Serneke reported higher underlying losses and non-recurring charges in Q1 2020. Since our update, Oaktree has withdrawn its agreement-in-principle to buy 80% of Karlatornet, adding to non-recurring costs in Q1 and delaying the project further. Serneke aims to reduce its cost base by SEK 200m per annum from Q1 2021, we believe to ensure better underlying performance in both Contracting and Project Development.
The asset case remains attractive in Serneke owing to a P/B multiple of 0.5x (equity worth SEK 92.3 per share) and with additional surplus value in the project portfolio of SEK 2.2bn (SEK 98 per share). The key focus for the company is on efforts to improve profitability by reducing costs and improving predictability within its operations.
We cut 2020E adjusted EPS by 40% due to losses in Q1, while the lower cost base and strong order backlog limit our estimate downgrades for 2021-22 to 4-6%.
Lower estimates and lower sector multiples reduce our fair value range to SEK 50-110 per share (from SEK 95-140), based on a combination of SOTP, DCF and peer multiples.
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