Aros has previously guided for one project start in Q2 (Danderyd, 170 units, sold to Patrizia), but the project started in early July (i.e. Q3). Hence, we expect a quarter with low underlying activity (sold units & started units) and do not expect the share of sold units in ongoing production to change materially q-o-q (91% as of Q1). Aros announced one acqusition in Sundbyberg (~180 units) during the quarter, a project which may start in 2024. In addition, Aros has now completed the acquisition of one additional ALM-project (Södermalm, Stockholm, ~110 units). Both of these acquisitions should support mid-term earnings. For Q2, we expect Aros to deliver a topline of ~SEK 408m (+143% y-o-y) with a gross profit of almost SEK 100m (+97% y-o-y) and an EBIT of SEK 70m (+185% y-o-y).
Keep an eye on management outlook
Key for estimates/earnings in 2024-2025 will be the amount of starts during the next 18 months. Aros has a few small projects (e.g. 15-25 units each) which may be started on speculation, i.e. without a high presale ratio. However, for major projects (excluding Patrizia) to start in H2'23 and 2024, we believe the market needs to recover somewhat. Apartment prices in Stockholm are "only" down ~9% from their peak, but consumers are so far not willing to sign up for completions 2-3 years into the future. Any comments on changes in consumer behaviour or demand should be watched closely.
Adj. 2023e P/B at ~0.65x
The share is trading in line with key peer JM (0.65x vs 0.61x). Key differences include more cautious book values in JM, while Aros is delivering higher margins. The share is up almost 30% in the last month. We make minor estimate changes and stick to our FVR of SEK 35-45.
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