Norwegian Property (Sell, TP: NOK10.00) - Yields exposed
After extrapolating forward 5-year swap rates, we believe the 5 year swaps are set to rise by c80bp in the next three years, on top of the 45bp gain YTD. As a result, we are concerned higher yield valuations imply downside risk to NPRO’s NAV. Also, we have cut our 2020 estimates to reflect the end of the Gardermoen Airport and Snarøyveien 36 leases. We are in line with consensus for Q1 after lowering our forecasts for increased winter costs (results due at 08:00 CET on 4 May). Based on the fundamentals, we have downgraded NPRO to SELL (HOLD) and cut our target price to NOK10 (11.5).Norwegian Property operates in management, acquisitions, sales and development of commercial real estate, including participation in other companies as well as businesses which are related as such. Co.'s properties primarily comprise office premises with associated warehousing and car parks, and retail and catering space. Co.'s activities are organized in four business areas: marketing and letting; property management; property development; as well as transactions and financing. As of Dec 31 2013, Co. owned 41 office and commercial properties in Norway, located in Oslo, Baerum, at Gardermoen and in Slavenger.
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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