Veidekke (Buy, TP: NOK105.00) - Pros beat cons at current valuation
Property Development earnings fell faster than we had expected, fuelling the Q1 miss, while Construction and Industry EBIT margins beat our forecasts. Despite our lower estimates and expectations that the residential markets are entering a cyclical low, we see positives elsewhere, particularly in civil engineering, Sweden’s residential market stabilising in 2018e, and Veidekke is trading at a 20% discount to peers on P/E n12m, we have raised our target price to NOK105 (95), and given the potential upside we upgrade to BUY (HOLD).Veidekke is a Scandinavian construction and property development company. Co.'s segments are grouped according to activity. The construction segment comprises mainly the construction of buildings and infrastructure. The property segment comprises the development of sites, property development and the sale of property (primarily residential). The industry segment comprises the production of aggregates (crushed stone and gravel) and asphalt, the laying of asphalt and road maintenance.
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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