Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 7 June 2024.

Initiating with a BUY, office-space reduction, and personnel changes

This week, we initiated coverage with a BUY on Public Property Invest, a key tenant for Fabege reduced its office space, Hufvudstaden made management changes, we updated our estimates for Besqab following the merger with Aros Bostad, and transaction volumes in May rose from low levels. The weighted-average implied EBITDA yields on the stocks we cover are 4.38% for 2024e and 4.78% for 2025e.

Norwegian Air Shuttle (Buy, TP: NOK19.00) - May traffic statistics

We consider this a weak report for Norwegian Air Shuttle, with a yield below expectations. We expect 2% negative revisions to consensus 2024e adj. EBITDA and believe a 3–5% negative share price reaction is warranted.

Group sales 0.6% below in May

NAS revenues 2% below, Widerøe 12% better on higher yield/load. Group revenues 0.6% below.

Norwegian Air Shuttle (Buy, TP: NOK19.00) - Pilot strike called off

Norwegian Air Shuttle announced Saturday morning that it has reached an agreement with the pilots and that the strike is off. We believe the pilots’ salary increase is on the high side, but the cost of a potential strike could have been significantly worse. With the stock trading at a 30% discount to the historical average on P/E and as this has been a key investor concern, we believe a positive share price reaction is warranted.

Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 31 May 2024.

A bit of everything

This week, Wihlborgs bought new assets, Citycon sought the conversion of its 2025 hybrid bond, SBB announced a new JV, dismantled an old one, and set a record date for the remaining 2023 dividends, Balder issued four bonds, while Prisma Properties is aiming for an IPO. The weighted-average implied EBITDA yields on the stocks we cover are 4.42% for 2024e and 4.82% for 2025e.

Norwegian Air Shuttle (Buy, TP: NOK19.00) - Potential pilot strike loo...

We reiterate our BUY on Norwegian Air Shuttle, but have cut our target price to NOK19 (21), reflecting negative estimate revisions due to slightly lower yield assumptions and increased earnings risk from the potential pilot strike.

Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 24 May 2024.

Bond margin improvement and other news

This week, Sagax issued a 6-year EUR500m fixed bond – the first ‘large and longer-duration’ EUR bond issue by a listed Swedish real estate company in around two years. Also, Fitch warned about the liquidity situation in SBB Norden, Emilshus raised equity, and K2A initiated a written procedure to extend its bonds. The weighted-average implied EBITDA yields on the stocks we cover are 4.38% for 2024e and 4.78% for 2025e.

Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 17 May 2024.

Equity raise, two more Q1 reports

This week, Nyfosa raised SEK1.7bn in equity, and Citycon and Olav Thon reported their Q1 results. Real estate stocks have performed well globally since the latest US CPI print. The weighted-average implied EBITDA yields on the stocks we cover are 4.32% for 2024e and 4.71% for 2025e.

Bergman & Beving (Hold, TP: SEK250.00) - Down to HOLD after revaluatio...

The Q4 report showed weak growth, but a solid profit margin and FCF generation. We have marginally revised our forecasts for 2024/25-2026/67e, following the results. After a solid share price performance and substantial expansion of valuation multiples, we find the risk/reward more neutral. We have downgraded to HOLD (BUY), with an increased target price of SEK250 (200), owing to our new 2026/27e valuation base, which suggests less near-term revaluation potential.

Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 10 May 2024.

Swedish policy rate cut, an upgrade and a downgrade

Sweden’s Riksbank cut the policy rate this week to 3.75% (4.0%); our estimates are based on another four cuts by end-2025. During the week we upgraded Veidekke to BUY, downgraded Castellum to HOLD, and reiterated our HOLD on Kojamo and SELL on Hufvudstaden and Sagax. The average implied EBITDA yields on the stocks we cover are 4.40% for 2024e and 4.79% for 2025e.

Hufvudstaden (Sell, TP: SEK115.00) - Vacancies on the rise

The Q1 results provided the market with no relief for its concern about the Stockholm office and retail rental market strength, as the company missed on revenues and saw an increased vacancy rate. We have cut our EPS by 5–6% for 2023–2026 and our target price to SEK115 (120), and reiterate our SELL.

Storskogen (Buy, TP: SEK9.25) - Another year of deleveraging focus

Q1 was weak, but above our expectations, prompting only limited forecast changes. The near-term focus remains on internal efficiency, returning to organic EBITA growth and deleveraging (end-Q1 net debt to EBITDA was still high at 3.31x all-in), suggesting a less-eventful 2024 from a corporate action perspective and renewed growth ambitions. We reiterate our BUY on still-strong valuation support (2024–2026e FCF yields of 17–22%), and have increased our target price to SEK9.25 (8.70).

Clear increase in vacancies

Norwegian Air Shuttle (Buy, TP: NOK21.00) - April traffic statistics

We consider this a slightly negative report. For legacy Norwegian Air Shuttle, the yield was slightly below our expectations but with higher PAX, while the Widerøe load and yield missed slightly. We expect 1% negative estimate revision to consensus 2024 EBITDA on the back of the report, and believe a slight negative share price reaction is warranted.

Norwegian Air Shuttle (Buy, TP: NOK21.00) - April traffic statistics p...

The April traffic statistics are due at 08:00 CET on 7 May. We expect Norwegian Air’s figures to be affected by the early timing of Easter and ramp up of capacity ahead of the summer season, forecasting a lower yield and load YOY. We reiterate our BUY and NOK21 target price.