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Train Alliance: A unique opportunity to invest in railways - SEB

We initiate coverage of the railway development company Train Alliance. The company was founded in 2009 and since then has undergone an impressive expansion journey while only scratching at the surface of the opportunities that lie ahead. With continued strong growth in rail transportation Train Alliance has in depth railway competence combined with a unique land asset from which value is to be created for many years to come.

In our view, Train Alliance is set to continue to grow at above-industry rates. Demand for rail travel continues to increase, driven by rising GDP and supported by environmental initiatives in both freight and passenger, and new operators have entered the market.

Train Alliance trades at a premium to its latest NAV of only 5%, despite having defensive assets with a significant valuation potential and a strong balance sheet. We argue that a premium of 15-25% reflects the valuation potential better, which is also supported by a DCF approach. We derive a fair share price range of SEK 69-75 per share with a mid-point value of SEK 72.
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