS by c2% on average, and our target price to SEK270 (280); we reiterate our BUY.

Wihlborgs (Hold, TP: SEK105.00) - Too-high premium versus peers

Q1 profit from property management (PFPM) was 1% above consensus and net lettings were on the strong side. Overall, we have made only minor estimate changes, raising our 2025–2027e FFOPS by 2–3%. With a large pipeline of ongoing projects (c1.5x of 2025e FFO left to invest) and following recent acquisition, the LTV is at its highest level since 2018. We see limited further FFOPS upside potential for 2025–2027. We consider the stock close to fully valued near-term and the valuation rich versus peers. We reiterate our HOLD, but have cut our target price to SEK105 (120).

Subsea 7 (Buy, TP: NOK205.00) - Saipem uncertainties reflected

We expect that seasonality and planned maintenance days will affect Q1, and are thus 15% below consensus (our full-year estimates are in line). We believe investor concerns around the Saipem merger are well reflected in the share price, as combined company multiples have come to Saipem stand-alone levels (prior to deal announcement). With cNOK40/share in shareholder returns (c26% of share price) over the next ~18 months, we consider the valuation attractive and have upgraded to BUY (HOLD). We reiterate our NOK205 target price.

Avance Gas (No_rec, TP: NOK) - Discontinuing coverage

We have discontinued coverage of Avance Gas, as it no longer has any assets, and does not plan to make any new investments. According to the company, remaining funds after its final USD0.74 DPS, to be paid on 7 May (ex-date 24 April), are expected to be used to settle any outstanding obligations to creditors, including liquidation fees, and the stock is expected to be delisted in June/July 2025. Our last published recommendation, target price and estimates should no longer be relied upon.