More Q1 reporting

Five of our covered names reported Q1 results this week. Hemfosa announced the two new CEOs following the upcoming demerger. The average implied EBITDA yields on the stocks we cover are 4.65% for 2018e and 4.95% for 2019e.

Northern Lights

Pandox (Buy, TP: SEK162.00) - We still see upside potential

EBIT was slightly below consensus as admin and Operator activities were below forecasts, and the Easter effect was higher than expected and led to higher costs than we expected. With the Q1 miss and weakened SEK, we have cut our LFL forecasts. While we have lowered our funding cost estimates due to market interest rates, we have also reduced our target price to SEK162 (165) to reflect our revised forecasts. We repeat our BUY recommendation.

Q1 reporting season has started

Four of our covered names have reported Q1 results this week, namly Castellum, Hemfosa, Citycon and Entra. Fabege has decided on a share split of 2:1. The average implied EBITDA yields on the stocks we cover are 4.58% for 2018e and 4.85% for 2019e.

Yields set to check NAV growth

Current swap yield curve market expectations imply 5-year swaps in the Nordics rising by 60–100bp over the next three years, leading to bank funding above current CBD yields. Thus, despite rental growth from market rents and developments, we think NAV growth looks set to be capped by higher yield valuations. We believe the new corporate tax law in Sweden would also lead to companies deleveraging. We see some Q1 risk from the cold Nordic winter. We keep our neutral sector stance.

A bid and some transactions

The week started with a bid for all shares in Victoria Park by Starwood Capital. In other news, D.Carnegie bought real estate assets for SEK1.6bn and SBB Norden sold a school. The average implied EBITDA yields on the stocks we cover are 4.61% for 2018e and 4.87% for 2019e.

New Swedish tax law

The Swedish finance minister has proposed a corporate tax law that includes a cap of 30% of EBITDA on interest rate tax cost deductions. Entra bought a small property and Hemfosa bought out a JV partner. The average implied EBITDA yields on the stocks we cover are 4.62 % for 2018e and 4.88 % for 2019e.

SEK1bn deal, green bond, and updates

In the news, Kungsleden acquired a SEK1bn property in Malmö, and issued its first green bond. This week we published notes on NPRO (which we downgraded to SELL) and Entra. Elsewhere, prospects of an interest rate rise in Norway moved closer. The average implied EBITDA yields on the stocks we cover are 4.55% for 2018e and 4.81% for 2019e.

Still rising SWAPs

Swap rates moved up this week – and most so in NOK in the Nordics. Castellum announced one large development in Malmö and sold one Stockholm property. Several bonds have been issued. Kungsleden and Fabege have announced leases. The average implied EBITDA yields on the stocks we cover are 4.57% for 2018e and 4.83% for 2019e.

Lowered CPI target, and other updates

Today Norges Bank cut its inflation target for the economy from 2.5% to 2%, while Entra announced a lease contract. Earlier in the week, Olav Thon issued a bond, Platzer’s CFO announced he will be stepping down, and D. Carnegie set a subscription price for a rights issue. The average implied EBITDA yields on the stocks we cover are 4.63% for 2018e and 4.89% for 2019e.

End of Q4 results

Balder reported its Q4 results this week and thus ended the Q4 reporting season for our covered names in the sector. Kungsleden’s CFO is stepping down. D. Carnegie & Co (not covered) reported Q4 results and proposed a SEK1.5bn rights issue. Technopis and Prime Living also reported Q4 results (we do not cover these two stocks). The average implied EBITDA yields on the stocks we cover are 4.63% for 2018e and 4.89% for 2019e.

More Q4 results

Six of the companies we cover released Q4 results this week; there were few surprises, with just one beating forecasts. However, as market interest rate swaps and FRAs continue to rise we lowered some of our forecasts following the Q4 releases. The average implied EBITDA yields on the stocks we cover are 4.60 % for 2018e and 4.91 % for 2019e.

Northern Lights

Pandox (Buy, TP: SEK165.00) - Still delivering, Q4 in line

Pandox’s Q4 profit from operations was in line with our forecast, albeit with some deviations at divisional level due to reclassification effects, but the proposed DPS was lower than expected. We have raised our funding cost forecasts on rising market interest rates in Q1, and see negative FX effects and have made minor result adjustments. We have cut our target price to SEK165 (170), but given the continued attractive FFO and stable growth outlook we keep our BUY recommendation.

Q4 season and coming transactions

Five companies under our coverage have had Q4 reports this week. Klovern has published its mandatory bid for Tobin. Kungsleden divested a warehouse for SEK555min in Helsingborg. Average implied EBITDA yields on the stocks we cover are 4.36% for 2018e and 4.84% for 2019e.

Rising swaps and transaction activity

Swap rates continued upwards this week; adding even more pressure on low yield-spread names. Wihlborgs started the year with the acquisition of two properties in Lund and two in the Copenhagen area. Kungsleden has acquired two newly built office properties as well as a property with a multistorey car park for approximately SEK1bn. Average implied EBITDA yields on the stocks we cover are 4.36% for 2018e and 4.78% for 2019e.

Tax risk materialising, swaps on the rise and Q4 reporting kicks off

Castellum’s CFO indicated during the Q4 webcast (kicking off the reporting season) that a decision on the new Swedish tax rate with interest rate cap would come in April. Swap rates continued upwards this week; we continue to see downside potential in low yield-spread names. Average implied EBITDA yields on the stocks we cover are 4.41 % for 2018e and 4.81 % for 2019e.

Growing into its valuation

Pandox (PNDXB SS, Hold) - Growing into its valuation (22 pages)