Trianon - Actionable response to higher interest rates - ABG

We postpone timelines for some projects Major swap portfolio restructured – 40% secured to 2025 25x P/IFPM and 1.0x P/EPRA NRV in 2022e Higher project costs should be fended off We make minor revisions to rental income and -1.5% to -2.8% to net operating income (NOI), due to higher utility prices in southern Sweden, a lower than expected margin in Q1 and assuming later starts and completions for some projects. We have delayed the timelines for some ongoing projects, primarily Centralköket 1, Kvarteret Hanna and Norra Sorgenfri phase 1 & 2. The latter two are a direct effect of the CEO’s message in the conference call that some project starts may await a government decision (post the September election) pertaining to the rental apartment investment support. Further, the CEO alluded to higher production costs than previously anticipated but the projects with approved zoning plans are in areas where the company may convert rental apartments into condominiums; thus, making up for increased production costs. Lower EPRA NRV from e.g. decreased earnings Trianon restructured its swap portfolio in Q1 to secure 45% of its interest-bearing debt (35%), mostly until 2025. Its interest maturity is now 2.0 years (2.7yr), while loan maturity is 2.6 years (2.1yr). In our Q1 preview, we incorporated 100bps of gradual repo rate increases until ‘24e into our estimates and ~43% of Trianon’s outstanding debt matures in 2022, with 28% maturing in Q4’22. EPRA NRVPS is lowered due to decreased earnings, the removal of previously assumed yield compressions and slightly lower assumed value changes from project profits in ’22e-‘24e. Trades in line (P/IFPM) and well below (P/NAV) its 3yr avg. The share is trading at ~28x P/IFPM and at a 7% premium to EPRA NRV LTM. Its 2yr averages stand at ~32x and a 42% premium, while its 3yr averages are at ~28x and a 32% premium. The average of comparable peers (Balder and Wallenstam) is trading ~50% (P/IFPM) and ~30% (P/EPRA NRV) lower. We lower our fair va ... Läs mer på ABG Sundal Collier