Skanska (Sell, TP: SEK154.00) - Margin surprise, but still concerned
Residential Development (RD) and Construction led a margin beat against our estimate in Q2, with a faster recovery in the latter than we expected in the US and Europe. We have raised our forecasts, but due to capital-intensive developments in Property Development (PD), we expect only a small increase in the DPS for 2019, implying a dividend yield below peers. Based on this and a weak book-to-build ratio, we reiterate our SELL recommendation, but have raised our target price to SEK154 (141) on our updated forecasts.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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