Pareto sees Swedish real estate sector shaping up
28/11/2023 11:45
** Pareto Securities says Swedish real estate companies are
"in better shape now than before" following the recent sector
rally and adjusts its recommendations
** While the sector has an average net debt/EBITDA of 12.2x
(except for Oscar Properties) and multiple companies continue to
exhibit high leverage relative to property values, the broker so
far sees "little sign of weakening demand" in the occupier
market
** That said, Pareto sees commercial properties to increase
vacancies by 1-2 p.p. on average until Q4 2024 as it expects
Sweden's decreasing GDP and rising unemployment to hit the
occupier market
** "We expect yields to continue to soften during Q4 2023
and in 2024 with some mitigating effects from the high October
CPI reading in Sweden of 6.5%, as most companies have an
assumption of 6.0% in their valuations," the broker adds
** It cuts Balder BALDb.ST , Diös DIOS.ST and Fabege
FABG.ST to "hold" from "buy" citing "fair value post rally"
** The broker maintains "buy" for Castellum CAST.ST ,
Catena CATE.ST , Cibus CIBUS.ST , Eastnine EAST9.ST and
Platzer PLAZB.ST , citing their "moderate leverage and ability
to withstand increasing interest rates"
** The Swedish real estate index .SX35PI has risen
.SX35PI 26% since Oct. 25, while still underperforming the
broader Swedish equity market .OMXSPI by 5.7 p.p. year-to-date
(Reporting by Elsa Ohlen)
((elsa.ohlen@thomsonreuters.com))