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Simen Mortensen
  • Simen Mortensen

EPBD the big story this week

The Energy Performance of Buildings Directive (EPBD) was approved on 12 April, requiring the modernisation of existing real estate in the EU, and will soon enter the Official Journal of the EU. In other news, KMC Properties bought a new asset and appointed an interim CEO, JM got a new CEO, while Castellum announced a divestment and new leases, and Atrium Ljungberg kicked off Q1 reporting season. The weighted-average implied EBITDA yields on the stocks we cover are 4.74% for 2024e and 5.01% for 2...

Simen Mortensen
  • Simen Mortensen

Fully valued near-term

We maintain a neutral sector stance, but see near-term setbacks and consider risks tilted to the downside near-term due to strong sector performance in the past month, while market interest rates have risen. We expect two years of zero NAV growth, on average, due to yield expansion, and the sector theme to be deleveraging, with limited capex. We see few potential company-specific catalysts, leaving share prices largely driven by macro factors. We consider the sector fully valued near-term, at an...

Simen Mortensen
  • Simen Mortensen

Vacancy uptick in Stockholm

This week, Citymark announced vacancies in the Stockholm office market are now higher than during the 2007–2008 financial crisis. Selvaag Bolig (SELL, TP NOK25) released KPIs for Q1, where unsold inventory was at an all-time high. Norwegian house prices rose 0.9% in March and 5.9% YTD. Entra announced leases. Corem announced that it aims to issue bonds. The weighted-average implied EBITDA yields on the stocks we cover are 4.62% for 2024e and 4.88% for 2025e.

Simen Mortensen
  • Simen Mortensen

Transactions, debt repurchase, and National Transport Plan

This week, Corem, Catena and Vasakronan (which re-entered the M&A arena after a more than 5-year absence) announced property transactions, SBB saw its share price rise by 29% on the week after retiring long-term debt, and the Norwegian government unveiled a somewhat smaller budget in its latest National Transport Plan (NTP), with a weak read-across to the local construction and consultancy sector, in our view The weighted-average implied EBITDA yields on the stocks we cover are 4.54% for 2024e a...

Simen Mortensen
  • Simen Mortensen

Insider transactions, SBB rating lowered and lease contracts

There were several insider transactions this week. Also, SBB offered to buy back certain hybrid and senior bonds, and credit agencies lowered their ratings in response. Corem announced new leases, and a large Norwegian real estate syndicate was taken over by one of its bondholders. The weighted-average implied EBITDA yields on the stocks we cover are 4.60% for 2024e and 4.86% for 2025e.

Olav Thon Eiendomsselskap ASA: Update to credit analysis

Our credit view of this issuer reflects its status as a leading shopping center operator in Norway with low leverage against structural risks as increasing penetration of e-commerce.

Simen Mortensen
  • Simen Mortensen

Modest 2024–2026 growth outlook

We expect flattish 2024–2025 NAVps growth for our Swedish coverage, due to too-low asset writedowns in 2023, but 7% in 2026e assuming stabilised yields. We forecast a 2024–2025 FFOps CAGR of 5%, held back by: 1) maturing interest rate hedges; 2) expected rental growth slow-down; and 3) deleveraging hurting investment capacity. However, we consider this priced in at a sector NAV median discount of 27%. We maintain a neutral sector stance, and our top picks are Catena, Castellum, Nyfosa and Pandox...

Simen Mortensen
  • Simen Mortensen

Last Q4 report and other updates

Last Q4 report and other updates Q4 reporting season for our covered names concluded this week with SBB’s results. Citycon has taken over Kista and issued a bond, and we cut our target price. Balder bought back hybrid bonds, Nyfosa is evaluating strategic options for its Söderport holding, and Pandox agreed to sell DoubleTree by Hilton Montreal. The weighted-average implied EBITDA yields on the stocks we cover are 4.85% for 2024e and 5.13% for 2025e.

Simen Mortensen
  • Simen Mortensen

Q4 reports flurry

Q4 reports flurry This week, Nyfosa reported solid Q4 results, but the market focused on it scrapping its dividend for 2023. Catena’s NAV grew by c7% QOQ in Q4, due to a landbank write-up, while Sagax reported 15% YOY PFPMPS growth for 2023. Corem also cut its dividend for 2023 and NAV dropped by 14% during the quarter. For KMC Properties, one-offs resulted in Q4 EBIT missing our estimate, while Citycon completed a share issue of EUR48.2m. The weighted-average implied EBITDA yields on the stock...

Moody's affirms Olav Thon Eiendomsselskap ASA's Baa2 rating, outlook s...

Moody's Investors Service (Moody's)  has today affirmed the Norwegian real estate company Olav Thon Eiendomsselskap ASA's (Olav Thon, OTE or the company) long-term issuer rating of Baa2. The outlook for Olav Thon remains stable. "Olav Thon's Baa2 rating has been affirmed as a reflection of the com...

Simen Mortensen
  • Simen Mortensen

Olav Thon (Buy, TP: NOK250.00) - Mixed Q4, but underlying in line

The value of the assets was written down c3.3% QOQ giving a reported Q4 loss. However, with the NAV at NOK360/share, there is still ample upside potential in the stock, in our view. The Q4 rental income beat our forecast, thus EBIT was also better than we expected. However, the beat was driven by turnover-based rents while the rental level in the portfolio at end-2023 was broadly in line with our forecast. We have cut our 2024–2026 FFO by c3–4% due to higher market interest rates. We reiterate o...

Simen Mortensen
  • Simen Mortensen

Mixed Q4s and a minor equity raise

Mixed Q4s and a minor equity raise This week, Castellum reported soft Q4 results, with net lettings of SEK-51m and soft market comments. Wihlborgs raised its DPS and carried out a modest asset writedown of only 0.5%. Hufvudstaden’s occupancy was solid, while Kojamo’s 2024 FFO guidance was below consensus. In other news, Balder said it would carry out a minor equity raise of cSEK1.2bn. The weighted-average implied EBITDA yields on the stocks we cover are 4.8% for 2024e and 5.2% for 2025e.

Simen Mortensen
  • Simen Mortensen

Widening gap in asset writedowns

Widening gap in asset writedowns This week, Fabege reported solid Q4 results, but with a rather soft rental market outlook. Wallenstam’s Q4 PFPM fell 19% YOY, and the report surprisingly included no asset writedowns, while Entra reported a 4.2% QOQ drop in asset values, taking the decline since its peak values to c16%. Pandox’s Q4 operating results were mixed, but it updated its guidance for ongoing investments, resulting in a SEK300m NOI uptick for 2026e. The weighted-average implied EBITDA yi...

Simen Mortensen
  • Simen Mortensen

Q4s, a tender offer and a bond issue

Q4s, a tender offer and a bond issue This week Atrium Ljungberg (HOLD, TP SEK220) reported solid Q4 figures and Corem (HOLD, TP SEK10) successfully issued a bond which reduces its refinancing risk. Entra (HOLD, TP NOK120) strengthened its balance sheet by selling its Trondheim portfolio for NOK6.5bn, and Aros Bostad (HOLD, TP SEK30) offered to acquire Besqab. In other news, Swedish Construction & Homebuilders reported mixed Q4 results. The average implied EBITDA yields on the stocks we cover ar...

Simen Mortensen
  • Simen Mortensen

Raising our sector view to neutral

After almost two years with a negative stance, we have turned neutral on the sector as we are less concerned about interest-coverage ratios and could see improved sentiment ahead of the first policy rate cut. We expect the transaction market to pick-up in 2024, helping some names to continue deleveraging, reducing sector risks. However, as the market is pricing in around six interest rate cuts by end-2025, together with a ‘soft landing’ economic scenario, we expect high market volatility if mark...

Simen Mortensen
  • Simen Mortensen

Refinancings and company updates

Refinancings and company updates This week, we updated our estimates for the recent pivot in market interest rates for SBB, Balder, and Wallenstam. Kojamo and Studentbostäder i Norden carried out debt refinancings. Atrium Ljungberg announced a final contract for Mälarterrassen at Slussen. Oscar Properties announced an asset sale. The weighted-average implied EBITDA yields on the stocks we cover are 4.40% for 2023e and 5.13% for 2024e.

Simen Mortensen
  • Simen Mortensen

Bond improvements, new leases, but still-weak transaction markets

Bond improvements, new leases, but still-weak transaction markets Castelum issued a SEK600m bond and Balder issued a SEK250m bond tap. Transaction market volumes remain low, but improving. David Mindus has been proposed as the new chairman of Nyfosa, and Wihlborgs and Entra announced rental agreements with renovation projects. The weighted-average implied EBITDA yields on the stocks we cover are 4.42% for 2023e and 5.09% for 2024e.

Simen Mortensen
  • Simen Mortensen

Olav Thon (Buy, TP: NOK250.00) - Nearing new highs; still undervalued

In line with peers, Olav Thon has rallied with the pivot in market interest rates. The share price is close to all-time-highs, but in our view is still undervalued, with one of the most attractive valuations in the sector. For the Q4 results, due at c08:00 CET on 16th February, we expect c13% adj. EBIT growth YOY. We have raised our target price to NOK250 (230) and reiterate our BUY.

Simen Mortensen
  • Simen Mortensen

A share rally, postponed interest payments, an IOC, and a bankruptcy

A share rally, postponed interest payments, an IOC, and a bankruptcy Since our most recent update before Christmas, SBB announced it will postpone interest payments on hybrid bonds, we initiated coverage on Sagax, and a creditor has claimed Oscar Property bankrupt. Also, Balder issued a minor bond, Entra sold three assets, and Citycon converted more bonds. The weighted-average implied EBITDA yields on the stocks we cover are 4.42% for 2023e and 5.03% for 2024e.

Simen Mortensen
  • Simen Mortensen

Sector continues to rally

Sector continues to rally This week, the real estate index continued to rally on falling long-term interest rates, and we expect the next potential sector catalyst to be an improvement in the primary bond market. We raised our target price on Nyfosa this week due to falling interest rates, Atrium Ljungberg cut its dividend policy, and Hufvudstaden’s tenant the Swedish FSA announced it will not renew its lease at end-2024. The weighted-average implied EBITDA yields on the stocks we cover are 4.6%...

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