Skanska (Buy, TP: SEK215.00) - EPS risk, but value support
Given the weak housing market and low property transaction volumes on rising interest rates, we see consensus Q1e EPS downside risk. However, unlike peers, Skanska has a solid, cash-positive balance sheet, and we see SOTP value support in the event of a cash release of invested capital. Ahead of the Q1 results (due at 07:30 on 4 May), we are 10% below consensus on EPS, and believe we could see weak KPIs in Residential Development (RD). Nevertheless, given the fundamental value support, we reiterate our BUY and SEK215 target price, but highlight that we see few potential catalysts near-term.Skanska is a project development and construction group, concentrated on selected home markets in the Nordic region, European countries and in the Americas. Co.'s business streams are: construction, which includes building and civil construction; residential development, which develops residential projects for immediate sale; commercial property development, which initiates, develops, leases and divests commercial property projects, with project development focusing on office buildings, retail and logistics properties; and infrastructure development, engaged in identifying, developing and investing in privately financed infrastructure projects, such as highways, hospitals and schools.
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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