Improving market - BUY the leader

EBIT down 4-1%. Uptick in sold units to continue in Q2'24e. Housing market rebound in the making - BUY

JM AB: 2 directors

Two Directors at JM AB bought/maiden bought 1,550 shares at between 183.170SEK and 184.000SEK. The significance rating of the trade was 68/100. 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 ov...

Jm Ab (Sell, TP: SEK155.00) - Q1 EPS miss

Higher tax costs than forecast meant Q1 EPS missed expectations. Sales of new homes were broadly in line with our estimate – but starts were below, prompting us to cut our 2024e EPS by c19% and 2025e by c5%. However, expecting a catch-up effect, we have raised our 2026e EPS by c16%. In our view, the valuation is already pricing in a market recovery, while we still see a risk of setbacks, mainly from fewer and slower interest rate cuts, and we see a better risk/reward elsewhere in the sector. We ...

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...

Jm Ab (Sell, TP: SEK155.00) - Hockey-stick recovery unlikely

The share price has rallied on the peak interest rate narrative, improved consumer sentiment and short covering, but new housing sales remain weak QTD. We expect Q1 profit to miss Infront consensus on price cuts, but starts to be above (results due at 08:00 CET on 23 April). Overall, we believe the share price has run too far ahead of the recovery and profit lead times are much longer than reflected in market expectations. We reiterate our SELL, but have raised our target price to SEK155 (130).

Jm Ab (Sell, TP: SEK130.00) - KPI boost, but weak margins

Driven by investor package sales, JM started and sold more units than expected in Q4. However, even without property writedowns of SEK245m, profit was weaker than expected. Unlike peers, JM reports profit based on a percentage of completion accounting (meaning project starts and units under production). Given the weak Q4 EBIT margin run rate in the ongoing portfolio, we have reduced our 2024–2026e EBIT margins. We reiterate our SELL and have reduced our target price to SEK130 (140) on our lowere...

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 ...

Jm Ab (Sell, TP: SEK140.00) - Downturn was deep, effects are long

Despite having raised our unit sales and starts forecasts to reflect a faster market recovery, expecting sales to reach the 2019 level by 2026, we believe EPS is unlikely to recover to ‘pre-slowdown’ levels until after our forecast period. With the share price up on falling interest rates, we believe the market underestimates the profit time lag and magnitude of the 2023–2024 sales drop. We reiterate our SELL, but have raised our target price to SEK140 (100) due to an improved market outlook on ...

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.

Jm Ab (Sell, TP: SEK100.00) - Significant miss in Q3

JM’s EBIT (POC) was sharply below even our lowest-in-consensus forecast on price cuts and weak volume. The higher interest rates hurt demand for new homes, but also affected JM’s building costs; JM has cSEK16bn in debt (IFRS). In our view, focus should be deleveraging, but with a declining sales ratio and weak demand, the risk is for more price cuts and possibly new equity. We are concerned the ‘surplus value’ for the landbank may be reduced in Q4. On lower estimates, we have cut our target pric...

Jm Ab (Sell, TP: SEK130.00) - Weaker for longer

With the inventory of homes for sale in Sweden still at all-time highs, consumer affordability ratios and demand for new homes are suffering due to higher mortgage rates. Having reduced our expected speed of the housing market recovery, as rates look set to be higher for longer, we have cut our 2023–2025 unit sales estimates. We see downside risk ahead of the Q3 results (due at 08:00 CET on 25 October). We reiterate our SELL and have cut our target price to SEK130 (135).

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...

Northern Lights

Jm Ab (Sell, TP: SEK135.00) - Q2 hurt by weak markets

JM reported Q2 EBIT (POC) 23% below our forecast and 27% below Infront consensus, hit by cost-cutting charges of SEK67m and weak underlying EBIT margins. The number of unsold completed homes jumped to 266 units, the second highest on record after Q2 2009. While unit sales and starts should improve in 2024–2025e, we continue to see downside risk to consensus. We reiterate our SELL and have cut our target price to SEK135 (140).

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

Jm Ab (Sell, TP: SEK140.00) - Q2 consensus seems too bullish

New housing sales have remained challenging QTD, with preliminary sales data from pro.booli.se indicating a 66% YOY drop in overall sales in Sweden and a 54% decline for JM. We expect the weak markets to hurt JM’s Q2 figures and forecast EPS 9% below consensus. Given the downside risk to consensus for Q2 and our lower2023–2025e EPS, we reiterate our SELL and have cut our target price to SEK140 (155).

Jm Ab (Sell, TP: SEK155.00) - Sentiment change needed

The Q1 results were supported by a larger than expected transaction gain in Property Development (PD), while residential development in Sweden and key KPIs missed. However, despite the massive declines in units sold and started, and unit sales down 46% in the past 12 months, consensus is for a revenue decline of only 11% in 2022–2025e. We have also updated our 2022-2025e NIBD for the new IFRS disclosures and believe EV/EBIT is on an increasing trend. We continue to see downside risk to consensus...

Jm Ab Minor model adjustments

We have updated our estimates due to JM selling a rental property development in Järfälla, Sweden for SEK676m, which we expect to have a positive effect on its Q1 results. We previously included this asset in our SOTP, but as it now moves from the balance sheet to recorded profits, we have updated our forecasts. We do not consider these changes to be material, and we have not changed our SELL recommendation. We reiterate our SEK160 target price.

NCC AB - Strategy, SWOT and Corporate Finance Report

Summary NCC AB - 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 NCC AB (NCC) is a provider of construction and property development services. It carries out the construction and development of residential and commercial properties, roads, industrial facilities, pub...