It's all about sales momentum from here

Selvaag Bolig (Sell, TP: NOK30.00) - Q3 miss, Urban Property covenants

While Q3 was an expected low season, with few deliveries, EPS was below our forecast on higher costs. The POC EBIT margin also fell more than we estimated, but we expect this to improve in the coming quarters with more starts. The company said it has renegotiated the terms with Urban Property, and the NIBD/EBITDA covenant will now use the POC (NGAAP) figures (previously volatile IFRS figures), thereby removing the potential 2025 covenant breach. However, we continue to find consensus recovery ex...

Running interest payments to UP from 2025e

Back to decent profitability in 2026e

Q3e: EBIT NOK -12m vs. cons. NOK -3m. UP: Divi. reduction or cut the full downside of a covenant breach. Trading at ~12x '26e earnings.

KPIs and profits reflect cycle-lows

While the sector has rallied on expectations of a recovery in Nordic CRE and residential starts, there are no signs of an actual recovery yet. With our base case still for a gradual sales recovery in 2026, our longer-term estimates remain below consensus, reflecting slow profit-recognition under IFRS – the latter also underlies our expectation of declining revenues and EBIT YOY in Q3 for several names we cover. Our sector top picks are still Skanska, NCC and Veidekke, while we see downside risk ...

Selvaag Bolig (Sell, TP: NOK30.00) - Recovery stalls in Q3

The recovery seen in recent quarters stalled in Q3, with group unit sales and starts down QOQ – unit sales ended 33% below our estimate (and down 51% QOQ), while unit starts were 79% below our forecast (and down 55% QOQ). The full Q3 results are due at 07:00 CET on 7 November, for which we forecast low nominal EPS. We reiterate our SELL and NOK30 target price.

Positive volume deviation and inventory draws

Selvaag Bolig (Sell, TP: NOK30.00) - EPS beat, but DPS delay

Assisted by two divestments, but also a solid underlying EBIT margin on completed developments, Q2 EPS beat our forecast and Bloomberg consensus. However, given its liquidity needs, Selvaag Bolig decided not to pay out a DPS for H1, and stated that it would assess a 2024 DPS after Q4. We continue to expect an improving market, but find the share price too high on 2024–2026e P/E, and reiterate our SELL and NOK30 target price.

Short-term headwinds, long-term value

Rolling the UP land portfolio

Units in production to trough in Q2

Selvaag Bolig (Sell, TP: NOK30.00) - Flippers are back

With expectations of interest rates having peaked, the flippers are back, with a catch-up effect in the Norwegian new-build market, helping Selvaag Bolig to sell 207 homes net in Q2, well above our forecast of 125. While 95 unit starts were lower than we expected, we estimate a catch-up effect in H2. However, profits remain trailing and we believe the valuation is too high, hence we find better risk/reward elsewhere. We reiterate our SELL, but have raised our target price to NOK30 (25).

Highest NOK sales ever

Expectations running ahead

We continue to see upside potential for diversified construction (Skanska, NCC and Veidekke), but downside risk for residential developers (YIT, JM, Peab and Selvaag Bolig) that have rallied on improving market expectations while new housing sales remains lacklustre. We await the adaptation of the recently EU-approved Energy Performance of Buildings Directive (EPBD). We see a mixed picture for EPS ahead of the Q2 reporting season. We keep a neutral sector view, and still recommend a stock-pickin...

2025 likely the earnings trough

Q1: A tad below, >260 unit sales YTD. UP: Divi . cut likely in a prolonged distressed market. HOLD, TP NOK 40.

Selvaag Bolig (Sell, TP: NOK25.00) - Estimates reduced on Q1 miss

With Q1 EPS 17% below our estimate, we have reduced our 2024e EPS by 3.5%, expecting 279 completed units for the remainder of this year. We see growing risk for 2025e EPS, given the guidance of just 18 completed units in H1 2025, but have only cut our forecast by 4.2%, as we expect starts to pick up later in 2024. While the share price rallied on market recovery expectations, we believe it will take several years for profits to recover. As we find the stock overvalued versus peers, and see a bet...

A tad below, but improved market conditions

Renovation rules now a reality

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. Member states will have two years to incorporate the provisions into their national legislation. While Q1 is Nordic construction’s low season due to winter effects, we see some downside risk to Q1e consensus and longer-term to 2024–2026e EBIT on lower development gains. We recommend a stock-picking approa...

Selvaag Bolig (Sell, TP: NOK25.00) - Inventory spike set to delay prof...

In its Q1 KPI update, sold homes were marginally above our forecast, helped by sales to its main owner. However, of the 236 completed units, only 179 were delivered to clients. Unsold inventory climbed to an all-time high of 126 units at end-Q1 (ATH), and 56 completed sold homes are pending delivery. Due to the inventory build-up, we have cut our 2024e EPS by c29%, but have raised 2025e EPS by c42.5%. We reiterate our SELL and NOK25 target price.

Selvaag Bolig (Sell, TP: NOK25.00) - Q4 miss

Q4 earnings (IFRS and POC) missed our forecasts, and the proposed H2 2023 DPS of NOK1 was below our expectation. While we expect sales to gradually recover in 2024–2026 on lower mortgage interest rates, we do not see the company returning to historical profitability levels in our forecast period due to lagging profit recognition (IFRS – IFRIC15) and accumulated capitalised interest rate expenses raising land bank costs. We reiterate our SELL and NOK25 target price.