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Simen Mortensen
  • Simen Mortensen

Kojamo (Buy, TP: EUR10.50) - Expecting improved rental markets

The Q3 results were in line with our forecasts, with continued muted Finnish residential rental markets. However, we expect markets to gradually improve, given a low supply of newbuilds over 2025–2027e and falling unemployment rates. With declining interest rates, we also see the potential for the company to restart project developments in 2025–2026. On the current valuation, we find the risk/reward attractive. We have upgraded to BUY (HOLD) and raised our target price to EUR10.5 (10).

Simen Mortensen
  • Simen Mortensen

Mixed Q3s and soft datapoint for Stockholm office market

This week, Hufvudstaden, Veidekke, Selvaag Bolig and Skanska reported Q3 results. Furthermore, Vasakronan (unlisted) reported soft vacancies and net lettings, which we consider a negative datapoint for peers such as Fabege and Hufuvdstaden. The weighted-average implied EBITDA yields on the stocks we cover are 4.33% for 2024e and 4.88% for 2025e.

Simen Mortensen
  • Simen Mortensen

Two upgrades, an equity raise, and transactions

This week, we upgraded Balder to BUY and Sagax to HOLD following their Q3 results, Balder completed a SEK1.5bn equity raise and bought assets from a JV, while a >5% rent increase for 2025 provided a positive datapoint for rent-regulated apartments in Sweden. The weighted-average implied EBITDA yields on the stocks we cover are 4.31% for 2024e and 4.86% for 2025e.

Simen Mortensen
  • Simen Mortensen

Q3 and rental KPIs in focus

This week, reporting season was in full swing, with nine covered companies reporting Q3 results. Overall, the results were mixed, while net lettings and vacancy rates were main points of interest given the current weak rental markets. The weighted-average implied EBITDA yields on the stocks we cover are 4.32% for 2024e and 4.78% for 2025e.

Simen Mortensen
  • Simen Mortensen

Shifted coverage, net-letting miss, potential residential market catal...

This week, we shifted our coverage from KCM Properties to Logistea and reinstated a recommendation with a BUY and SEK20 target price. In other news, Entra reported soft Q3 results, while Atrium Ljungberg’s were more neutral, and we see a potential catalyst for the Swedish residential market at the start of November. The weighted-average implied EBITDA yields on the stocks we cover are 4.70% for 2024e and 5.17% for 2025e.

Simen Mortensen
  • Simen Mortensen

Keen eye on vacancy rates

Interest rates have seemingly peaked, and more cuts are expected. Given the level at which rates are set to stabilise, we still expect some upward pressure on book value yields. NAV-wise, this is likely to be offset by rental growth and retained earnings, but our base case is limited growth in 2024–2025e. Rental KPIs remain the key focus, as vacancy rates continue to rise, particularly for offices, but so far rental prices have held firm. We maintain our neutral sector stance, with Castellum and...

Simen Mortensen
  • Simen Mortensen

Sector optimism

In the past week, Citycon divested a retail asset in Norway, Logistea updated its financial targets following the merger with KMC Properties, Cibus carried out a rights issue as it is targeting M&A in the daily-goods property sector, and we saw sector optimism at DNB’s Nordic Real Estate & Construction Conference. The weighted-average implied EBITDA yields on the stocks we cover are 4.21% for 2024e and 4.65% for 2025e.

Simen Mortensen
  • Simen Mortensen

Bonds, market data and investments

This week, Castellum issued a EUR500m bond loan, and according to Bloomberg, Catena is contemplating launching 1–2 green bonds next week. Pandox acquired another UK asset, Logista and Public Property Invest look set to join the FTSE EPRA index, and finally, August data for Swedish and Norwegian house prices and commercial transaction volumes was published. The weighted-average implied EBITDA yields on the stocks we cover are 4.26% for 2024e and 4.70% for 2025e.

Simen Mortensen
  • Simen Mortensen

Hufvudstaden up to HOLD, layoffs in construction sector and rate cut

This week we upgraded Hufuvdstaden to HOLD following its Q2 results, JM is laying off 145 employees, and the Riksbank cut the policy rate by 25bp to 3.50%. While we retain our neutral stance on the Swedish real estate sector, we have turned slightly more positive since last month’s reduction in long-term market interest rates. The weighted-average implied EBITDA yields on the stocks we cover are 4.27% for 2024e and 4.71% for 2025e.

Simen Mortensen
  • Simen Mortensen

More Q2 results and other news

The Q2 reporting season is again underway, following the summer break, with results from Olav Thon and Kojamo. In other news, Pandox announced it is considering a large UK investment, Norges Bank signalled the policy rate will not be cut near-term, and in Sweden, CPI has increased on an expected cut. The weighted-average implied EBITDA yields on the stocks we cover are 4.29% for 2024e and 4.74% for 2025e.

Simen Mortensen
  • Simen Mortensen

Kojamo (Hold, TP: EUR10.00) - Q2 as warned, market as feared

Kojamo’s Q2 results were as warned on 15 July. And as we expected, yields on book asset valuations and vacancy rates continued to rise. With no ongoing developments, the growth outlook remains weak. We see a better risk/reward elsewhere in the sector, and reiterate our HOLD and EUR10 target price.

Simen Mortensen
  • Simen Mortensen

Kojamo (Hold, TP: EUR10.00) - Guidance cut

On 15th July, Kojamo issued a profit warning, lowering its Q2 FFO guidance by c7% on a weaker lettings market. The company stated oversupply was the main reason, but we also expect demand to weaken in 2024–2025 in Finland with the rise in VAT and cuts in housing allowance for lower-income households. We find the risk/reward better elsewhere in the sector, but the valuation appears fair. We reiterate our HOLD, but have cut our target price to EUR10 (10.5).

Simen Mortensen
  • Simen Mortensen

Q2 reporting season in full swing

The Q2 reporting season continued this week, with Atrium Ljungberg, Wallenstam, Wihlborgs, Fabege, Public Property Invest and Catena reporting results. The weighted-average implied EBITDA yields on the stocks we cover are 4.34% for 2024e and 4.74% for 2025e.

Simen Mortensen
  • Simen Mortensen

Q2 starts and transaction updates

The slow market recovery in Nordic CRE transactions continued in June. Moreover, a large transaction in Stockholm, Sweden, supports commercial brokers’ estimated current CBD yields. The Q2 reporting season has started, with continued indications of a weakening office rental market in Sweden. The weighted-average implied EBITDA yields on the stocks we cover are 4.34% for 2024e and 4.74% for 2025e.

Simen Mortensen
  • Simen Mortensen

Strong divestment, flat Swedish policy rate and tenant bankruptcies

This week, the Swedish Riksbank kept the policy rate unchanged at 3.75%, but the market is factoring in an 85% likelihood of a cut in August. Stenhus Fastigheter has seen two key tenants apply for bankruptcy within a week, and Entra divested a hotel at a 28% premium to book value. Finally, we maintained a neutral view in our Nordic real estate sector update last week. The weighted-average implied EBITDA yields on the stocks we cover are 4.45% for 2024e and 4.86% for 2025e.

Simen Mortensen
  • Simen Mortensen

Improved sentiment, but unattractive sector valuation

On the positive side, sentiment has improved on peaked interest rates and tightening credit spreads. However, we consider the sector fully valued and maintain our neutral view, given our expectation of muted NAV/share and FFOps growth. Our key focus is on rising vacancy rates, particularly in the office segment. Our top sector picks are Wihlborgs, Catena and PPI.

Simen Mortensen
  • Simen Mortensen

A merger, a bond exchange offer and other news

KMC (No rec) and Logistea (No rec) plan to combine, with Logisea acquiring all of KMC Properties’ group operations. SBB Norden announced a bond exchange offer. Dios named David Carlsson new CEO. Corem divested SEK107m of properties. Citycon announced the result of a bond hybrid exchange offer. The weighted-average implied EBITDA yields on the stocks we cover are 4.43% for 2024e and 4.83% for 2025e.

Simen Mortensen
  • Simen Mortensen

Initiating with a BUY, office-space reduction, and personnel changes

This week, we initiated coverage with a BUY on Public Property Invest, a key tenant for Fabege reduced its office space, Hufvudstaden made management changes, we updated our estimates for Besqab following the merger with Aros Bostad, and transaction volumes in May rose from low levels. The weighted-average implied EBITDA yields on the stocks we cover are 4.38% for 2024e and 4.78% for 2025e.

Simen Mortensen
  • Simen Mortensen

A bit of everything

This week, Wihlborgs bought new assets, Citycon sought the conversion of its 2025 hybrid bond, SBB announced a new JV, dismantled an old one, and set a record date for the remaining 2023 dividends, Balder issued four bonds, while Prisma Properties is aiming for an IPO. The weighted-average implied EBITDA yields on the stocks we cover are 4.42% for 2024e and 4.82% for 2025e.

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