YIT (Sell, TP: EUR5.50) - Structural problems
Rolling 12-month housing starts in Finland are running at 3.4x population growth (42,947 units versus 12,486 inhabitants). The net birth rate is negative, and population growth is being driven by immigration, restrictions on which are among the tightest in Europe. Regional urbanisation helps, but Helsinki-Uusimaa population growth is only 18,966 annually (including immigration). We see a clear risk of housing oversupply, and are concerned production volumes could shrink by half or more longer-term. We have cut our target price to EUR5.5 (6); our recommendation remains SELL.YIT provides services for the construction sector. Co. has two segments: Housing and Business Premises and Infrastructure. The Housing segment is engaged in the development and construction of housing, holiday homes and entire residential areas, with a focus on its own developments. This segment is also engaged in property maintenance in Russia. The Business Premises and Infrastructure segment is engaged in the development and construction of offices, shopping malls, public facilities, assisted living facilities and other business premises; renovation projects; construction of roads, bridges, tunnels, rail and metro stations, ports and power plants; as well as road and street 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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