Hemfosa - Terminating coverage

ABGSC ceases coverage of Hemfosa BUY is our final recommendation SEK 110 is our final target price

Sector down 9% in a week

On the back of coronavirus uncertainty, the sector is down 9% in a week, but following the recent strong sector performance, share prices are at similar levels as a month ago. We expect very limited effect on earnings the coming quarters in the Nordic real estate sector because of the coronavirus. On the positive side for the sector, this supports the low interest rate environment, as 10-year swaps (in both SEK and NOK) are back at record-low levels, widening the yield gap, which is now back abo...

Four HOLDs following Q4 reports

Following last week’s Q4 reports we have four HOLD recommendations. The average implied EBITDA yields on our covered stocks are 3.76% for 2019e and 3.94% for 2020e.

Q4-reports and a terminated lease

Despite popular belief, community service properties are not a relative ‘safe-haven’; and was again proven this week with an 11.000sqm vacancy. Q4 reporting season is in full swing . The average implied EBITDA yields on our covered stocks are 3.78 % for 19e and 3.97 % for 20e.

Q4 season underway

Castellum reported a solid Q4, with total net lettings bouncing back to a positive figure, likely helped by signed leases with its fully owned co-working company. NCC’s Q4 supported our expectations of improving EBIT margins, and management repeated its view that the new prudential accounting adopted in 2019 meant several large projects were still running on low margins. The average implied EBITDA yields on our covered stocks are 3.82% for 2019e and 3.98% for 2020e.

Northern Lights

Hemfosa (No_rec, TP: SEK) - Discontinuing coverage

Following SBB’s acquisition of Hemfosa, we have discontinued coverage of Hemfosa. Our last published recommendation, target price and estimates should no longer be relied upon.

Tightening yield gap

The recent share price rally and modest long-term interest rate rise have squeezed the yield gap to its lowest level in nine years. As there are no signs of improved macro fundamentals, the negative net letting trend looks set to continue in H1 2020. We see downside potential in the Nordic real estate sector going into the Q4 reporting season, and reiterate our negative sector view.

M&A settlements and investments

Catena invested SEK235m in logistics assets in Denmark, while Wihlborgs acquired an office building in Denmark for DKK100m. Hembla is about to delist, and SBB updated settlement dates in the pending Hemfosa bid. The average implied EBITDA yields on our covered stocks are 3.28 %for 2019e and 3.45 % for 2020e.

Office letting and transactions

In late December Fabege signed 2019’s second-largest letting contract in Sweden worth cSEK70m per year –with TietoEVRY for a new office project in Solna. December finished with a high number of transactions, which is the normal seasonal pattern; SBB and Nyfosa were particularly active. Transaction volumes in Sweden hit an all-time high in 2019. Defaults by retailers continued. The average implied EBITDA yields on our covered stocks are 3.63% (2020e) and 3.73% (2021e).

Hemfosa Fastigheter Ab: 4 directors sold

Four Directors at Hemfosa Fastigheter Ab sold 10,240 shares at between 125.000SEK and 127.500SEK. The significance rating of the trade was 69/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors...

HEMFOSA FASTIGHETER AB sees an upgrade to Positive due to a better fun...

The general evaluation of HEMFOSA FASTIGHETER AB (SE), a company active in the Real Estate Holding & Development industry, has been upgraded by the independent financial analyst theScreener with the addition of a star. Its fundamental valuation now shows 4 out of 4 possible stars while its market behaviour can be considered as defensive. theScreener believes that the additional star(s) merits the upgrade of its general evaluation to Positive. As of the analysis date December 17, 2019, the closin...

Recent updates and a transaction

On Thursday, we upgraded Fabege to BUY (HOLD) and raised our target price to SEK162 (145) based on peer property transactions and expectations of increased net-lettings. In other news, Norwegian Property has acquired a property in central Oslo at Karl Johan Street for NOK710m. We also recently reiterated our SELL on Catena, but raised our target price to SEK320 (260) based on strong peer performance in the logistics/industrial segment and its recent land bank acquisition. The average implied EBI...

Initiating coverage and shareholder support for takeover offer

This week, we initiated coverage of SBB with a SELL and SEK17 target price, and published an update on Pandox. In other news, Hemfosa has acquired properties in Finland and Sweden, and there is large shareholder support for the public takeover offer from SBB. The average implied EBITDA yields on our covered stocks are 3.75% for 2019e and 3.94% for 2020e.

Bank margins could rise, an IPO, and developments

This week the Swedish FSA confirmed it wants to raise risk weights on commercial real estate loans. On Friday, K-Fastigheter had its first day of trading. In other news, Castellum started a development, Fastpartner renames its common shares, and Wihlborgs announced a lease. The average implied EBITDA yields on our covered stocks are 3.75% for 2019e and 3.94% for 2020e.

Transactions and struggling retail tenant

Selvaag Bolig is planning to sell much of its landbank to Urban Property. Pandox has entered an agreement to acquire seven hotel properties with a total of 1,532 rooms in Germany from HR Group. Another large retail tenant at NK, Hufvudstaden’s department stores, is facing financial problems. The average implied EBITDA yields on our covered stocks are 3.80% for 2019e and 3.99% for 2020e.

Northern Lights

A split and a merger

Veidekke has received an offer for its Property Development division. Samhallsbyggnadsbolaget i Norden has offered to acquire Hemfosa. Olav Thon’s report showed FFO and NAV growth in the Q3 results. The average implied EBITDA yields on our covered stocks are 3.84 % for 2019e and 4.03 % for 2020e.

Hemfosa (Hold, TP: SEK121.00) - HOLD on bid

Following Samhallsbyggnadsbolaget i Norden’s (SBB) equity/cash offer, we have raised our target price on Hemfosa to SEK121 (110), in line with the bid, but downgraded our recommendation to HOLD (BUY) given the limited potential upside. We do not expect any competing bids, and Hemfosa’s board has recommended the bid to shareholders. We therefore recommend locking-in profits.

Powerpoint Sector Report - Weekly Real Estate Matrix

Performance and valuation... ...for Nordic real estate Prices as of 8 November 2019