3% organic is weak, but underlying is fine

Q1: '24 low point, meagre 3% growth pushes market share lower. Demant doing well overall beyond the 3% figure. HOLD, TP 340 (350) on 3% underlying '24e EBIT cut.

Demant (Buy, TP: DKK400.00) - Better quarters should lie ahead

Q1 organic growth was a soft c3% YOY on tough comparables, reflecting growth of c4% for Hearing Aids and c7% for Diagnostics, but a weak c0% for Hearing Care due to slowing momentum in France. We expect 2024 to be back-end loaded and driven by Oticon Intent. The 2024 guidance was unchanged for key lines, including organic growth of 4–8%, EBIT of DKK4.6bn–5.0bn, and share buybacks of DKK2.0bn+. We reiterate our BUY and DKK400 target price.

ODDO BHF SECURITIES MORNING NEWS – DETAILED COMMENTS 05/06/2024

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ODDO BHF SECURITIES MORNING NEWS – COMMENTAIRES DETAILLES 06/05/2024

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Demant A/S : Slower start to 2024, weaker dynamics in France, UK and C...

>Q1 review – slower organic growth leads to miss on sales forecast - Demant’s Q1 revenues of DKK 5,423m (-1.5% y-o-y,) were driven by organic growth of 3% (vs ODDO BHF 6.2%/consensus 4.7%) and were -3%-2% vs ODDO BHF/consensus. The Communication business is excluded from the operating development as the asset is booked as discontinued operation. No bottom line was reported on a quarterly basis.Hearing aids impacted by flat growth in Europe - Hearing a...

Q1 not great, but relief looks warranted

Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 3 May 2024.

Q1 reporting continues

This week, Castellum and Balder reported Q1 results, Wihlborgs announced a new lease, and SBB corrected 2023 profits and dissolved Unobo. Norges Bank has signalled interest rates might stay higher for longer. K2A has halted preference dividend payments. The weighted-average implied EBITDA yields on the stocks we cover are 4.69% for 2024e and 4.97% for 2025e.

Demant (Buy, TP: DKK400.00) - 2024 likely to be back-end loaded

We forecast Q1 organic revenue growth of 4.7% YOY (in line with consensus), driven by Hearing Care (we forecast 4.9%) and Diagnostics (we forecast 8.4%), while Hearing Aids faces a tough YOY comparable (we forecast 3.6%). We expect 2024 to be back-end loaded and driven by Oticon Intent. We expect maintained 2024 guidance of 4–8% organic growth, c1% M&A growth, c-1% FX, and EBIT of DKK4.6bn–5.0bn. We reiterate our BUY and DKK400 target price.

Weekly Real Estate Matrix

Performance and valuation data for Nordic real estate stocks as of 26 April 2024.

Q1 reporting season kicks off

Q1 reporting season kicked off this week, with results from Nyfosa, Entra, Wallenstam, Fabege, KMC Properties, Pandox, and Catena. In other news, Public Property Invest is to be listed on the Oslo stock exchange on 29 April. The weighted-average implied EBITDA yields on the stocks we cover are 4.75% for 2024e and 5.04% for 2025e.

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...

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...

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.

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...

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.

Demant (Buy, TP: DKK400.00) - Improved long-term outlook

At its CMD, Demant updated its long-term outlook. It now targets 8–10% LCY growth (7–10%) including 6–8%-points organic growth and c2%-points M&A growth, and still sees incremental EBIT margin expansion. It expects the hearing-aid market to grow 4–6% p.a. in value (2–5%), as ASP is now guided fairly flat. We are positive on the Sirius-based Oticon Intent launch. We reiterate our BUY, and have raised our target price to DKK400 (375).

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...

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.