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Eivind Sars Veddeng ... (+11)
  • Eivind Sars Veddeng
  • Frank Maaø
  • Håkon Astrup
  • Helge André Martinsen
  • Karl-Johan Bonnevier
  • Niclas Gehin
  • Nicolay Dyvik
  • Ole Martin Westgaard
  • Ole-Andreas Krohn
  • Rune Majlund Dahl
  • Simen Mortensen
Simen Mortensen
  • Simen Mortensen

Hufvudstaden (Hold, TP: SEK127.00) - Warranted NAV discount

The Q1 results were in line with our estimates and consensus. Asset values were lifted by 1.4% QOQ, and the vacancy rate improved slightly. We believe the current NAV discount is fair given the high exposure to retail and low valuation yields used in general. We reiterate our HOLD recommendation and have raised our target price to SEK127 (120).

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Joachim Gunell ... (+10)
  • Joachim Gunell
  • Jon Masdal
  • Marius Knudssøn
  • Martin Arnell
  • Martin Huseby Karlsen
  • Nicolay Dyvik
  • Ole Martin Westgaard
  • Ole-Andreas Krohn
  • Patrik Ling
  • Simen Mortensen
Simen Mortensen
  • Simen Mortensen

Hufvudstaden (Hold, TP: SEK120.00) - The market has spoken

In line with the market sell-off, we also fear lower NAV on rising interest rates. We are also concerned about luxury spending, as new mortgage amortisation rules are set to reduce consumer wallets. However, after the sell-off we find the short-term downside has been taken out, and have upgraded our recommendation to HOLD (Sell). We have cut our target price to SEK120 (130) on increased yield forecasts.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

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.

Simen Mortensen
  • Simen Mortensen

Cutting FFO on higher payable tax

While the company reported profit from rental operations in line with our forecast, we have cut our FFO forecast for Hufvudstaden given its increased payable tax rates. NAV was written up in Q2 as yields were lowered again, even as low as 3.4% on the most prime assets, a level still not seen in the transaction market. We reiterate our SELL recommendation and SEK130 price target.

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