DnB Markets - SpareBank 1 SMN (MING) Investing in capital-light income

Report

DnB Markets

Håkon Astrup

Investing in capital-light income

Sparebank1 SMN (MING NO, Buy) - Investing in capital-light income
(14 pages)

09/08/2017 14 EN

Underlying

SpareBank 1 SMN

SpareBank 1 SMN is an independent, regional finance house. Through the SpareBank 1 Alliance and its own subsidiaries (the Bank), Co. has access to products in the fields of financing, savings and investment, insurance and money transfer services. At its Offices business area, the bank provides advice to retail customers, farm sector customers, pools/associations, one-person businesses and small and medium businesses. The Corporate business area focuses on financial counselling in investment and operations financing, domestic and foreign money transfers, fixed income and currency hedging, investment of surplus liquidity and insurance of individuals and buildings/operating equipment.

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NO0006390301 Oslo Bors Norway

Provider

DnB Markets

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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Analysts

Håkon Astrup

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DnB Markets

Scope for continued strong earnings

Seeing support from still-high interest rates and sound fundamentals, we expect solid NII and robust asset quality to contribute to continued strong earnings generation for the banks, despite the stable and eventually falling key policy rate trajectory. Trading at an average 2025e P/E of ~8.5x (adjusted for undistributed 2023 dividends), we continue to find the valuation undemanding. We maintain a positive view on the sector and highlight SVEG as our top pick.

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March 21, 2024 March 21, 2024 1 EN

DnB Markets

Sparebank 1 SMN (Buy, TP: NOK161.00) - Continued core revenue momentum

Supported by sustained core revenue tailwinds, a NOK414m one-off gain from SpareBank 1 Markets and still-low loan losses, MING reported a strong Q4 ROE of 18.9%, despite elevated cost inflation. The board proposed a 2023 DPS of NOK12.0, implying a ~74% payout ratio and an 8.4% dividend yield. Trading at a 2025e dividend-adjusted P/E of ~8.3x, we continue to find the valuation undemanding and reiterate our BUY and NOK161 target price.

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February 9, 2024 February 9, 2024 1 EN

DnB Markets

Scope for further generous distributions

With repricing efforts yet to take full effect and sound fundamentals boding well for manageable loan losses, we see prospects for solid earnings generation ahead, despite likely margin pressure from high levels longer-term. Given the banks’ solid capital positions, a more moderate growth outlook, and an enhanced profitability focus in the sector, we forecast further generous shareholder distributions, with an average dividend/ buyback yield of ~8% for 2023e. At an average 2024e P/E of ~8.4x, we reiterate our positive sector view, with SRBNK and SVEG as our top sector picks.

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December 11, 2023 December 11, 2023 1 EN

Medistim (Hold, TP: NOK190.00) - Sales in Americas weaken

Revenues grew 3.5% YOY in Q1 (currency-neutral total sales grew 2.2%), below our estimate c6%. The EBIT margin of 24% was almost back to normal and in our view shows the low margin in Q4 2023 (16.4%) should be seen as a one-off. However, we remain concerned about revenue growth, especially in the Americas, after the fifth consecutive quarter of declining currency-neutral sales. Thus, while we reiterate our HOLD, we have lowered our 2024–2026e sales by c3–8% and cut our target price to NOK190 (210).

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Niklas Wetterling

Niklas Wetterling

Catena (Buy, TP: SEK515.00) - Time to put the money to work

The Q1 results were solid in our view; although the vacancy rate rose, it was from a very low level, and was therefore of limited concern. We reiterate our BUY and have raised our target price to SEK515 (500). In our view, Catena has (too much) firepower following its last equity raise and we would like to see more M&A, project activity, or speedy reinvestment. Following the equity raise the stock looks highly valued on a 2025–2026e P/FFO of 21–19x, but that drops to 15–14x adjusted for earnings from our forecast recurring development gains.

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Miika Ihamaki

Miika Ihamaki

Kesko (Hold, TP: EUR17.00) - Technical(ly) weak

Q1 disappointed due to Building & Technical Trade (BTT) profitability well below expectations. We continue to see a mixed case, with stable to gradually improving Grocery Trade (GT) but still-weak Building & Technical Trade. We reiterate our HOLD but have cut our target price to EUR17 (18), after lowering our 2024–2026e clean EBIT and DPS by c4%.

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11h / 10m 11h / 10m 1 EN

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Investing in capital-light income

Scope for continued strong earnings

Sparebank 1 SMN (Buy, TP: NOK161.00) - Continued core revenue momentum

Scope for further generous distributions

Medistim (Hold, TP: NOK190.00) - Sales in Americas weaken

Catena (Buy, TP: SEK515.00) - Time to put the money to work

Kesko (Hold, TP: EUR17.00) - Technical(ly) weak

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