Veidekke (Hold, TP: NOK90.00) - Failure in the main engine
Veidekke issued its largest ever profit warning this morning, taking a NOK550m writedown in four Norwegian civil engineering projects. In our view, the question now is how long it will take before we see margins normalise. Until we see evidence of this, we expect the shares to be held back with weak Swedish and Norwegian housing markets. We downgrade our recommendation to HOLD (BUY) and cut our target price to NOK90 (105).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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