reports
- Simen Mortensen
Mixed upside potential, despite market recovery expectations
Pent-up demand and falling interest rates remain the backbone for newbuild recovery expectations. However, as the recovery has not yet started, property developers screen as the most attractive long-term, but visibility remains mixed. Diversified construction companies are more attractive on near-term P/Es, although many seem to be fully valued on solid share-price performance over the past six months. We maintain a neutral sector view; NCC and Skanska are our top picks.
- Niklas Wetterling
Besqab (Hold, TP: SEK27.00) - Early signs of improving market
Q4 POC-based adj. EPS of SEK0.4 was above our forecast of SEK-0.4, and Besqab started 108 units net, just above our estimate of 101. We maintain our unit starts forecasts, but have raised our 2025e adj. EPS due to project delays pushing more completions from 2024, and 2026–2027e on timing effects. However, we expect 2024–2026 IFRS-based earnings to be weak and volatile until merger synergies materialise, and a ramp up in project starts in 2025e. We reiterate our HOLD and SEK27 target price.
- Simen Mortensen
Wide peer valuation range on market recovery expectations
Various waves of expectations for a recovery in newbuild markets have led to volatility in the sector, but an upwards share-price trend overall. Although we still await proof the new-volume market (both residential and commercial) is recovering, consensus is fuelled by falling rates. However, trailing profits under IFRS valuations are record-wide. We maintain a neutral sector view and stock-picking approach.
- Simen Mortensen
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 ...
- Niklas Wetterling
Besqab (Hold, TP: SEK28.00) - Slowly moving in the right direction
Q2 was neutral, with POC-based adj. EPS of SEK-0.1 in line with our forecast. In our view, one positive was the 73 units sold in Q2 (12 in Q2 2023), with Besqab starting sales for five new projects. We have made limited estimate revisions. On an IFRS basis, we expect weak and volatile 2024–2025 earnings until merger synergies materialise, and ramped-up project starts from 2025. A key factor to monitor is the supply of used homes, which likely needs to be absorbed prior to a recovery within new h...
- Simen Mortensen
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...
- Niklas Wetterling
Besqab (Hold, TP: SEK28.00) - Besqab 2.0
We have updated our estimates following the merger of Aros Bostad and Besqab. On an IFRS basis, we expect weak and volatile 2024–2025 earnings until synergies materialise, with gradually ramped-up project starts from 2025. We reiterate our HOLD and SEK28 target price.
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