Stendörren: Internal growth focus bears fruit - ABG

Positive occupancy and NOI margin trend Balance sheet supports further growth New fair value range due to lower peer multiples Confirmed strength in the property management The report was slightly below expectations and we make minor estimate revisions on rental income and net operating income. Q1 was the third consecutive quarter with an improved occupancy rate, which alongside the SEK 15m net letting (41m TTM) strengthens our thesis for an improved occupancy rate ahead. We raise our NOI margins (~0.4-0.6pp) in ’22-‘24e due to the company’s emphasis on lowered operating costs and energy efficiency during the last 1-2 years. Although like-for-like rental income was up by 3% y-o-y, operating costs were down by 9%. The lower NOI margin in the earnings capacity decreased q-o-q, which was due to inclusion of costs related to tenant adjustments that will generate rental income later, and slightly higher template costs from external valuers for some properties. Net LTV to fall by ~3pp until year-end ’24e Due to the current market environment, we no longer expect yield compression, assuming instead flat yields ahead. This explains the negative revisions to EPRA NRV. We only make minor changes (+5bps) to the average interest rate, and despite modelling some template acquisitions (SEK 50m in Q4’22e and SEK 200m p.a. in ’23e and ‘24e), we expect net LTV to fall in our forecast period (~45% by YE’ 24e vs ~48% in Q1’22). Trading in line with its 2- and 3-year averages The share is trading at a 6% premium to last reported EPRA NRV, which is below its 2-yr (16%) and 3-yr (14%) averages, although the outlook and LTM performance are better than for several years. On cash earnings, the share is trading at ~25x P/IFPM LTM, in line with its 2- and 3-yr (~27x) averages. Moreover, the average of its peers CATE, NP3, SAGA and SLP is at a 67% premium (P/EPRA NRV) and ~24x (P/IFPM), last reported. We lower our fair value range to SEK 205-245 (275-315) due to decreased peer multiples, a higher r ... Läs mer på ABG Sundal Collier