YIT (Sell, TP: EUR1.40) - Q1 misses on EBIT and KPIs

EBIT of EUR-8m was below our estimate and Vara consensus, and unit sales missed too. The inventory of unsold completed homes for sale continued to increase. The company states it will continue to focus on its capital releases, with sale of its stake in the Tripla shopping mall and reducing unsold inventory as the major moving parts. However, YIT’s markets are weak and its debt remains elevated. We reiterate our SELL and EUR1.4 target price, while we believe new equity might be also needed.

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...

YIT Oyj: 1 director

A director at YIT Oyj maiden bought 12,000 shares at 1.666EUR and the significance rating of the trade was 52/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years clearly...

YIT (Sell, TP: EUR1.40) - A bandage, not a remedy

This morning, YIT announced a refinancing package of EUR100m in liquidity from new equity, a convertible bond and delayed loan amortisations. While this removes the near-term liquidity risk, we believe it remains overleveraged and should continue to focus on further divestments and reducing debt. With a weak market, we still expect low nominal EPS, having further reduced our 2024–2026e on the increased share count and funding cost assumptions. We reiterate our SELL and EUR1.4 target price.

YIT (Sell, TP: EUR1.40) - 2024 also set to be challenging

We expect improving the balance sheet with capital releases and asset disposals to remain management’s focus in 2024, with the guidance including adj. EBIT of EUR20m–60m due to challenging markets, particularly in Finland. Given current CRE markets, we are concerned the Tripla Mall sale could end up below its EUR192m equity value. We also remain concerned YIT might need to raise equity this year. As expected, the Q4 results were weak, and no DPS was proposed for 2023. We reiterate our SELL and E...

Renovation regulation approaching

The ‘trilogue’ process regarding the Energy Performance of Buildings Directive (EPBD) that aims to double renovation rates of commercial and residential properties has been concluded, and the new legislative text is due to be published in spring 2024. Also, the recent pivot in market interest rates has improved the sector outlook, but with long profit lead times. Names with high short interest (JM and SBO) have rallied the recently, but we believe the current valuation underestimates the profit ...

YIT (Sell, TP: EUR1.40) - Lowering expectations

In recent weeks, YIT has issued several announcements as it adapts to weak markets and works to improve its financial situation. Since our Q4 preview on 4 January, the company has announced it will close its Swedish operation, having sold its equipment services to Renta and issued a profit warning on falling asset values. We have cut our estimates for Q4 and 2023–2026e, reduced our target price to EUR1.4 (1.5), and reiterate our SELL.

YIT (Sell, TP: EUR1.50) - First obstacle cleared

On 21 November, YIT announced it had received a EUR140m new term loan and will redeem its 2024 March bond (EUR100m). YIT also sold its renewable energy business and will book a EUR46m non-recurring gain with its Q4 results (due at 08:00 CET on 9 February). Only EUR25m from the asset sale is fixed, with payments in 2024e (EUR10m) and 2025e (EUR15m), and much of the guided Q4 profit is a variable settlement to be paid in 2032e. We reiterate our SELL, but have raised our target price to EUR1.5 (1.2...

Political agreement for EPBD

Yesterday evening saw a political agreement and the conclusion of the final trilogue meeting on EPBD revisions. There are some revisions to earlier drafts, but EU member states will now prepare requirements for lower energy building stocks. We believe that once in place this regulation should be a positive for construction companies, but CAPEX for real estate companies.

YIT (Sell, TP: EUR1.20) - Unquantifiable deleveraging

YIT’s balance sheet disclosures are one of the weakest in the sector. While it aims to divest EUR400m by end-2024, details on these assets and investments are limited. Unlike peers, YIT has not written down shopping centre asset values, and we expect history to be repeated with losses in divestments. The Q3 results fell short of our forecasts, as price cuts hit EBIT more than expected. We reiterate our SELL and have reduced our target price to EUR1.2 (1.3).

YIT (Sell, TP: EUR1.30) - Capital release and refinancing focus

We once again expect a low quarterly EPS, in line with consensus. With two asset sales at undisclosed prices in Q3, we will focus on how much of the planned EUR400m capital release was achieved in the quarter. YIT’s need to refinance is another key focus, where we expect new equity may be necessary. The Q3 results are due at c8:00 CET on 1 November. We reiterate our SELL and EUR1.3 target price.

Bright spots few and far between

With only three BUYs, we consider bright spots in the sector – just as residential newbuild and commercial development sales in today’s market – few and far between. New housing sales and commercial property markets have been hit by rising interest rates, and the EU’s Energy Performance of Buildings Directive (EPBD) – which holds potential upside – has been delayed. We still prefer stocks with no (or limited) pure residential exposure; our top picks in construction are Skanska and NCC, but, desp...

YIT (Sell, TP: EUR1.30) - In a tough spot

While Q2 reported EBIT disappointed, adj. EBIT (excluding ‘one-offs’) was stronger than expected, although these ‘one offs’ appear to be ‘recurring’ and over the past six years or so have amounted to EUR207m or c45% of the current market cap. YIT announced a strategic review of various assets and operations, looking to release EUR400m in capital by end-2024; however, markets remain tough, and we are concerned the company might need to raise equity to deleverage. We reiterate our SELL, but have r...

Compagnie d'Entreprises CFE SA - Strategy, SWOT and Corporate Finance ...

Summary Compagnie d'Entreprises CFE SA - Strategy, SWOT and Corporate Finance Report, is a source of comprehensive company data and information. The report covers the company's structure, operation, SWOT analysis, product and service offerings and corporate actions, providing a 360˚ view of the company. Key Highlights Compagnie d'Entreprises CFE SA (CFE) is a provider of construction services. It offers the development of real estate, multi-technical, dredging, and marine engineering. The com...

Building trouble in the private sector

The building outlook remains grim, with very weak new private housing sales and a tough commercial property market. However, the overall picture is eased slightly by support from the public sector and civil engineering, and a likely renovation wave from the Energy Performance of Buildings Directive (EPBD). However, we still prefer stocks with no (or limited) pure residential exposure, and retain our neutral sector stance. Veidekke and Skanska are our preferred picks in construction, but we expec...

Northern Lights

YIT (Sell, TP: EUR1.00) - High leverage in a weak market

YIT said it aims for a capital release of cEUR400m under its transformation programme. However, the transaction market for the projects it seeks to divest seems to be as weak as the housing market in which YIT operates. In line with consensus, we expect low absolute EBIT profits and minor EPS in Q2. We note its asset-sale ambitions but are concerned that the weak market due to high interest rates could lead to sales below book values. We reiterate our SELL and EUR1 target price.

YIT (Sell, TP: EUR1.00) - Capital release or equity raise likely neede...

Q1 EBIT adj. was in line with the profit warning, and the challenging Finnish residential market saw a further decline units sold. We are concerned YIT may have to raise equity if it does not divest assets. However, in current markets, such divestments may only be possible below book values. With our below-consensus forecasts and its high financial leverage, we have downgraded to SELL (HOLD) and cut our target price to EUR1 (2.3).

Northern Lights

YIT (Hold, TP: EUR2.20) - Weaker faster than expected

Following the Q1 profit warning and lowered guidance for Q1 and 2023e, we have cut our already consensus-low forecasts. We continue to find the risk/reward better elsewhere, but note the very low P/B ratio already reflecting much of the negatives. We have reduced our target price to EUR2.2 (2.4) and reiterate our HOLD.