Wallenstam (Sell, TP: SEK42.00) - Soft market outlook in key segment
We reiterate our SELL due to market-factor headwinds. We see a risk of fewer development project/profits, which could hurt the already weak FFO (our estimate: 21x P/FFO), as fewer interest costs will be capitalised in the P&L. We do not believe this is reflected in consensus. We also see potential for further weakened market sentiment for rental residential given our expectation of datapoints indicating rising yields for these assets in H2. We consider Wallenstam a quality company with high-quality assets, but still believe the valuation is too demanding. We have cut our target price to SEK42 (47.5).Wallenstam Byggn is a property company that builds, develops and administers properties for sustainable living and the pursuit of business in Stockholm and Gothenburg. Co. is also a producer and supplier of renewable energy through its subsidiary, Svensk NaturEnergi (NaturEnergi). Operations were run in three business areas - properties in the Gothenburg and Stockholm regions and renewable energy through NaturEnergi. The two property regions also include responsibility for leasing and management of housing and commercial premises together with planning and construction work. Operations at NaturEnergi consist of both the generation of, and trade in, renewable energy.
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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